Talking Business: Sony vs. Microsoft (Part 1)
This will be a two part series forecasting each companies execution over the next 1-5 years and today we start with Sony.
Sony vs. Microsoft is something you regularly hear in blogs and the social media universe from each of their respective fan boys. What about their business plan, is it sustainable? With two conglomerates like Sony and Microsoft, is gaming just a branding effort or a critical piece to each company’s profitability? Without getting too caught up the weeds let’s break down where they stand now, and future projections.
Sony has a long track record with game consoles and is heavily accepted everywhere. PlayStation , which is Sony’s game console brand, has been relevant since 1994 and has continued to garner more and more favor throughout the years. The current generation platform was introduced at a cheaper price than its competition and has continued to lead the way in sales since being released. They continue to give gamers what they want and have superior hardware to graphically lead the way against the likes of Microsoft.
As with any public company, decisions to restructure can come about at any time. Sony has recently decided to exit the PC business and cut other low margin products. Experiencing a recent 20% nosedive in year over year YOY (April 15-March 16) smartphone sales can only point to the next area of cuts. In addition the recent Earthquake in Japan has also affected Sony’s supply chain.
Want some good news? Sony’s PS4 hardware & software sales were up 11.8% YOY. What does this mean for gamers? It means Sony will be continuing to pour resources into this department. In any good business the CEO knows to keep feeding the profit cows while they anxiously await another trip to the butcher. Gaming is 16% of Sony’s overall business and this number can continue to grow as they continue to go after more of the overall market.
Sony is betting on games, games, and oh yes, more games, but in October 2016 they are also gambling on VR. Tech research firm Tractica LLC anticipates the VR market to grow to nearly $22 billion by 2020. How much of this market can PlayStation and Sony get a hold of? Well, with their price point being $399 they come in under the competition, specifically Oculus and HTC. They also have over 50 games in production for their upcoming peripheral. The only thing that could stop Sony, is well, Sony. How will they support VR while it loses the company money initially? Will they continue to fund this division even if their audience doesn’t accept it with open arms? Will PlayStation VR share the same fate as their PC business? Only time will answer these questions, but without a doubt they’re all in on VR.
There are several concerns facing Sony over the next five years, but with their history, in house IP, and VR being on the horizon, they are poised to continue greatness. The game segment being such a large part of their overall business (at 16% it sits atop all other segments), it’s Sony’s top priority. In the foreseeable future they will continue to thrive and produce great hardware and content.
Check back next week to view Part 2 of this story covering Microsoft.
Sony Corporation. S&P Capital IQ, McGraw Hill Financial. June 11th, 2016. Accessed June 14th, 2016
Sony profits boosted by Playstation sales. (n.d.). Retrieved June 14, 2016, from http://www.bbc.com/news/business-36157706
Tractica. (n.d.). Retrieved June 14, 2016, from https://www.tractica.com/research/virtual-reality-for-consumer-markets/