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How Sony Can Win the Next-Gen War

How Sony Can Win the Next-Gen War

Wed 30 Oct 2013 12:23am GMT / 8:23pm EDT / 5:23pm PDT
Hardware

The [a]list daily looks at winning strategies for Sony in its multi-front battle to be number one in gaming

Sony Computer Entertainment

Sony Computer Entertainment is a Japanese videogame company specialising in a variety of areas in the...

playstation.com

Sony was the undisputed leader of the Big Three Console makers when the PlayStation 2 was the dominant console. That was many years ago, and soon it will be two entire console generations. While Sony and Microsoft had roughly similar numbers for the total consoles sold between the Xbox 360 and the PlaySatation 3, both were handily outpaced by Nintendo's Wii. The Xbox 360 has outsold the PS3 in the US for years, despite Sony's best efforts.

The battle is shaping up very differently for the next generation, because it's not just a console battle any more. Sony and Microsoft are competing in a global multiplatform battle for gaming hardware dominance, between consoles (current and next-gen), smartphones, tablets, streaming, VR headsets, and beyond.

Sony starts with some distinct advantages. First, Sony CEO Kaz Hirai understands the game industry very well, since he led Sony Computer Entertainment for many years. Microsoft doesn't even know who its next CEO will be at this point - and that CEO may not feel that games are an important part of Microsoft's future. Second, Sony has 20 years of game creation to draw on, with a solid library of games and deep experience in game making. Third, Sony has large and successful divisions creating music and movies, with an enviable content library in those areas. Finally, Sony is now producing an array of excellent smartphones and tablets that can work well with its overall gaming strategy.

You shouldn't minimize Sony's challenges, though. The company has struggled in recent years through major losses and restructuring, and while the picture is looking better right now this does not leave Sony with the sort of financial reserves enjoyed by Microsoft (with cash in the bank of around $80 billion).

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28 Comments

Bruce Everiss
Marketing Consultant

1,692 594 0.4
I am really not sure that this is a war worth winning.
Home electronic gaming has had three main ages.
First came home computers. Commodore, Atari, Sinclair.
These were killed off by piracy.
So the second age was consoles, which served as an anti piracy dongle.
But their business model was incredibly expensive to sustain and needed a huge critical mass.
Now we are in the third age, which is far, far bigger and more important. Gaming has become ubiquitous and is on mobile devices. We are heading for an installed base of 7 billion smartphones. As an industry it is our job to create products that entertain as many of these 7 billion as possible.

Consoles are dinosaurs. Will the PS4 and XB1 sell enough to get to a critical mass that makes it worth investing in blockbusters for them? It is a huge ask and an immense challenge for the platform holders. The cost of failure will be high. The cost of success might be even higher. They are pushing water uphill. And even if they succeed they will still be a small niche next to mobile.

Posted:11 months ago

#1
Popular Comment
AH, the daily dose of Bruce! Welcome back.
Now onto the excellent next gen games to enjoy!

Posted:11 months ago

#2

Scott Davis
Games Analyst

18 30 1.7
Popular Comment
@Bruce

I don't normally chip in to these kind of conversations, but I feel Bruce has hit a nerve with what I believe to be false preaching - apologies in advance.

I understand what you're saying, mobile gaming is huge: 1 billion active mobiles in 2012, 500 million of these were used to play games, around 32% of these players were payers - that's under around 166 million paying players. But when you look at the average spend for the mobile segment, its very low. The average revenue per download for the top top titles is just around $3-5 which the majority of games that can't make it into the top app charts can only aspire to coming close to.

You ask whether the new console generation can get to a critical mass that warrants investment? Well the games console market is already showing that it has that mass as it is projected to make up for about around 43% ($30 billion) of the global games market by the end of 2013 in comparison to the 18% ($12 billion) that the mobile market is projected to have - sure the mobile market has grown in spades over the past 2 years but even a market which has been stagnating for around 2 years is controlling the largest segment in the market and has been for some time.

