Marketing Plan Sony PlayStation 4

PlayStation 4 Marketing Plan

Author: Toni Hoang, Tim von Oldenburg Version: 1.0 Date: 26.01.2010

Toni Hoang, Tim von Oldenburg

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Marketing Plan Sony PlayStation 4

Table of Contents

Page 1. About the company 2. Internal analysis 2.1. General analysis 2.2. SWOT analysis 2.3. Predecessor analysis 3. External analysis 3.1. PEST analysis 3.2. Porter's 5 forces 3.3. Competitors 3.3.1. Nintendo 3.3.2. Microsoft 3.3.3. PC 3.4. Customer analysis 4. Marketing Mix 4.1. Product details 4.2. Price 4.3. Distribution 4.4. Promotion 4.4.1 Marketing slogans and logo 4.5. Marketing Objectives 5. Evaluation and Control Toni Hoang, Tim von Oldenburg 21 22 -23 4 4 5 6 7 7 8 10 11 12 13 14 17 17 18 19 20

Marketing Plan Sony PlayStation 4

1. About the company

Sony Computer Entertainment, Inc. Branch: Video Entertainment Research & Development of Hardware and Software Game development studio

Subsidiary of Sony Corporation 2nd-largest japanese electronics company Core business: entertainment electronics Slogan: make.believe

Mission Statement: "to become a leading global provider of networked consumer electronics, entertainment and services."

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Marketing Plan Sony PlayStation 4

2. Internal analysis
We will start with a further review on our company to build a knowledge base by providing several information and analyses in order to understand the following content better. At first, a general overview about the Sony Corporation will be given. It is followed by the SWOT analysis and a short review on the predecessor, the PlayStation 3.

2.1 General
Brand awareness Place 29 in world-wide brand value ranking Place 3, behind Nokia and Samsung, in the segment Consumer Electronics Well-known products VAIO notebooks PlayStation and PlayStation Portable DVD players, HiFi, TV Former Sony slogans and statements Exclusive. Stylish. VAIO Mobile Excellence eco Product Process Planet Turn ideas into reality

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Marketing Plan Sony PlayStation 4 Revenue, headcount and number of sales $78.8 million of revenue in 2009, which is $2.3 million less than in 2008 Number of sales decreased in 2009 due to slowdown of the global economy Plans for 2010: Decrease losses by undertaking further internal restructuring Headcount: 171.300 as of March 31, 2009

Plans for 2010 Restructuring Consolidating of TV design and production divisions Consolidating of LCD TV and battery division Headcount reduction of 30% in TV division no changes in SCEI Paycut for managers and directors

The goal is to decrease costs by 250 billion Yen in 2010.

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Marketing Plan Sony PlayStation 4

2.2 SWOT analysis

SWOT analysis is a strategic planning method used to evaluate the Strengths, Weaknesses, Opportunities, and Threats involved in a project or in a business venture. It involves specifying the objective of the business venture or project and identifying the internal and external factors that are favorable and unfavorable to achieving that objective. Since the SWOT analysis has internal factors and the external factors also require internal adjustments, we decided to include the SWOT analysis into the internal analysis. Strengths high quality products: the predecessors of the PlayStation 4 always got the best test results for hardware performance on the edge - support of new technologies (BluRay) free online gaming PlayStation Network Store for downloadable contents (gameplay videos, game demo versions) Weaknesses high price in comparison to our competitors difficulties concerning game development (complicated hardware architecture) Opportunities unique, PlayStation 4-only exclusive games motion control to target casual gamers (especially women) growing countries with improving living standards Threats Cloud Computing as a new kind of gaming experience Could also be considered as an opportunity! Toni Hoang, Tim von Oldenburg -6-

Marketing Plan Sony PlayStation 4

2.3 Predecessor analysis

This part will provide main information on the predecessor referring to sales. A more detailed analysis of the market share will be given later in the 3rd chapter. The PlayStation 3 and PlayStation 3 Slim

Launch date - PlayStation 3 - PlayStation 3 Slim Units sold Break-even point Price - at launch - now Market share (7th generation consoles) $599 $299 26% November 11, 2006 September 1, 2009 32 million (as of, Januar 30 2009) not yet reached

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Marketing Plan Sony PlayStation 4

3. External analysis
In the following part you will be presented several external anayses referring to the video game console market. They play an important role in our marketing plan since the game console market is highly competitive. After a short view into the PESTL analysis and Porter's 5 forces, there will be a deeper insight into our main competitors, namely Nintendo, Microsoft and the PC. At the end the customer analysis will end this chapter that is needed to understand how and why the goals are set.

