Sony is expected to reveal its vision of the future of home entertainment on Wednesday by providing a glimpse at a new-generation PlayStation console that streams games, films, music and more.
"Sony needs a big hit with this game console," said Forrester analyst James McQuivey.
"Not just because it has lost its dominance in gaming to Microsoft's Xbox 360, but because the company needs to make what might be its last attempt to be relevant -- not as a device maker but as a digital platform."
McQuivey argued that the Japanese consumer electronics titan must show it can go beyond selling gadgets to skillfully cultivating ongoing relationships with customers who turn to online sources for entertainment.
"It's a big challenge," the analyst said. "While we won't know for a while whether Sony's new box succeeds as a device, we will know right away whether Sony has the right ambitions."
Analysts and industry insiders are certain that a Sony event in New York City on Wednesday evening will be devoted to introducing the PlayStation 4, a console that would hit the market next year.
"Expect Sony to come out, guns blazing, talking about technical details and specifications of what is likely to be a pretty mind-blowing system," said TechSavvy Global strategic innovation consultant Scott Steinberg.
The company will likely also announce "kick-ass games and development talent recruited to the cause," he continued, explaining that "Sony has traditionally been run by engineers and focused on high-performing gaming systems."
However, analysts want to see whether Sony goes beyond impressive hardware to a console that integrates services, the popularity of smartphones and tablet computers, and rich portfolios of games, films, music, and television shows.
"The question is going to be how the system has been updated to stay relevant to the times," Steinberg said. "Gamers want to know what they can get on the PS4 that they can't get anywhere else."
The PS4 will succeed PlayStation 3 consoles that began their lifespan in late 2006.
Sony has remained mum, but that hasn't stopped talk of hardware upgrades such as improved graphics and controllers with touchpads, and chatter of a Sony cable-style service to route film or music content to PlayStation consoles.
Speculation ahead of the event included talk of being able to play full-scale videogames streamed online -- a break from the practice of selling titles on disks.
"If Sony can offer streamed top-notch games via an affordable pricing plan, that would be a coup," Steinberg said. "It is a nascent market that will be growing by leaps and bounds in coming years."
Free or inexpensive free games on smartphones and tablet computers are increasing the pressure on videogame companies to deliver experiences worth players' time and money.
New generation consoles are typically priced in the $400 to $500 range, and blockbuster game titles hit the market at $60 each.
"Sony is under a lot of pressure," said National Alliance Capital Markets analyst Mike Hickey. "Gamers are desperate for innovation and better games."
While Sony is tethered to "legacy" hardware, companies such as Apple and Google are driving innovation with tablets, smartphones, and ways to route Internet offerings to television sets, according to Hickey.
In ramping up content and services for PlayStation, Sony needs to motivate people to upgrade from the current model.
"If Sony wants to win it, they need to show some killer games to get people to go out and spend a lot of money for the core game experience," Hickey said.
He blamed a dearth of compelling titles as a reason for disappointing sales of Nintendo's innovative Wii U consoles, introduced late last year.
"The Wii U is a case study you can't ignore," Hickey said. "Sony at least has to nail it with the games; the core market can drive the mass market."
Industry tracker NPD Group reported that just shy of $9 billion was spent in the United States last year on purchasing or renting video and computer games.
Another $5.92 billion was spent on game downloads, subscriptions, and play on mobile games or at social networks, according to NPD.
"Tablets are in every household and the computing power of tablets is going up every year," Hickey said. "Eventually, the tablet could very well become the console."
