Sony had a rough few days. The Japanese tech giant has lost about US$10 billion since Microsoft announced it was buying a popular videogames maker.
The company is clearly in a corner, despite some of its loss being due to panic selling across the market. The loss of a key supplier of games content to its arch-rival could make Sony's consoles less attractive to consumers around the world.
The share price of Sony.
It would be a huge decision for Microsoft to pull the content from the Sony consoles. The new PS5s are expected to outsell Microsoft's Xbox Series consoles by about two to one in 2022. The game is still on the PS consoles nearly eight years after Microsoft bought Mojang.
The latest takeover will take at least a year to complete, and Microsoft will inherit the ongoing investigation and lawsuits against the company over alleged abuse and harassment of female employees. It could cause problems down the line.
Sony has breathing room to respond to this danger. There are three suggestions.
Microsoft's biggest threat to Sony is the Xbox Game Pass, a subscription service that allows users to download or stream hundreds of titles for just US$15 per month. Game Pass has 25 million subscribers and is a boon for price-sensitive PC and console gaming, frequently offering blockbuster titles on launch day.
Microsoft puts their entire games catalog on Game Pass every time it buys a maker of video games, giving people a fear of missing out. Game Pass profits are questionable at this early stage, but subscriber numbers are rising fast.
Sony's service has just over 3 million subscribers. Sony's streaming performance and availability are among the worst of its peers, even though it has a bigger catalog of games and a cheaper monthly price.
When a market-leading business is replaced, the upstart almost always starts by selling to neglected budget users, like how digital cameras defeated Kodak, for example. Sony exposed itself to an emerging business model that it might not be able to compete with by allowing Microsoft to get entrenched with budget gaming.
The fastest way to catch up is to buy Stadia. 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 Sony's catalog and price point could put the company back on the offensive.
The world shortage of Semiconductors has affected console sales. There is a slight edge to the decision of Sony to increase production of its legacy consoles. They use simpler chips and are easier to make than the equivalent Xbox Series S.
This advantage is not sustainable, given the increasing appetite for gaming, and the continued shortage of Semiconductors. The solution is to let people play games on other devices than dedicated consoles. Sony's dependence on its console business is critical to the company's survival, and this shows a lack of will to reduce it. Sony should aim to make its titles run on most, if not all, smart TVs, phones, set-top boxes and computers, regardless of whether or not it buys Stadia.
There are some green shoots for Sony on other platforms. The company's latest open-PC release, God of War, has sold well and received rave reviews. Sony prioritized the release of God of War on its own console first, so it was on the PS4 four years earlier.
Microsoft publishes all of its new titles on PC and Xbox consoles at the same time, focusing on user-base growth and not just console sales. Sony has relied on exclusiveness to sell more PS3s in the past. Microsoft's multi platform approach lowers marketing costs and immediately spreads the cost of games development across a much larger user base, which makes it a better idea than exclusives when new consoles are in short supply. Microsoft's strategy would be better for Sony.
Microsoft has been at the forefront of the metaverse movement, which plans to combine our digital and physical realities via an augmented or virtual reality headset. The internet was an important innovation in the 1990s, and the deal between Microsoft and Call of Duty's parent company, Activision, could be the key to mass consumer adoption of virtual reality.
The crown of the world leader in these headsets was unofficially lost to the Meta device in 2021. Sony's position on the metaverse movement is not clear. Despite customer demand for free-roaming devices, the PS VR 2 headset will still be tethered to the PS 5 console.
Sony has been cautious about new markets and usually waits for others to develop them. That is unlikely to work against competitors like Microsoft, Meta, and Apple, which are more powerful than that. The next decade will see Sony lose more ground to these tech giants as they recreate the reality we live in, if it doesn't move fast and with a clear purpose.
The Conversation has a Creative Commons license for this article by Hamza Mudassir. The original article is worth a read.
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