Sony Slowly Turning an Oligopoly into a Monopoly

The gaming console market has long been dominated by the top three firms of Nintendo, Sony, and Microsoft. Since the departure of Atari from the market, these have been the only firms with mass produced consoles for consumers to buy. This is due to the console industry being very fixed cost based, and the consumer base is very loyal to their brands. Even as new generations of consoles have come out, these three firms have been the ones to come out with new consoles instead of new firms entering. However, with the newest generations of consoles coming out: Sony’s Playstation 4, Microsoft’s XBOX One, and Nintendo’s Wii U, Sony has taken over control of half the market.

The main competitors in the video game market are Sony and Microsoft since Nintendo’s console is much different in nature and appeals to a different consumer base. In the previous generation, the Playstation 3 and XBOX 360, sales for each were almost identical worldwide. However, with the new generation consoles, Sony has dominated Microsoft. The Playstation 4 has had over 25.3 million shipments worldwide, while the XBOX One has had only 14.32 million shipments. The result is that when the shipments of all three consoles are compiled, Sony has a remarkable 50% of all worldwide new generation console shipments.
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While the actual sales of consoles is generating less revenue for Microsoft, publishers are also gaining less revenue from Microsoft’s XBOX One as well. One for example, Ubisoft, made similar revenue off of the XBOX 360 and Playstation 3, about 450 million euros off each console. For the new generation of consoles, Ubisoft has gained only 394 million euros off the XBOX One and 660 million euros off the Playststion 4. It is important to project what might occur due to this. Microsoft may lose deals with publishers if Sony continues to beat them this badly. If Microsoft loses deals with publishers and gamers cannot play their favorite game on their system, Microsoft may lose even more customers to Sony.

 

Links

http://arstechnica.com/gaming/2015/07/analysis-sony-pushes-past-50-percent-of-the-worldwide-console-market/

12 thoughts on “Sony Slowly Turning an Oligopoly into a Monopoly

  1. One thing that has impressed me about Sony is how they were willing to experiment and make mistakes, which helped them realize why consumers liked their console. We saw that when Nintendo came out with the Wii, there was a big disruption in the market and both Microsoft and Sony were now worried about this new competitor. Sony hurriedly tried to copycat Nintendo by coming out with its own motion influenced gaming device with Playstation Move, which has largely been a complete failure. Instead of pouring more funds into this, they realized this was not their place in the market and instead chose to invest in improving their core console. They focused on what consumers want from their console which is great games, great graphics, and reliable platforms. Sony will continue to be the main powerhouse in the gaming industry if they follow this strategy.

    • It will be interesting to follow how virtual reality will figure into the mix. The most prominent VR firm, Oculus, was recently acquired by Facebook. I do not know if they are planning to license their technology for games that are also played on XBOX One and PS4, or if Oculus and Facebook will attempt to carve out their own line of games. If Oculus does not cooperate with Sony and Microsoft, the two current companies will surely have to develop their own VR technology if they want to continue competing.

      • I think Virtual Reality is still relatively far away from fully breaking into the mainstream, so the good news for Sony and Microsoft is that they have still have time to pour money into the VR R&D department, if that is where the industry is headed. The Oculus Rift has a $599 price tag, but in order for the product to fully function, users will have to spend upwards of $1,000. That means only seriously hard-core gamers and early adopters will be making the purchase. I think as of now, Sony and Microsoft still have time to create their own competitive platforms

  2. Just curious from a non-gamer perspective, what differentiates PS4? Is it worth it for Nintendo and Microsoft to invest in updated versions for their products? Since you mentioned brand loyalty is strong for gamers and obviously some people switched to to Sony because of PS4, what could change the future landscape of the gaming hardware industry?

    • I am not a gamer, but what I have read and heard about this product and similar products is that in order to stay up to date with software for new games or even have the ability to buy new games, you must purchase the newest console. It is quite a smart marketing plan to require consumers to upgrade their existing consoles or even buy new ones in order to use other new products they release. As far as consumer base is concerned I am not too familiar but in my experience I have lived with people who either own one or the other so any obstacles facing challenges of only owning one system are not relevant, and I am sure many the culture of these consumers follows similar suite.

