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Sony’s Battle for Video Game Supremacy

Sony’s Battle for Video Game Supremacy

Theresa Iennarella

Latasha Dobbs

James Friel

Amanda Hampton

Rahul Tiruangari (Absent/No Participation)

Pawanvir Singh

Marketing Management

Due Date: February 25th, 2018

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Sony’s Battle for Video Game Supremacy

Introduction:

“Greatness Awaits”, this is a slogan by Sony that every gamer knows. Sony has been

known for its electronics for years and has been in the electronic industry for decades and

decades. Form their Walkman’s to their TV’s, Sony has excelled in technology for years. But

there was one product that was announced in 1991, that would change Sony forever, and set an

industry standard in the gaming world. They announce its first gaming system, called the

PlayStation. This was a fast-growing market, and Sony wanted its hands in it. Prior to the

PlayStation, Nintendo was the only successful company to sell a system.  In Fortune magazine,

Olafsson was quoted as saying "The video-game business...will be much more interesting (than

when it was cartridge based). By owning a studio, we can get involved right from the beginning,

during the writing of the movie." This was the era for Sony and its unstoppable gaming system.

This paper will discuss the successes and weakness of Sony’s PlayStation industry. As well as,

offer solutions to correct the issues.

Identifications

Sony is a company that most people around the world know. They have built a name and

a brand for themselves. They have many slogans that portray who they are, such as; “Greatness

Awaits” or “Be Moved”, and now the more popular one “Like no Other”. But is Sony truly like

no other? The company has seen its ups and downs. When TV’s first came out they were the

leader of that industry. Then they began to invest in movies and gaming systems which hurt their

part in the TV industry. When LED TV’s came out, they lost the market to Samsung. Sony is

making money with their movie productions and gaming systems. According to Engadget,

“Gaming and Motion Picture arms saw increases in sales, but these were cancelled out by woes

in Mobile and Devices arms”. Sony has relied on its gaming department to make the company
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money and see a year over year growth in revenue and profit. And the Sony PlayStation has done

this. The PlayStation has been the leader in gaming since the PlayStation 2, and they have run

the market very well. But Sony still deals with issues that demand attention right away, to

continue their dominance.

The first issue that needs to be addressed by Sony, is the platform and its compatibility

with mobile devices and computers. The compatibility and integration with the Xbox and a

computer work great and have attracted a lot of consumers from PlayStation to Xbox. With

Xbox, a consumer is able to play his game and play with his friends that play on a PC. This is

also referred as cross platform. But Microsoft was not done yet, they also have integrated mobile

gaming with Xbox and PC. For example, if a consumer is playing Minecraft on their Xbox or

PC, then can continue the game on their mobile device, whether that be an iPad, tablet, or phone.

This allows them to play on the go. With PlayStation, they offer a proprietary product, that

allows you to play on the go. It is called the PlayStation Vita. This is a portable gaming device

that will allow you to play your games on the go. But the catch is, the consumer needs to buy the

unit at a price of $200. The PlayStation Vita failed for Sony, because of all the added costs with

the device. After the device was bought, there added costs such as monthly online subscription

and the games needing purchasing as well. Sony still leads the gaming market, but because of

the cross platform that they don’t offer, they are losing clientele to Microsoft.

The second issue that Sony management needs to address is the cost of the unit. Sony

PlayStation starts at $399, if the consumer wants the latest model with all the new features. Xbox

starts at $299 and also offers a free game with it as well. The Xbox has the same features that the

PlayStation has including; 4k player, controller, same speed etc.… The PlayStation is very

similar but yet price it at a higher price than the Xbox. The Xbox is also taking PlayStation

consumers because of price point. Price of a product in today’s economy is very important to a

consumer. This is why there is so much competition in every market, most people are shopping
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Sony’s Battle for Video Game Supremacy

for the best price. This is one of the main reasons why Amazon is beating most brick and mortar

stores.

And finally, the third opportunity in Sony’s PlayStation is the marketing inside retail

stores. It seems Microsoft has better displays of their products as well more of their products in

the store. A consumer gets attracted to displays and something that sticks out in their face. For

example, Best Buy stores have many giant displays of new games for Xbox rather than showing

it for PlayStation. Marketing is very important and necessary in a business, without it, products

and services will not sell. The marketing needs attention by Sony very quickly to continue to

retain their clients.

Evaluation: Quantitative Analysis

According to Marshall (2015),

a bottom-line profit is established first and then pricing is set to achieve the target.

