Sony Corporation and the Video Game Console Market: 1 A Competitive Analysis
By Ryan Bogner, Peter Hung, Guan Wang, and Steven Wang
This report evaluates Sony Corporation’s strategy in the console gaming market from the top-down perspective of the entire corporation.
Executive Summary Sony’s current strategy in the video game console market is simple: use the technologically superior Playstation 3 as a loss leader to introduce the Blu-ray optical drive2 into consumers’ homes and leverage that market penetration to drive content sales once Blu-ray is established as the de facto standard for optical storage. It is therefore in Sony’s interest to reach the tipping point for ...view middle of the document...
The three main competitors are Nintendo, Sony, and Microsoft. The three are fairly dichotomous, either innovative and user friendly or technologically pushing the envelope. Nintendo has made its mission to do the first.4 Sony and Microsoft both fall in to the latter category. Thus, safe in a fairly differentiated position, Nintendo is in a dominant position in the marketplace. It has the expertise and reputation to not only maintain its position, but push out would be competitors. This has paid off and Nintendo sales of the Wii are far outpacing original expectations. Sony is no longer dominating the market, and compared to the previous distribution of demand for gaming consoles is losing significant ground. In terms of market share, Microsoft has stayed in about the same position as the previous generation of consoles. (See Figure 2.) The consumer market is segmented mainly by age. The casual gamer, consumers who do not treat gaming as their main source of entertainment, represents 36 percent of the market.5 This
A Blu-ray optical drive plays high density Blu-ray disks up to ten times the capacity of current DVDs. For more information, please refer to the “Blu-ray Disc” entry on Wikipedia, available at http://en.wikipedia.org/wiki/Blu-ray. 3 “Annual US Video Game Sales,” The NPD Group, http://retailindustry.about.com/od/seg_toys/a/bl_npd012703.htm 4 “The development of games that are more complex and graphically intense has been the focus of game companies for too long. . . . Nintendo has implemented a strategy, which encourages people around the world to play video games regardless of their age, gender of cultural background. Our goal is to expand the gaming population.” – Satoru Iwata, Nintendo President & CEO, in Nintendo’s 2006 Annual Report 5 “Annual US Video Game Sales,” The NPD Group, http://retailindustry.about.com/od/seg_toys/a/bl_npd012703.htm
group tends to be between the age of 18 and 24 and white.6 Nintendo is aggressively courting non-traditional gaming groups outside this traditional profile in an attempt to increase the size of the console market. In contrast, Sony and Microsoft court the “hardcore” gamer and expect console sales to trickle down to more casual gamers. These companies focus on serving their existing customer base, a group that views gaming as their primary source of entertainment. This “hardcore” group, which represents 11 percents of the market 7 , is more likely to play competitively and tend to buy more games and spend more time playing games than casual gamers. This divergence of strategies is perhaps best illustrated by the marketing strategies of each company. Whereas Nintendo’s advertising consists of smiling, racially diverse groups waving around the Wiimote (wireless remote), Sony and Microsoft rely on less traditional means. Sony recently garnered much controversy over its Astroturf (fake grassroots) marketing strategies, including hiring spray painters to paint graffiti images of their...