3.1. PESTL analysis

PEST analysis stands for "Political, Economic, Social, and Technological analysis" and describes a framework of macro-environmental factors used in the environmental scanning component of strategic management. We added an L for legal issues, because in the gaming industry there are additional restrictionts especially referring to the content. Political: different taxes and currencies have impact on revenue USK, PEGI (age restrictions) provide easier software development kits (it was hard to program for the PlayStation 3) Economical: growing market in industrial countries small market in lower developed countries

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Marketing Plan Sony PlayStation 4 Social: TV set as requirement to use PlayStation 4 growing group of Digital Natives more acceptance regarding video games GreenIT using environmental friendly raw materials, less power consumption new innovations in video games, more interactive gameplay regarding game controlling

Technological: new upcoming disk formats (BluRay3D), computing units (CPU, GPU) adapt to several video standards (e.g. NTSC/PAL)

Legal: different regulations referring to content and age restrictions: USK (Germany) PEGI (Rest of Europe + North America)

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Marketing Plan Sony PlayStation 4

3.2. Porter's 5 Forces

Porter's five forces is a framework for the industry analysis and business strategy. It uses concepts developing, Industrial Organization economics to derive five forces that determine the competitive intensity and therefore attractiveness of a market. Attractiveness in this context refers to the overall industry profitability. An "unattractive" industry is one where the combination of forces acts to drive down overall profitability.

Customer high power

New entrants low risk

Competition Nintendo WiiHD XBOX 720

Suppliers Hardware Game Publisher Game Developer

Substitutes Cloud Gaming

Consumer: Since the PlayStation 4 is a consumer product, we highly depend on sales. Therefore the consumer has a high bargaining power on our product. The market for casual gamers has increased heavily due to Nintendo's sport and fun games. Also, sales increased after reducing the price of the PlayStation 3.

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Marketing Plan Sony PlayStation 4 New entrants: The risk of new entrants is very low due to the development phase that has to be done to release a new gaming console A lot of money is needed to enter the market. Market saturation is already reached with only 3 consoles. Furthermore, the main problem are the game developers, who wouldn't create games for a new, unkown and unexperienced platform if they are not sure how this platform will sale. Suppliers: There is a high power of suppliers regarding hardware. We have to calculate our prices regarding the prices of the hardware units we use. Prices for the PlayStation 3 used to be high, since the output of IBMs Cell Processors was lower than expected. There was also a shortage of blue LEDs needed for the BluRay Drives. Game developers and publishers provide the games for our console, therefore we have to listen to their needs and demands. Thus we want to have more games developed for the PlayStation 4 than for the PlayStation 3 (due to the complicated architecture). Subtitutes: The only substitute is the upcoming Cloud Gaming Service (OnLive.com). There is a huge potential that is not measurable yet, since it is still in beta status. Competition will be described in detail in the next chapter.

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Marketing Plan Sony PlayStation 4

3.3. Competitors

Our direct competitors are the consoles from Nintendo and Microsoft. Furthermore, it is possible to use the PC as a gaming device. The Nintendo Wii was dominating the console sales from the very beginning due to its lower starting price and innovative controlling technique. Nevertheless we are on second place in Japan. On the other hand, the XBOX 360 is very popular in the USA. Thus we are still on 3rd position, but very close to Microsoft's XBOX 360. We expect to become 2nd place in the 3rd quarter of 2010 after our latest price discount.

Total units sold (Dez. 2009)

32 Mio. Units 26% 56 Mio. Units 47%

33 Mio. Units 27%

Playstation 3 Xbox 360 Wii

Console Market Share (7th Generation)

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Marketing Plan Sony PlayStation 4

3.3.1. Nintendo
Nintendo Co., Ltd. is a Japanese multinational corporation located in Kyoto, Japan. Founded on September 23, 1889 by Fusajiro Yamauchi, it produced handmade hanafuda cards. Nintendo soon developed into a video game company, becoming one of the most influential in the industry and Japan's third most valuable listed company, with a market value of over US$85 billion. Nintendo is the fifth largest software company in the world.

