Sony Playstatioin 3 Game over?
Executive summary
Sony is a well respected brand in the electronic industry. With its success entering the gaming market with its PlayStation, Sony has earned a position as a market leader. Problems began to occur when Sony launched its seventh generation gaming console. New competitors entered the market, such as Microsoft and old rivals such as Nintendo. The release of the Sony PlayStation 3 failed to achieve growth in sales due to the lack of direct and indirect network effects. One of the reason majority of the users were not adopting because of the high price premium and the technological uncertainty. Technological uncertainty included the new innovation Blu-ray and the number of main stream users willing to buy the console. The SCENT analysis displayed a strong network effect for the Sony PS2 because it was: a more advanced product, had agreements with third party game developers, and had a strong advertising campaign. Unfortunately, this was not the case for PS3. There was a strong network effect for the PS3 when its Blu-ray became the de facto standard in 2008. PS3 also showed signs of increase sale when it dropped the price of its console yet they were still losing money on each console being sold. The recommended course of action that Sony should take is composed of 3 main components: alteration to the promotional program, a shift in the marketing strategy, and the addition of demos in select locations.
Key Issues
With the launch of the Sony PS3, sales were not what Sony had hoped. Sony had owned 60% of the market share in the gaming industry, but this figure has dropped significantly. Sony sold only 1.28 million PS3’s resulted in just 13.5% of the market share. One of the factors for a slow growth in sales was the high price of the PS3; this caused a weak direct network effect due to technological uncertainty. The question is; how PS3 will kick start its network effect and gain large install base, when the majority has yet to adopt (chasm)? Game
Sony is a well respected brand in the electronic industry. With its success entering the gaming market with its PlayStation, Sony has earned a position as a market leader. Problems began to occur when Sony launched its seventh generation gaming console. New competitors entered the market, such as Microsoft and old rivals such as Nintendo. The release of the Sony PlayStation 3 failed to achieve growth in sales due to the lack of direct and indirect network effects. One of the reason majority of the users were not adopting because of the high price premium and the technological uncertainty. Technological uncertainty included the new innovation Blu-ray and the number of main stream users willing to buy the console. The SCENT analysis displayed a strong network effect for the Sony PS2 because it was: a more advanced product, had agreements with third party game developers, and had a strong advertising campaign. Unfortunately, this was not the case for PS3. There was a strong network effect for the PS3 when its Blu-ray became the de facto standard in 2008. PS3 also showed signs of increase sale when it dropped the price of its console yet they were still losing money on each console being sold. The recommended course of action that Sony should take is composed of 3 main components: alteration to the promotional program, a shift in the marketing strategy, and the addition of demos in select locations.
Key Issues
With the launch of the Sony PS3, sales were not what Sony had hoped. Sony had owned 60% of the market share in the gaming industry, but this figure has dropped significantly. Sony sold only 1.28 million PS3’s resulted in just 13.5% of the market share. One of the factors for a slow growth in sales was the high price of the PS3; this caused a weak direct network effect due to technological uncertainty. The question is; how PS3 will kick start its network effect and gain large install base, when the majority has yet to adopt (chasm)? Game