Sony has released an updated version of the Playstation 4 that does not include an optical output. There are a few options to make the LS40 work with this new version of the Playstation 4 "Slim":
Option 1: Set the PS4 to output all audio via the USB port. You will not use the optical cable in this configuration. Press and hold the Playstation button on the controller. Scroll down to Adjust Sound and Devices. Select Output to Headphones and change the setting to "All Audio." With this configuration, the right volume wheel will control both game and chat volume and they won't be able to be controlled independently. The left volume wheel will control the mic monitor level. Surround sound and EQ modes are not available with this configuration.
Option 2: Many TVs feature an optical out port. You can connect the optical cable between the optical out on the TV and the USB base station of the LS40. You will need to set your TV to output "Dolby Digital" and make sure that the TV is set to output audio to the optical port. Please refer to the User Guide of your TV for instructions on how to do this. If you are passing the HDMI from your PS4 through an AV Receiver before the TV, you may need to change the setting on the AV Receiver to allow the audio to pass to the TV. Please refer to your AV Receiver User Guide for instructions on how to do this.
Option 3: An HDMI to Optical audio extractor is available from many sources. This adapter will connect between the HDMI output of the PS4 and your TV. You would then set the adapter to 5.1 channel output and connect the optical cable between the adapter and the LS40 USB base station. We have tested this unit available from Amazon with the LS40, but other units should work as well: