3 ways Sony can fight back against Microsoft
The Japanese tech giant needs to step it up
1. Buy Google Stadia
Sony’s biggest threat from Microsoft is actually Xbox Game Pass, a Netflix-like subscription that allows users to download or stream hundreds of titles at just US$15 per month. Game Pass has25 millionsubscribers and is a boon for price-sensitive PC and console gamers, frequently offering blockbuster titles on launch day.
Every time Microsoft buys a videogame maker, it has put their entire games catalog on Game Pass, giving gamers a fear-of-missing-out (or FOMO) similar to what makes many people continue with their Netflix subscriptions. While Game Pass’ profitsare still questionableat this early stage,subscriber numbersare rising exponentially.
Sony’s similar service, PlayStation Now, has just3.2 millionsubscribers. Despite a much bigger catalog of games and a competitive monthly price of US$9.99, itsstreaming performance and availabilityare among the worst of its peers: Sony is still using tech that is nearly nine years old, from its purchase of astartup called Gaiki.
When a market-leading business is replaced, the upstart almost always starts by selling to neglected budget users – witness how digital cameras defeated Kodak, for example, or how Netflix took onDVDs and BluRayby aiming squarely at the lower end of the market. By allowing Microsoft to get entrenched with budget gamers, Sony has exposed itself to an emergent business model that it might not be able to compete with.
The fastest way of catching up might just be to buyGoogle’s strugglingStadia streaming service. Stadia’s performance and reach is among the best, and its failure can be distilled down to a lack of content and a business model that charges users separately for games and platform access. Combining Stadia’s tech with PlayStation Now’s vast catalog and simple price point could put Sony back on the offensive.
Google Stadia is great tech but struggling. Credit: Dennizn
2. Grow out of semiconductor dependence
The world semiconductor shortage hashit console salesby slowing down production. Sony, however, hasa slight edgefrom having decided toincrease productionof 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 thesemiconductor droughtwill likely continue for a number of months, and theincreasing appetitefor 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, hassold quite welland received rave reviews from gamers and critics. Yet, thanks to Sony’s “exclusivity” strategy of prioritizing the release of its games on its own console first, God of War was on PlayStation 4s four years earlier.
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 ofthe metaversemovement, 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 theworld leaderin these headsets until 2021, when 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.
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 , andApple(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.
This article byHamza Mudassir, Visiting Fellow in Strategy,Cambridge Judge Business Schoolis republished fromThe Conversationunder a Creative Commons license. Read theoriginal article.
Story byThe Conversation
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