Sony PlayStation Firm Presentation

1
Sony PlayStation Firm Presentation

• Ryan Brownell
• Mari Embertson
• Josh Gillingham
• Matt Sinnott
• Ryan Snell
• Levi Waters

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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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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History Contd.

• PlayStation 2
• Released in Japan in March of 2000
• Backward compatible with PS1 games
• Can play DVDs / CDs 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

5
Sonys 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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Sonys 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
• RD 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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Sonys 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

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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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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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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Cell Next Generation, Multi-purpose
Microprocessor

• Convention processor is designed for narrowband
  data and wont meet requirements of new
  technology
• On-line gaming, multiple consoles in networks, HD
  television

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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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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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Sales and Operating Revenue

• Year ended march 31, 2004
• 7,247 million

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SWOT Analysis

• Strengths
• 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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VRIO Cell Microprocessor
Valuable Rare Costly to Imitate Exploited Strength/ Weakness
Yes Yes Yes Yes Strength, sustainable, distinctive, competitive advantage
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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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New entrants and investors

• New entrants
• 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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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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Health of the sector

• Sales continue to grow
• 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)
  todays most impressive technological features
• Online gaming capabilities, WiFi

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Opportunities/Threats

• Opportunities
• 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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Bibliography

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  stry/
• http//et.sdsu.edu/saeria/670/670webquestgamemarke
  t/Future.htm
• http//seattle.bizjournals.com/seattle/stories/200
  3/06/02/story7.html
• http//www.microsoft.com/msft/ar04/nonflash/10k_fr
  _no_01.html
• http//www.us.playstation.com/psp.aspx
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  .asp
• http//www.gamespot.com/news/2005/04/27/news_61230
  76.html
• http//www.sony.net/SonyInfo/IR/financial/ar/2005/
  index.html
• http//darkwatcher.psxfanatics.com/console/psx.htm
  
• http//darkwatcher.psxfanatics.com/console/ps2.htm
  

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Bibliography Contd.