1. Sony PlayStation Firm Presentation
Ryan Brownell
Mari Embertson
Josh Gillingham
Matt Sinnott
Ryan Snell
Levi Waters
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2. History
Teamed up with Nintendo in 1988 to produce a super disc to stay competitive with current consoles
Attachment for Super Nintendo
Sony & Nintendo
parted ways in 1991
Sony Computer Entertainment Division formed shortly after
Original concept PlayStation could play SNES games
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3. History Contd. PlayStation released in late 1994
Designed as a multi-media/ multi-purpose entertainment unit
Retailed for $299
Sold 100,000 units in its first weekend
Currently has sold over 50 million consoles
More than 1000 games worldwide
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4. History Contd. PlayStation 2 Released in Japan in March of 2000
Backward compatible with PS1 games
Can play DVD’s / CD’s right out of the box
Sold over 1 Million units in a few days
Retailed for $500- $1,000
Allowed 56k/broadband gaming
PSX(PS2 on steroids)
"all in one" box providing a DVD / TiVO recorder, TV tuner, CD / DVD player, game console, digital photo manager, and more
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5. Sony’s 1st Quarter 2005 Fiscals
Posted a loss of ¥7.3 billion ($65 million)
Down from a ¥23.3 billion ($207 million) profit last year
Losses were attributed to restructuring costs, lower demand for TVs, and declining electronics prices
Revised earnings forecast to expect net income of ¥10 billion ($89 million) for the 2005 fiscal year ending march 31, 2006
Compared with an estimate of ¥80 billion ($712 million) made April 2005
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6. Sony’s 1st Quarter 2005 Fiscals
64% sales increase to ¥105.4 billion ($938 million) during the quarter, helped by the launch of the PSP in north America and steady PS2 sales
R&D costs associated with developing the PS3 and money spent on advertising the PlayStation brand
Creating a ¥5.9 billion ($52 million) operating loss
Shipments of the PSP totaled 2.09 million worldwide and PS2 sales grew significantly from last year to 3.53 million units
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7. Sony’s Gaming Sector Fiscal Review
Sales fell 6.5%
Unit sales of PS2 software reached record high, but was greatly offset by decline in unit sales of PS2 hardware and strategic price reductions
Operating income decreased 36.1% as falling hardware sales and startup costs for PSP countered higher operating income for software
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8. Strategy PS2 continues to expand further
More than 90 million sold as of June 2005
Slim-line PS2 released in Nov 2004
Still in high demand for hardware and software
16.17 million console units in 2004 fiscal year
More than 5,000 game titles worldwide
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9. Strategy PSP creates new market Released December 2004
Combines wide variety of entertainment content
Favorable hardware and software shipments
More than 30 titles as of may 2005
Movie and music video titles released in April 2005
Will launch in Europe in Sept. 2005
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10. Strategy Next generation entertainment system: PS3
To be launched spring 2006
High performance micro-processor
Alliance with IBM and Toshiba
Allows HD quality content
Backward compatibility with PS & PS2 games
Combines world of games, music, movies, and broadcasting
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11. Cell: Next Generation, Multi-purpose Microprocessor
Convention processor is designed for narrowband data and won’t meet requirements of new technology
On-line gaming, multiple consoles in networks, HD television
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12. Cell: Next Generation, Multi-purpose Microprocessor
Strategic alliance with IBM and Toshiba speeds the development process
Combine company strengths
Invest over $400 million over 5 years
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13. Cell: Next Generation, Multi-purpose Microprocessor
Processor fabricated in houses of investors
Stage 1 at Sony: construct mass production facility for semi-conductors
Be market leader in broadband network era
Digital consumer electronics, network enabled devices
Will require new semi-conductor
Differentiate Sony products on quality
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14. Sales and Operating Revenue
Year ended march 31, 2004
$7,247 million
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15. SWOT Analysis Strengths Weaknesses Opportunities Threats
Large capital base, market leader, innovator, high barrier to entry, efficient supply chain management, vertical integration, Creative advertising
Weaknesses
High fixed costs, research & development, first mover mistakes, communication barriers, barriers to exit, high marketing costs
Opportunities
Growing digital consumer electronic market
Threats
Obsolete technology
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16. VRIO: Cell Microprocessor
Valuable
Rare
Costly to Imitate
Exploited
Strength/
Weakness
Yes
Strength, sustainable, distinctive, competitive advantage
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17. Competitive Forces Market domination by three firms
Threat of substitutes is high
Nintendo DS, Microsoft entrance
Gaming consoles (X-Box, Gamecube, future systems)
Little buying power
Sell to numerous locations. No specialized packaging/incentives to buy from specific location
Strong supplier power
Set the MSRP and varies little (if any) from location to location
Intense rivalry among the three firms
The battle for Market Share
Sony 70%
Nintendo and Microsoft look to gain market share in 2005/2006
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18. New entrants and investors
Extremely difficult as start-up costs would be high
Taking market share away from the “big three”
Microsoft entering the portable gaming market
Possibly the next closest threat?
Mobile gaming
Investors
Company earnings are expected to surge an impressive +34% this year, rising by another +38% next year. With a projected growth rate of +33% a year for the next five years, the stock sports a very low PEG (P/E as a fraction of its five-year growth rate) of less than 1.
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19. Success Factors Sony Strong brand recognition for electronics
Successful launch of Playstation One in a market dominated by Nintendo and Sega
Hardware integration
Games/controllers from the first Playstation can be used on the newer platforms
Online Capable
Competitive prices
PS2
First mover advantage
PSP
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20. Health of the sector Sales continue to grow Age group is expanding
$40 billion industry by the end of the decade
Age group is expanding
Sony can capitalize on the expanding age range in the video game market
Technology is progressing and becoming cheaper
Sony will launch its newest console in 2006 for around $400 with far greater technology than the PS2
Industry is expanding into new areas
Sony PS2, PSP, and PS3 all have (or will have) today’s most impressive technological features
Online gaming capabilities, WiFi
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21. Opportunities/Threats
Market share
More than 70%?
PSP
PS3
Sony will soon be using an innovative semiconductor chip in its next generation PS3 videogame console, which will have music, video, and Internet capabilities. The chip's performance could lead to its use in other products, giving Sony a competitive edge in the marketplace.
Online market
If they keep it simple, they can generate revenues
Threats
X-Box 360, Nintendo Revolution
First mover advantage
Competition to the extreme of losing money
Explicit games
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22. Bibliography
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23. Bibliography Contd.
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