Current video game console: Wii Working title of new project: Wii HD Strengths: innovative ideas (e.g. "Wiimote") longstanding experience in the video game industry Nintendo characters are well-known (e.g. "Mario") also develops handhelds

Weaknesses: no multimedia-support implemented yet gained the image of focussing on youth policy of strict content guidelines for video games no HighDefinition gaming due to lower performance

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Marketing Plan Sony PlayStation 4

3.3.2. Microsoft
Microsoft Corporation is a multinational computer technology corporation that develops, manufactures, licenses, and supports a wide range of software products for computing devices. Headquartered in Redmond, Washington, USA, its most profitable products are the Microsoft Windows operating system and the Microsoft Office suite of productivity software. Current video game console: Xbox 360 Working title of new project: Xbox 720 Strengths: combination of multimedia and gaming huge range of third-party developers Halo-series is well-known large turn-out in the US market

Weaknesses: new to the game console industry security and copy protection of the Xbox has always been incomplete no development of handhelds lower performance and image quality compared to PlayStation 3

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Marketing Plan Sony PlayStation 4

3.3.3. PC
The personal computer can also be used to play games in several ways. Strengths: open platform open in technology and performance more possibilities (at the moment)

Weaknesses: Games are not adjusted to certain systems more expensive than consoles You first have to set up your PC and install a game in order to play it

Great potential in Cloud Computing (OnLive.com) Gaming on Demand OnLive is currently in beta status.

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Marketing Plan Sony PlayStation 4

3.4. Customer analysis

These tables show how our customer base looks like, how they use our products and how their gaming behaviour might be. Groups of people we target are marked by a cross. The main target groups are marked by a yellow background color.

Purpose / Age Games

6 12 X

12 18 X

18 30 X

30 and above X

Movies

Music

Internet

As you can see, our main target group are people of an age from 18 to 30. We will take a closer look on them concerning gaming in the following table.

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Marketing Plan Sony PlayStation 4 Games Male Casual gaming 18 30 We have a small customer base that may be labeled as male casual gamers. There are still possibilities to increase this customer base, e.g. with party games. This will be our main target group for the PlayStation 4. As the Nintendo Wii showed, Female there still is great potential in the feminin sector, especially for sports, logic, fun and multiplayer games. This is our current main target group. They frequently play games that are mainly Male Frequent (hardcore) gaming released for the PlayStation, e.g. action, role-playing, sports and racing games. Those people are mostly loyal customers and are aware of our technical advantages. There are not many female hardcore Female gamers, they do not play an important role.

Customers focus on different things when considering a purchase quality and performance design backward compability to their old games Price Exclusive games, e.g. Super Mario on Nintendo consoles PlayStation 4 PlayStation 3 PS2 PSOne Wii GameCube, but not to N64 and older consoles Xbox360 Xbox (partly)

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Marketing Plan Sony PlayStation 4 When do customers buy consoles? all over the year for themselves as a present (e.g. parents for their children) especially during christmas time

When do customers use their consoles? all-day life, e.g. for playing music enjoy free time (gaming) in the evening, watching movies at parties (gaming, playing music)

Why do customers buy a new console? technical trends (HD, BluRay, 3D etc.) there are no new games produced for the old one they are unsatisfied with the old one

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Marketing Plan Sony PlayStation 4

4. Marketing Mix
The Marketing Mix sets up all activities that are directly related to our product. Everything that is planned to get the PlayStation 4 on the market is decided here. The classical Marketing Mix, that we will use in our marketing plan, contains four elements describing product policy as well as pricing, distribution and promotion strategy.

4.1. Product Details

full home entertainment system video playback, incl. BluRay, DVD, DivX, H264 etc. music, CDs, MP3, AC3, FLAC etc. 2 TeraByte HardDiskDrive fully customizable Linux operating system support

This is a design concept made for the PlayStation 4. It can bee seen that there are additional information visible on the console itself and the newly developed controller.

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Marketing Plan Sony PlayStation 4

The additional screen on the console can be used to control the console without turning on the TV, e.g. to listen to music with help of the console. We are clearly pursuing a differentiation strategy. The PlayStation 4 supports the most common audio and video codecs as well as some exotic ones. We give our customers the space and freedom they need, as they may install own software on our system and also develop software themselves. This is unique in the console market. Microsoft as well as Nintendo have a close system and do their best to prevent their consoles from being hacked.

