Battle for Video Game Supremacy

Tokyo Tsushin Kogyo

 Founded 7 May 1946 Nihonbashi, Chūō, Tokyo, Japan

 Founders Masaru Ibuka and Akio Morita

 Headquarters Sony City, Minato, Tokyo , Japan

 Area served Worldwide

Sony Group Headquarters at Sony City in Minato, Tokyo

Sony's Battle for Video Game Supremacy

EAT

GAMING INDUSTRY
The Gaming Console Media Formats
&
Two Gaming Title CD/DVD/HD DVD

Wars
Disappointment in establishing own technology formats

Universal Media Disc(UMD)

Beta-Max
Replicating the PS2’s success for the new PS3
 PS3 Price - $599
Barrier Advantage

Will not be considered as Standalone Blue Ray

a toy anymore Players $900-$1,000

Not an impulse purchase Older Generation PS Games

Demographic break down of Video Game Players
Video Game Software Sales
 Decline in Software Sales

Wait for the next Do not purchase new

generation of product S/W for outdating
systems
 The Rise and Fall of Atari

Odyssey (1966) Pong (1975) VCS (1977)

 The Rise of Nintendo
Nintendo focused on producing fewer, but higher quality games.

Run only Nintendo approved Licensed out development of

games, with help of security chips games 20% commission and a
installed in the console minimum of 30,000 units advance
order for the console

30 different suppliers for different strict inventory management,

parts of the console and self final quickly removing games that
assembly to keep the production were not selling well and, at
secret times, restricting supply to
maintain the appearance of
scarcity
Nintendo represented more than 90% of US home console market due to hit titles
 Sony Enters the Arena
Believing that a three-dimensional (3D) game could provide a more immersive experience than a
traditional two-dimensional (2D) game, the Sony PlayStation, launched in 1994, was designed as
a fully three-dimensional machine.
Top selling video games 2005
Game Development and Publishing
Public Backlash
To preempt federal regulation, the Entertainment Software Ratings Board (ESRB) was
established in 1994 to assign ratings to inform consumers about the content in games.
 Game Development and Publishing
Gaming manufacturers made their money not from the sales of consoles—in fact most consoles were
priced below cost— but rather from software.

1) Microsoft’s Xbox - sold at a $100 loss per unit

2) Microsoft’s Xbox 360 - sold at a $130 loss per unit

3) Sony’s PS3 Premium version – will be sold at a loss of $250 per unit

4) Sony’s PS – sold at $8 profit per unit

5) For every game title sold – profit $5-$8 (Gaming Manufacturers)

 SWOT Analysis
S 1. Superior brand name: Sony PlayStation is W 1. The lack of proximity of Sony Corporation's
one of the most popular and desired production facilities to customers: Sony
t video game systems among consumers. e Corporation's production facilities are located
r a in distinct regions far away from end-users. As
2. PlayStation is able to defeat competitors k a result, the corporation may be unable to fully
e such as Microsoft's Xbox and Nintendo's address consumer needs (Sterman, Jekarl, &
n
n Wii thanks to this edge (Sterman, Jekarl, Reavis, 2007).
& Reavis, 2007). e
g s 2. Sony has a weak financial structure, which is
t 3. Sony Corporation is known for its
s
defined by declining income streams along with
technological prowess, as evidenced by rising expenses and liabilities, which can result
h the PlayStation, which is both e in decreased profit margins.
s outstanding and inventive. s
T 1. Continued economic downturns: The
economic crisis that has gripped the world's
h major countries has had an impact on Sony
Corporation's activities.
r 2. The consequences of the black market: The
e industry continues to be plagued by smuggled
and counterfeit video game systems. As a
a result, Sony loses from lost sales and revenue
opportunities.
t 3. Changing compliance regulations: Sony
s Corporation's operations are constantly
scrutinized by numerous environmental,
health, and safety standards. Sony's
profitability and sales margins have suffered
as a result.
O 1. Joint ventures, mergers, and acquisitions: The
flexibility of entering into joint ventures, as
p
p
well as crucial corporate acquisitions, can
benefit Sony greatly. These would allow for
o greater operational diversification and
expansion (Sterman, Jekarl, & Reavis, 2007).
r
t 2. Diversified technology: Sony Corporation
u can use today's technical advances to reinvent
its video game systems and reposition itself
n
i
in the video game business.
t
i
e
s
 Different Strategies for Different Audiences

TARGET Audience
TARGET Audience

Atari and Nintendo Sony

Children, Teenagers, School College Graduates, males in their
20s

Sony owed much of the PlayStation’s success to an effective campaign that targeted maturing gamers looking for edgier, more
sophisticated games that tested their gaming skills. As Sony claimed industry dominance, a new mantra spread over the industry: target
the core gamers – males in their 20s. The strategy worked extremely well for Sony which sold over 100 million of its PS2 units
worldwide
 Console Wars Re-Ignite
The launch of the Xbox 360 in November 2005
marked the beginning of the first console war
in which Internet connectivity was a core
component of all the major hardware
manufacturers’ strategies.
Nintendo, with its new Wii console, looked forward
to launching the first Nintendo console with well-
integrated online functionality that, among other
things, provided Wii owners with weather updates
and email and web browsing services.
1. Sony would be entering the online video game arena with
the PlayStation Network Platform, described as an
“ecosystem” comparable to Microsoft’s Xbox live which
would be launched simultaneously with the PS3.

2. The platform would allow players to connect to the Internet

so that they could play against each other online as well as
communicate through email and live voice chat.

3. PS3 owners would also be able to purchase games although

it was not known if the back catalog of PlayStation and PS2
games would be available for download.

4. Unlike the Xbox 360, the PlayStation Network Platform

would allow licensees to connect their own game servers to
the network. One analyst opined, “Sony sees online as more
of a loyalty builder for their audience rather than a money
making strategy. Microsoft sees it as both.
 Recommendations
In November 2006, with the launch of the Sony PlayStation 3 a mere weeks away, Sony Corporation’s
CEO Sir Howard Stringer reflected on the past 30-year history of the video game industry, while
crossing his fingers that the PS3 would have a successful launch in an increasingly cut-throat industry

1. Sony should aim at making the console more appealing to hardcore gamers.

2. The PS3 was initially marketed as a multimedia device, offering gaming capability, as well as a built-
in Blu-ray player and wireless internet connection and it focused too much on other aspects of the
PS3 and there was confusion over what the machine was.

3. Sony should encourage games publishers to develop more titles for the PS3

4. Having tapped into the casual gaming market, Microsoft and Nintendo are working to extend
functionality.

5. Despite trailing the Wii on sales, PS3 is arguably best placed to take advantage of market
convergence. Sony's long-term plan remains for the PS3 to become a multi-media hub in the home.

6. However, for this strategy to be successful, Sony will have to overcome a unique set of marketing
challenges.
PS’3 Promotional Video