Three ways for Sony to avoid getting left behind by Microsoft
- Written by Hamza Mudassir, Visiting Fellow in Strategy, Cambridge Judge Business School
Sony has had a rough few days. The Japanese tech giant has lost a whopping US$14 billion (£10 billion), or about 9% of its total value, since rival Microsoft’s announcement[1] that it is purchasing popular videogames maker Activision Blizzard for nearly US$70 billion.
While some of Sony’s loss is arguably due to short-term panic selling across the wider market, the company is clearly in a corner. PlayStation is Sony’s largest, most profitable[2] and fastest-growing business, and the loss of a key supplier of games content to its arch rival could make its consoles less attractive to gamers around the world.
Sony share price
Google Stadia is great tech but struggling.
Dennizn[14]
2. Grow out of semiconductor dependence
The world semiconductor shortage has hit console sales[15] by slowing down production. Sony, however, has a slight edge[16] from having decided to increase production[17] of its legacy PlayStation 4 consoles. These are much older than Microsoft’s equivalent Xbox Series S, meaning they use simpler chips and are easier to manufacture.
Yet this advantage is not sustainable, given the semiconductor drought[18] will likely continue for a number of months, and the increasing appetite[19] for gaming. The solution is to let gamers stream titles to devices other than dedicated consoles, but PlayStation Now is far from ubiquitous. This shows a clear lack of will by Sony to reduce dependence on its console business, which in turn is critically dependent on semiconductor manufacturing. Whether by buying Stadia or making a step-change investment in PlayStation Now, Sony should aim to make its titles run on most, if not all, smart TVs, phones, set-top boxes and computers.
There are, it should be said, some green shoots for Sony on other platforms. The company’s latest open-PC release, God of War, has sold quite well[20] and received rave reviews from gamers and critics. Yet, thanks to Sony’s “exclusivity” strategy of prioritising the release of its games on its own console first, God of War was on PlayStation 4s four years earlier.
Sony’s PC version of God of War has been a success.
Ralf Liebhold[21]
By contrast, Microsoft publishes all its new titles on PC and Xbox consoles simultaneously, focusing on user-base growth and not just console sales. Sony insists it will continue with exclusivity, having relied on it to sell many more PlayStations in the past. Yet not only does Microsoft’s multiplatform approach lower marketing costs and immediately spread the cost of games development across a much larger user base, exclusivity makes little sense when new consoles are in short supply. Sony would be better off copying Microsoft’s strategy.
3. Lead the metaverse movement
Microsoft has been at the forefront of the metaverse[22] movement, which plans to merge our digital and physical realities via an augmented or virtual reality (VR) headset. Such technology could be as important an innovation as the internet was in the 1990s, and the Activision deal gives Microsoft control of gaming worlds such as World of Warcraft and Call of Duty which could be the key to mass consumer adoption of VR.
Sony’s PlayStation VR was actually the world leader[23] in these headsets until 2021, where it unofficially lost the crown to the Meta (formerly Facebook) Quest 2 device. Despite this early lead, Sony’s position on the metaverse movement is unclear. Its upcoming PS VR 2 headset will still be tethered to the PlayStation 5 console, despite customer appetite leaning heavily towards untethered, free-roaming devices.
PlayStation VR is no longer number one.
Christian Bertrand[24]
Sony has long been cautious about new markets and usually waits for others to develop them before swooping in. But that is unlikely to work against competitors as large, networked and powerful as Microsoft, Meta and Apple[25] (which is also rumoured to be developing a VR headset). Sony needs to move fast and with a clarity of purpose – otherwise the next decade will see it lose even more ground to these tech giants as they recreate the very reality we live in.
References^ Microsoft’s announcement (theconversation.com)^ most profitable (www.sony.com)^ expected to (www.gamesradar.com)^ eight years (www.theguardian.com)^ ongoing investigation (www.denofgeek.com)^ 25 million (www.theverge.com)^ are still questionable (www.essentiallysports.com)^ subscriber numbers (www.statista.com)^ 3.2 million (www.pushsquare.com)^ streaming performance and availability (www.youtube.com)^ startup called Gaiki (www.theverge.com)^ DVDs and BluRay (www.pcmag.com)^ Google’s struggling (www.trustedreviews.com)^ Dennizn (www.shutterstock.com)^ hit console sales (www.verdict.co.uk)^ a slight edge (www.verdict.co.uk)^ increase production (www.bloomberg.com)^ semiconductor drought (www.zdnet.com)^ increasing appetite (www.statista.com)^ sold quite well (www.videogameschronicle.com)^ Ralf Liebhold (www.alamy.com)^ the metaverse (theconversation.com)^ world leader (www.androidcentral.com)^ Christian Bertrand (www.shutterstock.com)^ Apple (www.wsj.com)Read more https://theconversation.com/three-ways-for-sony-to-avoid-getting-left-behind-by-microsoft-175713
