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Is the PlayStation NEO part of Sony’s new strategy?

Rumors have emerged that an upgraded version of Sony's PlayStation 4 will be called the NEO, and market watchers expect the new console will help boost hardware sales.

Video games website Giant Bomb claimed multiple sources had confirmed the gaming console will be referred to as the NEO and will have improved computer and graphics processors. It is also expected to support 4K images.

Despite the original PlayStation 4 being released late in 2013, selling improved versions of gaming consoles in the middle of the product's lifecycle is not an unusual strategy for Sony or its rival, Microsoft, which sells the Xbox.

Sony had not responded to requests for comment by the time of publication.

Sony Playstation 4
Chesnot | Getty Images

"Both Sony and Microsoft have a track record of improving consoles mid-cycle with new form factors and better components so rumors of upgrades are not that surprising," Piers Harding-Rolls, director and head of games at IHS Technology, told CNBC via email.

"These strategies have been used both in terms of boosting sales and to cut costs internally using more efficient builds and cheaper components."

Usually, games consoles have had very long life-spans. Microsoft announced this week it was discontinuing the Xbox 360, which was first released in 2005.

However, Serkan Toto, CEO of Japanese gaming consultant and advisory group Kantan Games, thinks Sony is attempting to emulate Apple by releasing incremental updates.

"The long-term plan for Sony is to break through the previous console lifecycle," he told CNBC in a phone interview.

"They are basically following what Apple is doing. Apple sells you the iPhone, and then after one year they push out an update," he said. "Apple doesn't let consumers wait five, six, seven years. The lifecycle of smartphones are much, much shorter."

By selling the NEO alongside the current version of the console, Sony will be able to support its hardware profit margins by targeting users with more sophistication.

"If the console comes to market I expect it to be priced relatively highly - similar to launch pricing [$399]," said Harding-Rolls. "The original version will probably have a price cut and be more significantly targeted at a broader audience."

However, Sony could easily make a mistake and alienate its current user base by, for instance, selling exclusive games on the NEO.

"Sony has to follow a unified content strategy for both versions of the PS4 to avoid frustrating existing users that don't want to invest again," Harding-Rolls warned. "Exclusive, higher end content is a no no at this stage and would not be popular with publishers."

It's not known when the NEO will be released, but it may be launched in October in order to support the company's virtual reality system, the PlayStation VR.

"For virtual reality, you need to have a powerful computer," Serkan Toto said. "It's a pretty challenging problem that Sony has solved by having the PlayStation to power the virtual reality applications that they are preparing," he added.

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