Although this approach sounds straightforward, it actually brings up an important

reason pricing is best cast within the purview of marketing instead of under the

sole control of accountants or financial managers in firm. When pricing decisions

on a given product are made strictly to bolster gross margins, bottom-line profits,

or ROI (target return on investment) without regard to the short- and long-term

impacts of the pricing strategy on other important market- and customer-related

elements of success, the product becomes strategically vulnerable. Market

managers are in the position to take into account the competitor, customer, and

brand image impact of pricing approaches. Still, in preparing product budgets and

forecasts, marketing managers are expected to pay close attention to their

organization’s financial objectives. During the research that leads to a decision to

introduce a new product or modify an existing one, one key variable of interest is
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whether the market will bear a price point that enhances the firm’s overall

financial performance.

While Sony has proven successful in adapting their product offerings and business

models to maintain their position in the industry, it will be necessary for the company to

stay focused on the critical issues. A need for a more competitive cross platform, market

competitive pricing and increased, more modern marketing efforts will all aid to increased

performance for Sony. Implementing the suggestions as outlined will be helpful and

evaluating the success of these initiatives from a qualitative and quantitative standpoint will

be necessary for strategic continued growth.

Sony can focus on a few different key areas to determine success with implemented

changes designed to improve corporate profitability. A quantitative analysis can prove to be a

“more tangible, numerical objective…that can tell Sony what needs to be done and even how to

do it” (Mauer, 2017). With necessary changes to the areas of cross functionality, quantitatively,

Sony can measure this success by evaluating the total costs to the organization to enhance this

feature in their programming and what, if any, actual costs will be passed on to consumers in the

ways of either paid upgrades or increases in costs. Comparing these results with the projected

number of new customers the company stands to gain with these changes can help give insight

to whether or not the company should implement these changes. If projections show a positive

correlation with profitability, outweighing the costs to do so, the company can use actual

increased sales numbers moving forward to evaluate how the performance of this initiative.

Evaluating the issue of noncompetitive pricing, Sony can evaluate cost cutting measures to

lower their internal costs and pass these costs savings on to end users. Sony can determine

price points for critical features and alternative methods of sourcing and producing these pieces

for total cost savings. Quantitatively, Sony needs to understand exactly how much costs need to

decrease in order to become market competitive and determine if they are able to find savings

in these areas. Assuming these cuts are feasible, Sony can effectively correct the issue of price
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without sacrificing profitability. If all or some of these cuts are not possible, Sony will have to

evaluate their compressed margin and the total anticipated losses in adjusting their resale cost.

Comparing this result with anticipated increase in market share at this new competitive price

point, the company can decide if the volume increase outweighs the decrease in profitability. If

Sony decides to go this route, they can use actual sales numbers quarter over quarter to

evaluate the success of these measures.

While marketing modifications are necessary for Sony’s success, measuring this becomes

more difficult from a quantifiable standpoint. In order to determine the success of different

programs or advertisements, Sony can appoint pilot locations to implement different strategies.

The company can then evaluate the cost of these strategies at each location versus the increase in

sales at each location. This analysis will show which strategies are effective, or not, and use this

information to enhance or cancel other less successful programs.

Evaluation: Qualitative Analysis

PlayStation users are able to play while using a mobile device or computer by

purchasing a separate device and subscription. PlayStation offers a 12-month subscription for

$59.99, three-month subscription for $24.99 and one-month subscription for $9.99. In addition,

a free trial period is offered which includes multiplayer, online games, free games, exclusive

discounts and each month two selected PlayStation 4 games for free. Cloud Storage allows

players to save games and character profiles to the cloud and continue playing when you sign in

to any PlayStation 4. Players can invite friends to join in their PlayStation 4 games even if they

don’t own the game.

The cost of the PlayStation range different prices. At Walmart, the PlayStation 4

Gaming console with bonus game runs $299.00; Sony PlayStation Pro 1TB Gaming console

black runs $399.00. The PlayStation VR Launch bundle PS4 cost $474.99. The VR &
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integrated 3D audio game cost $19.50. Now, the Power A charge and display station for

PlayStation VR is sold separately for $29.99. The cost continues to rise for the accessories

needed to play these games. In our research, Sony conducted Qualitative analysis by finding out

the interest of gamers and the age of the consumers. No research was done in terms of pricing

or creating a game which is cost efficient. Interestingly, most of these games come with one

remote control and a game. The systems which are bundled are priced higher because they

include more accessories. However, the most important accessories are not included or offered

at a discounted price.

The Qualitative Research collected assisted Sony assisted with the competitive

marketing. Every year a new game system with enhanced functions are developed for gamers.

