Sony - The Giant is Falling Asleep

SONY

Gaming Industry

Revenue 2010-11
networked products and services segment

$18,006 million

Summary

Sony is the major player when it comes to the gaming industry. Since the release of the original PlayStation console in 1995, Sony has earned this position in the extremely competitive market. With global sales of 102 million PlayStation units, and 150 million PlayStation 2 units, top design houses have battled to have their games released on the consoles before other systems and this has raised the barriers for competitors. With games such as Gran Turismo, Grand Theft Auto, and the Final Fantasy Series, Sony has become a part of every gamers life. However, most recently due to the PS3 release delay and the Security Breach of the PlaysStation Network, Sony has jeopardized this dominion and will most likely face stiffer competition in the future.

Present

Most recently, Sony has not been doing very well. First, they released the PS3 a year late and this cost the company a lot of customers who purchased an Xbox 360 instead. Because of this, Microsoft gained a substantial advantage in building brand awareness. As of 2008, 5.4 million PS3 consoles had been sold compared to 12 million for the Xbox 360 and 12.7 million Wii systems.

The second issue was that on April 19, 2011 the PlayStation Network was put offline due to a “compromise of personal information as a result of illegal intrusion.” This intrusion cost Sony a lot of loyal customers who no longer feel secure using PSN or simply can’t. Again, this has benefited Microsoft.

Future

Sony is in a difficult position for the future. Both of the issues mentioned above have allowed competitors to catch up. However, they recognize the challenges ahead and have started preparing for the future.

The introduction of the Move has allowed Sony to enter the Immersive Gaming space, one that has proven very successful for Nintendo and Microsoft. Since the PS3 hardware is very powerful, they will surely take advantage of this and other immersive gameplay experiences. By incorporating Sony’s massive R&D they can connect the PS3 with Sony Mobile Phones, Bravia Televisions, and other Sony Home Entertainment Devices to take immersive gameplay experiences to the next level.

Also, Sony has announced their intention to make the PlayStation Network an “open” system, which means that the PSN will be open to systems other than the PS3. If they can make their system more secure, this may be a huge move for Sony. By commoditizing the online experience they may take customers away from Microsoft since players will be able to play against other systems and other friends.

Lastly, Sony has started testing online distribution models and this will afford Sony better margins, marketing research, and sales. They need to get on this like white on rice. However, they can’t fully take advantage of this until they solve the issues with the PSN. If customers don’t feel safe playing for free, it will be unlikely that customers will want to have their credit cards stolen.

I would say that Sony is not positioned very well for the future.

Insight

The industry as a whole is very similar for the three main console manufacturers: Sony, Microsoft, and Nintendo. All three are following similar business plans in regards to online distribution, immersive gameplay experiences, and online gaming. As far as games are concerned, partnerships don’t offer the competitive advantage they once did because developers have more leverage. The future lies in hardware development and being the first to market. If they make hardware that inspires developers, this is where a company can take the lead! Whether it is by making the new 8th generation console, or cloud computing, Sony needs to have developers on their side once again.

The immediate steps that Sony needs to take are to introduce an 8th generation system before everyone else, improve network security on their side, and really take advantage of the immersive gaming experience and the fact that they have so many other consumer products that Microsoft and Nintendo do not.

Thormahlen, C. Video Games in the US. IBISWorld Industry Report NN003. March 2011
Playstation Network. http://en.wikipedia.org/wiki/PlayStation_Network
Playstation. http://en.wikipedia.org/wiki/Playstation