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Marketing Plan Sony PlayStation 4

4.2. Pricing
Our differentiation strategy justifies the high price in comparison to competitive products. The starting price will be about 80 % of production costs, in order to reach break-even point in time. As usual, the costs are covered by the sold games, not the console itself. The targeted end consumer price is about 400 USD. The standard bundle will consist of: a PlayStation 4 console one controller a HDMI cable (or any up to date cable) power supply

We will again start at a relatively high price and will lower it after 2 years to 300 USD when production costs have fallen. There will be Christmas bundles with a second controller and one mainstream PlayStation exclusive game, still for about 400 USD, to increase sales during Christmas time. The game to be bundled is not chosen yet. 5% price elasticity is planned depending on Nintendo's and Microsofts products and prices. Furthermore, we will release a limited edition in chrome for prestigue customers at launch date (limited to 1000 units).

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Marketing Plan Sony PlayStation 4

4.3. Distribution
As usual we will distribute the console through resellers in several local stores (e.g. GameStop) and online stores (e.g. Amazon) with a common lauch date. Thus production for our launch-stock has to be done until September 2012. The total starting stock will be 800.000 consoles for the first month 200.000 for the Japanese market 300.000 for the North American market 150.000 for Europe 50.000 for other countries

30 % will be provided to online stores like Amazon. The rest will be distributed selective to the local stores, depending on their accomodation regarding discounts. For warranty issues, a Pickup & Return service will be provided for 2 years.

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Marketing Plan Sony PlayStation 4

4.4 Promotion
There are two instances that are responsible for promotion of the Sony PlayStation 4. At first, this is Sony itself, of course. At second, it is the distributor, who also is interested in the successful sale of our product. Sony: place advertisements of the console on TV, in the afternoon as well as in the evening place advertisements of PlayStation 4 Games on TV, according to their target group place advertisements in video game magazines be present on video game trade fairs be present on technology and computer trade fairs advertisements on the internet

Distributor: place advertisements on TV place advertisements in their own booklets place advertisements in their stores

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Marketing Plan Sony PlayStation 4

4.4.1 Marketing slogans and logo

The PlayStation 3 had a lot of very catchy (memorizable) slogans. Most of them substituted the letter e or E with the number 3, which looks like a horizontal mirrored E. This is of common use in the internet speech of younger generations, but it also refers to the 3 in PlayStation 3. We want to have slogans for the PlayStation 4 similar to those. The 4 can substitute the letter A, but can also substitute the word for. The following slogans will be used for marketing purposes: RE4LITY IS JUST A G4ME 4 VIDEOS, 4 MUSIC, 4 GAMES, 4 YOU.

This will be the logo of the PlayStation 4:

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Marketing Plan Sony PlayStation 4

4.5. Marketing objectives

All these objectives are based on numbers and facts of the predecessor, the PlayStation 3. Profitability The break-even point of the PlayStation 4 is expected to be reached 3 years after launch. This will be an improvement of half a year in comparison to the PlayStation 3.

Revenue Costs

10

20

30

40

Mio. units sold

Market share and volume It is realistic to expect a total of 30 million sales of PlayStation 4 units 3 years after launch. The market share will be about 35% of 8th generation video consoles. As the PlayStation 3, Xbox360 and Wii will still be sold the next few years, also the total console market share has to be taken in consideration. We expect the total console market share to be about 15%. The offline console market will lose volume in favour of the upcoming cloud gaming market (Gaming on Demand). We will take this as a chance and develop an upgrade for the PlayStation 4 for our upcoming cloud gaming service. Toni Hoang, Tim von Oldenburg -25-

Marketing Plan Sony PlayStation 4 Launch The launch date of the PlayStation 4 is set to be in October 2012. You will find further information in Price and distribution.

5. Evaluation and Control

There are three values that can be considered when evaluating the success of the PlayStation 4. market share sales volume (and therefore takeover) customer satisfaction

The first and second one, market share and sales volume, are both measurable, objective values. The Sony Market Research Team will, at the middle of every quarter, task an independent market research company with the providing of these numbers. Also, the Sony Market Research Team will quarterly do a survey to find out the users' satisfaction with the product. Additionally, we will set up a feedback channel for our customers, containing support telephone and email easy return and repait service

The results of these tasks are used to check whether we reached our goals or not. We want to be permanently informed about market share and market trends weaknesses and strength of our marketing plan weaknesses and strength of the PlayStation 4 itself -26-

Toni Hoang, Tim von Oldenburg