The cost of success and failure on the console market is rapidly declining with the concentration on smaller and cheaper developed indie titles becoming a staple in next gen strategy with the majority of AAA titles being produced from a background of stupendous wealth and financial security. In contrast the cost of success on the mobile market is rapidly increasing as the mobile market is becoming heavily over crowded and is being dominated by a handful of titles with a tiny % of the titles on mobile controlling the majority of the grossing revenue each month with not much room for other, less-known titles, to get in on the action.

Now I'm not a console purist and am saying 'CONSOLE! CONSOLE! CONSOLE! - mobile certainly has it's merits and sleeper hits as Puzzle & Dragons has certainly proved, but I think you may be exaggerating with what you feel is a dying segment of the games market and using crazy numbers such as "7 billion" isn't going to re-enforce your argument when indeed that number is much lower than that, with a lower % of that playing games, and an even lower % of that actually being payers.

Posted:11 months ago

#3

Justin Biddle
Software Developer

159 484 3.0
Now now. Let's not let a silly thing like facts get in the way of a mobile crusade ;)

Posted:11 months ago

#4

Keldon Alleyne
Handheld Developer

448 419 0.9
@Bruce: I'll assume you are alluding to 7 billion potential smartphone users as significant smartphone power will become cheap enough for everyone to use as their primary computing device.

But let's think this one through, because unless there is some global economic overhaul that nobody has told us about I can't really take that figure seriously.

Posted:11 months ago

#5

Caleb Hale
Journalist

155 231 1.5
Proselytizing that mobile games are going to take out console/PC games is like saying there's no market for fine jewelry because you can buy the cheap, plastic kind dropping a quarter into a dispenser outside a grocery store. I get that mobile gaming technology is (or soon will be) sophisticated enough to match consoles, but the demand for console-quality games, played with a controller in front of a large television, like that fine jewelry, isn't going away.

I also believe a lot of people are underestimating both Sony's and Microsoft's willingness to treat their games like a service that can be accessed from more than just your home console. It's not hard to see both companies' investments into building cloud computing infrastructures will likely culminate in the player's ability to access their PlayStation or Xbox games from a tablet or similar mobile device, although a seamless success in this venture may be years (or perhaps even another generation) away.

Posted:11 months ago

#6

Dan Howdle
Head of Content

280 810 2.9
7 billion install base? That would be quite a feat with a global human population of 7.046 billion. That's, you know; everybody. Might want to re-check that figure.

Posted:11 months ago

#7

Bruce Everiss
Marketing Consultant

1,692 594 0.4
@Scott Davis

What you fail to take account of is trajectory.
Consoles have been in decline since 2008. The last two major console launches failed.
Meanwhile mobile phones are selling at a billion units a year and the user base is exploding.

Posted:11 months ago

#8

Keldon Alleyne
Handheld Developer

448 419 0.9
@Bruce: Consoles have mostly declined since 2008 because prior to that we had a massive spike from the Wii. Ignoring the Wii's influence you will have a true professional understanding of the video game market's behaviour.

Posted:11 months ago

#9

Bruce Everiss
Marketing Consultant

1,692 594 0.4
@Dan Howdle

We have had this discussion on here before.
There are already over 7 billion active mobile phones in the world, of which about 2 billion are smartphones. But soon no more dumb phones will be made. So all the world's mobile phones will end up being smartphones.
In very many villages around the world the smartphone is the first computer they have seen. They go from having no electricity to having access to all the world's knowledge.

Posted:11 months ago

#10

Bruce Everiss
Marketing Consultant

1,692 594 0.4
@Keldon Alleyne

The Wii collapsed the most. But all home consoles have been in decline since 2008.
Google provided this straight away: http://news.cnet.com/8301-10805_3-57547692-75/xbox-360-shines-bright-in-otherwise-dismal-game-market/

Total sales for the video game industry fell to $755 million last month, a 25 percent drop from October 2011. Sales of gaming hardware took a 37 percent nosedive, while software sales fell 25 percent. Only video game accessories managed to eke out a gain of 5 percent.
The industry has been on a downward spiral for the past year as more people turn to mobile devices to get their gaming fix.

And this: http://www.engadget.com/2012/08/10/npd-xbox-360-ruled-a-steadily-declining-video-game-empire-in-july/

There is loads more.