These game systems are increasingly expensive and it becomes a sport for the novice. These

games are no longer for adolescents but adults are more involved than kids. People are able to

play online which is very popular. They play online with people from all over the world. There is

essentially no need for two remote controls. However, the various games require specific

accessories for the gaming experience. According to our research, Sony used Behavioral data by

watching the trends, sales and the advancement of technology. This type of information provides

more detailed information rather than surveys. By marketing in stores and offering different

selections of packages for gamers this may appeal to shoppers. This information isn’t provided

inside retail stores. Sony must create strategies to make their products and services better.

In terms of marketing, Sony markets more directly on their website. Sony offers a

package which releases 6 games every month for subscribers of its exclusive plus service can

excess for free. The package also includes: two PS4 games, two PS Vita games or two Ps3

titles. The 30- day trial can be used first but the consumer will have to become a subscriber

after the trial period. Sony’s website is very inviting and targets a specific audience. There are

various games available with advanced technology and audio sounds. In the retail store, the
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consumer wouldn’t necessarily receive the same experience as Sony’s website. It will be in

Sony’s best interest to market more heavily in stores as it has on the website. Consumers are

going to retail stores and Sony needs marketing which will grab the shoppers’ attention.

Recommendations:

This case study shows just how dominant Sony has been at the traditional game consoles

since the release of the PlayStation 2. The last sentence of the case study jumps out in your face.

In October, just one month before the public unveiling of the PS3, 235,000 PS2s were sold in the

United States compared to 217,000 Xbox 360. They utilized a very smart pricing strategy prior

to releasing the PlayStation 3. With the issues and delays they had prior to releasing the PS3

they were well behind the new Xbox 360. They combatted this by lowering their price of the

PS2. Their pricing strategy obviously worked as they outsold the new Xbox with their older

generation PS2.

Sony won many loyal customers by providing superior graphics and great games. They

also did an excellent job using their engineering and manufacturing skills to utilize the CD

format for their games versus most of their competitors that utilized cartridges. This enabled

Sony to manufacture their games at a much lower per cost unit of about $1.50/game compared

to $12.00 for a cartridge game. Sony’s first PlayStation offered the ability to play CD’s which

wasn’t as big of a deal because most people already had CD players. However, when they

introduced the PlayStation 2 that could play DVD’s that seemed to offer a nice added benefit.

Consumers could get a gaming console and a DVD player at a very reasonable price. Sony

sold their consoles at a loss which really surprised me when reading this. They were more

interested in making money on the games that they could manufacture very inexpensively and

not have to pass on the full cost of the console to the consumer. This could be compared to

what Keurig does with their K Cup coffee machines. The Keurig is a single serving convenient
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way to brew coffee by the cup. This convenience comes at a much higher price than if you

were to brew coffee the traditional way. Green Mountain the parent company of Keurig will

practically give away the machines because they want you to keep buying their K Cups.

Moving forward Sony needs to do a few things. They need to continue to focus on their

core customers and find a way to bring new and younger gamers into their arena. Like we have

mentioned Xbox and some of their other competitors have much better online and mobile

gaming platforms. Everyone has a smart phone these days and Sony needs to develop a way for

them to marry their traditional gaming console and the smart phones. The future of gaming

seems to be heading faster and faster into the virtual reality world. Sony really needs to be at the

forefront of virtual reality or they risk having their competitors beat them to the punch. One great

way for them to drum up interest in this arena would be through sports. They could partner up

with collegiate and professional sports teams and have virtual reality booths at NFL games

showcasing their new technology and game. They could do this with NASCAR as well and have

virtual reality car rides. Sony has been a dominate player in the gaming world for a long time

and with the appropriate marketing plan they can continue to be the industry leader.

Conclusion:

Sony, the leader in electronics, has made a brand and a name for itself in the gaming

industry. It all began in 1994, when Sony wanted to enter the booming market and compete

against Nintendo. It was a dangerous market at the same time, many other companies failed to

compete against Nintendo. But Sony did a great job and a great marketing strategy with it as

well. This paper discussed the strengths and weaknesses of Sony’s gaming department. And

also, it discussed solutions for the weaknesses, along with an action plan to resolve the issues.

Sony is a great company, and every great company has pros and cons, and what makes a
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company even better is finding the problems and fixing them right away. Sony has done that and

is a company that will continue to succeed. “Greatness Awaits”.

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Marshall, G. W., & Johnston, M. W. (2015). Marketing management (2nd ed.). New York:
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