  3. It is also interesting to consider what additional services Playstation 4 provides to their consumers. I am not personally a gamer but my brother has a regular subscription to Xbox Live. I was curious to see how these two devices compare on this front because I know the ability to play games with your friends from the comfort of your own home has become big in this day of age. After a bit of research I found that while there are not significant differences between Xbox Live and Playstation Live, Playstation is cheaper, offers more exclusive programming, and matches Xbox Live in almost every other feature. I think it would be interesting to see how much affect these live packages play on a consumers choice between devices.

    • It’s interesting that you bring up the two differences in online multiplayer between the two firms. Apparently, soon Xbox live players and Playstation live players are going to be able to play against each other. In a statement released earlier this week, Microsoft said they are ready to create a cross platform network in which gamers from the two popular consoles will be able to play with each other. I think this could be a mistake for Microsoft considering the increase Sony had in PS4 buyers and now with the cross platform network, the only thing consumers will choose from is the console rather than having to also consider which live subscription they prefer. I know when I purchased my Xbox 360 a long time ago, I went the Microsoft route because all my friends had Xboxes and I wanted to game with them. If Sony is truly the better console, then this should be a no brainer for consumers. Also, in the past Xbox has had exclusive rights on extremely popular multiplayer games like the Halo games. It will be interesting to see if they will allow Sony to access games like Halo or others with the new cross platform network.

      • I agree that the multiplayer issue could dramatically reduce the already shrinking market share Microsoft has. This makes me wonder what motivated the two to create a cross platform network. Sony responded to Microsoft’s announcement by saying it would be willing to work with developers. So is the actual agreement going to be with new software and game developers or with Microsoft? It seems the company is not as interested in sharing the market as it is in creating new avenues of gameplay.

  4. An interesting component of this article that could be continued is the role of PC gaming and how it has affected the market share of these three competitors. My brother is very into this debate and has found PC gaming to have exploded on the market within the past decade, even customizing their software to allow players to play games that were previously exclusive for Xbox or PS to play them on their PC. Given that most everybody in this techy culture has a PC it would not be surprising to observe an increased market share over this form of gaming.

  5. Regardless of the hardware differences, it is also worth noting that there has been a constant price war between the two gaming consoles. Microsoft initially priced its Xbox One at $499 while PS4 was at $399. This resulted in a blowout in the sales of Xbox One because of the difference in price. Microsoft did not drop the price to $399 until six months later when Kinect came out in June 2014 (both consoles launched in November 2013). In November 2014, Microsoft further reduced the price to $299 for Black Friday sale and has kept the price at that ever since. Sony also decreased the price of PS4, but the price remains higher than $299 at $349.
    Source:
    http://www.fool.com/investing/general/2015/11/25/microsoft-xbox-one-vs-sony-ps4-the-holiday-price-w.aspx

    • So is it worth it for Sony or Microsoft to slash the price of their gaming consoles? It would mean more people buy their product than the other (since they seem to act as substitutes rather than complements), which could help strengthen brand loyalty in the future. Meanwhile, the company can make its profits from the games that are sold separately – at a hefty price tag of around $60. Since most gamers are going to invest in at least a handful of games, this could be a viable strategy.

      • I think it is. Sony is planning to release a new PS4 with improved hardware and graphic card soon (much like Nintendo with its 3DS, 3DS XL -> New 3DS, New 3DS XL), so I am sure Microsoft is planning something similar as well. Like you said, the brand loyalty they established will profit them well at present and in the future. On your second point, I am not so sure about, since I do think the gaming console companies benefit that much from game sales, except for the games they produced themselves, such as Microsoft’s Minecraft, Halo series, Gears of War series. However, the majorities of game producers are external, this includes Activision Blizzard, Ubisoft, EA, etc. Thus, to us consumers, this is very similar to the printer & cartridge market since the cost of cartridges always exceed that of the printer; however, it is inherently different from the producers’ points of view.

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