Posted:11 months ago

#11

Justin Biddle
Software Developer

159 484 3.0
The fall in hardaware sales and software sells couldn't simply be the natural end of the current generation? I would not be surprised if similar figures appeared for previous generations. You appear to be willing to ignore some key parts of the very articles you posted

"The industry as a whole was unmistakably feeling the combined effects of the pre-holiday doldrums and a console generation that's long in the tooth"

Yes one of the articles attributes it to mobile sales but you could say that neither statement from either article justifies their reasoning for both.

You might find this interesting.

http://ignorethecode.net/blog/2013/09/13/the_videogame_sales_cycle/

It shows the sales cycles for this and previous generations. What do you know? There seems to be a massive sales dip towards the end of the cycle. I'm guessing each time consumers stopped buying consoles for the mobile revolution that never happened!

Joking aside I'm not trying to claim that this proves that the next generation of consoles will succeed or not. Just that I can no more use those figures as proof of my argument than you can of yours (although historical trend would suggest that a drop off in sales at a cycles end is not unusual throughout the generations). Only sales figures for the next generation over time will tell you what is happening one way or another.



This sounds an awful lot like your argument. Insert Wii-U for dreamcast and mobile for pc and away you go.

Edited 4 times. Last edit by Justin Biddle on 30th October 2013 2:55pm

Posted:11 months ago

#12

Dan Howdle
Head of Content

280 810 2.9
Popular Comment
I'm a very well travelled guy. Just back from a month in the Himalayas, in fact. The reality in which the rural third world is gearing up for smartphones is not the one I've personally rubbed shoulders with. Empirically speaking, high technology there is clean water, a steel harrow, or a flushing toilet. Where basic life necessities are subsisted for, mobile computing - any type of computing - is not just a long way off, it's unlikely ever to make it onto that list of basic needs.

It's not a matter of when they will catch up with Western technology, but that the mechanisms of third-world rural society will never have need of it.

Second of all, the downward sales spiral of console and PC gaming is standard end-of-generation fare, and there is no evidence whatsoever that those spending less than they were are taking the money saved and blowing it on apps.

Edited 1 times. Last edit by Dan Howdle on 30th October 2013 2:55pm

Posted:11 months ago

#13

Justin Biddle
Software Developer

159 484 3.0
Exactly. In fact if the sales figures weren't dropping I'd be wondering why the hell they were bringing out new consoles if all is selling well.

I also note that looking at those figures that only Wii has been declining since 2008. PS3 and XBOX 360 peaked in 2011

Edited 1 times. Last edit by Justin Biddle on 30th October 2013 3:11pm

Posted:11 months ago

#14

Sandy Lobban
Founder and Creative Director

314 206 0.7
Sony have all the content thats for sure, but they dont have a universal method of distributing the content. As ever they need an OS that is extensible and applicable to different devices and one that people can understand. Their message isnt clear. I doubt that is coming any time soon, but they could be up there with the big players if they nailed such a thing.

Edited 1 times. Last edit by Sandy Lobban on 30th October 2013 3:18pm

Posted:11 months ago

#15
I think too often, we get too caught up in the shrubs than the entire forest ecosystem.
Game developers need to distribute content. This content will be delivered to everyone with opposable thumbs, toes (and nipples) across every conceivable delivery system and maybe oneday straight into the mind.

So, trying to say the big toe is superior to the little toe, is not going to foot it :)

Posted:11 months ago

#16

Scott Davis
Games Analyst

18 30 1.7
Popular Comment
@ Bruce

You can't just claim 'trajectory' as an excuse to write off the console gaming market, that is just severe mis-information. We are at the end of a current console generation and the recent trajectory of the mobile market has been partly down to the emergence of maturing markets for android devices worldwide - this does not represent the overall picture of the mobile gaming market.

iOS sales have started to stagnate, the % of device owners who play games has remained stable year on year, and the % of these players that are paying for games - whilst they have changed how they spend there money, with around 91% of grossing revenue now coming from in-app spend - has actually gone down slightly year on year.

I don't disagree that the mobile market has seen a boom recently as android has become easier and cheaper to get in emerging markets and I don't disagree that the mobile market will continue to grow...BUT this will happen alongside the console gaming market, not instead of the console gaming market which is what you seem to think.

