129-Sony in the Game Business

Sony has just introduced a new PlayStation3. This product comes in a new slim form factor. Its price is $299. This is a 25% reduction from the $399 price of the current model of the PlayStation3. The price cut comes as the PS3 has struggled against its competitors, whose products have carried lower prices. Sony was in a Leader’s Trap.

Not only is the PS3 struggling against lower-priced competitors, it is also facing the head winds of a badly depressed market. Industry sales of game hardware and software are down 29% from a year ago.

The problem? Even at the new price, the product is more expensive than the industry leader. Nintendo’s Wii console sells for $250. The wildly successful Wii sets the price bar for the heart of the market. Its total console sales have passed 20.7MM compared to just over 15.5MM for the Microsoft Xbox and about 7.9M for the PS3. A competing console price higher than $250 really focuses the customer’s attention on the value of the marginal benefits.

Sony justifies the fact that the PS3 will remain the more expensive console because it offers a Blu-Ray player. Customers may not see it that way (see the Perspective, “The Two Greatest Consultants in the World” on StrategyStreet.com). The new PS3 may end up as a high end, Performance Leader, product with limited market share.

Sony has climbed part way out of its Leader’s Trap (see Video #42: Leader’s Trap on StrategyStreet.com) but still has a way to go. You will see more of the same in our next blog.

Posted 8/31/09

Update:

The video game industry marked yet another sales record last year, it is now selling over $130 billion in products. 2022’s Top 10 biggest video game brands are also largely the same as in the previous years. The following lists the Top 10 biggest video game companies 2022 in the world by the achieved gaming revenue last year.  Sony clearly has escaped its old Leaders Trap.

Sony’s current game prices appear to be competitive with the games of its important competitors. Here are some prices in mid 2022:

For comparable consoles:

Sony PlayStation 4 slim $529

Microsoft Xbox series X $520

For video games themselves:

Sony PlayStation 4: $41.21

Xbox series S: $39.28

Nintendo Pokémon Legends: Arceus: $44.39

Activision Call of Duty: Vanguard: $34.34

The 10 Biggest Video Games Companies in the World 2022 According to the Website All Top Everything

(based on latest revenue numbers as of March 2022, in U.S. Dollars)

TOP 10 BIGGEST VIDEO GAME COMPANIES IN THE WORLD:
1. SONY
Gaming Revenue: $24.9 billion
2. MICROSOFT
Gaming Revenue: $16.3 billion
3. NINTENDO
Gaming Revenue: $15.3 billion
4. TENCENT
Gaming Revenue: $13.9 billion
5. ACTIVISION BLIZZARD
Gaming Revenue: $8.8 billion
6. ELECTRONIC ARTS
Gaming Revenue: $5.6 billion
7. EPIC GAMES
Gaming Revenue: $5.1 billion
8. TAKE-TWO INTERACTIVE
Gaming Revenue: $3.4 billion
9. UBISOFT
Gaming Revenue: $2.5 billion
10. BANDAI NAMCO
Gaming Revenue: $2.0 billion

It appears that Sony is not only out of the Leaders Trap but also has become the industry’s price and product leader. With this position, Sony forces other competitors to either price exactly where it is or slightly below in order to attract customers. See HERE for more explanation.

8/22

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THE SOURCES FOR STRATEGYSTREET.COM: For over 30 years we observed the evolution of more than 100 industries, many hostile.  We put their facts into frameworks applicable to all industries and found patterns.  Strategystreet.com describes the inductive results of these thousands of observations and their patterns.