Edited 4 times. Last edit by Scott Davis on 30th October 2013 4:47pm

Posted:11 months ago

#17

Adam Campbell
Associate Producer

1,178 967 0.8
What you fail to take account of is trajectory.
Consoles have been in decline since 2008. The last two major console launches failed.
That's odd. The console installed base continues to break its own record each generation, in terms of fastest sales and overall market size.

I don't think the next generation is lacking in momentum or potential to increase the market even more and continue to be a breadwinner for game revenues.

I'm with you on believing mobile has great potential but I couldn't use fancy numbers generated by them as a way to discredit the success consoles still continue to enjoy, with not much sign of letting up either.

Posted:11 months ago

#18

Brian Lewis
Operations Manager

132 84 0.6
Sadly I have to agree that Bruce is right...
Happily I have ot agree that Bruce is wrong...

The changes in the market make the consoles of old no longer viable as a new product. Any attempt to launch a 'new' console, using the old models is going to be very costly, and will clearly result in failure. (This is where Bruce is right). However, that does not mean that a console (dedicated TV gaming machine) is no longer viable. There will be consoles, and they will continue to provide entertainment. (This is where he is wrong).

Just as TV replaced Radio, and how the internet is replacing TV today, there will be new mediums that bring entertainment to the masses. However, just like in the past, the old media does not go away. Radio may not be the 'key' channel for entertainment today, but it is still a HUGE industry, that is used by millions daily. Console may no longer be the driving force for electronic entertainment, but that doesnt mean it isnt a viable business.

No one should be surprised if the next generation of consoles does not have the success of previous generations. However, to declare consoles as a dead end product, well that is a bit of an exaggeration.

Posted:11 months ago

#19

Robin Clarke
Producer

321 748 2.3
Popular Comment
Hey guys, ice cream sales have been steadily declining since August. Ice cream is over. If Walls would only listen to me then all their problems would be solved. I bought the first packet of their sausages in 1937 you know.

Posted:11 months ago

#20

Rick Lopez
Illustrator, Graphic Designer

1,269 942 0.7
7 billion mobile "smart" devices.... doesnt mean 7 billion gamers.

Edited 1 times. Last edit by Rick Lopez on 30th October 2013 5:52pm

Posted:11 months ago

#21

Hugo Dubs
Interactive Designer

163 24 0.1
Im really not an expert but it seems that next-gen consoles are well in place to be successful as products to sell. I think that the pre orders being sold out are a good starting point. I mean, if there is enough people willing to buy a new console, it must be interesting to sell consoles then. Also, even if current business models in the gaming industry are not substainable for everybody, a title such as GTA V demonstrates that there still is a load of cash to make out of the console market.

I know that here are business talks but from a product point of view, consoles' games and phone apps are very different to me. You don't enjoy a gta in the same way than a doodle jump, and it's not the same people buying those products. from my little point of view, it's like saying that a bed and a chair are the same product, even if it's both part of the furniture market.

current gen was supposed to be the last, the upcoming one is supposed to be the last, so it must exist a reason MS, Sony and Nintendo still make consoles.

Posted:11 months ago

#22

Paul Jace
Merchandiser

935 1,410 1.5
Bruce if your plan was to hijack the thread so that we completely forget to talk about Sony's chances than "a winner is you".

Posted:11 months ago

#23

Farhang Namdar
Lead Game Designer

75 47 0.6
I think you guys need to work more, how many hours do you guys spend on reading and writing posts. Impressive, it's almost like we're not in the same industry.

Posted:11 months ago

#24

Steve Goldman
Journalist.

81 92 1.1
Quite honestly Steve Peterson is a bias fool who does not know ANYTHING about the industry

hates on nintendo without fact, and kisses sonys behind

Posted:11 months ago

#25

Bruce Everiss
Marketing Consultant

1,692 594 0.4
@ Steve Goldman

There is no need for posts like this on a professional industry forum.
Go to one of the many fanboy sites if you want to engage in ad hominem rubbish like this.

Posted:11 months ago

#26

Paul Jace
Merchandiser

935 1,410 1.5
I think this is the first time I've ever agreed with a post from Bruce.

Posted:11 months ago

#27

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