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Sony PlayStation Firm Presentation

Sony PlayStation Firm Presentation. Ryan Brownell Mari Embertson Josh Gillingham Matt Sinnott Ryan Snell Levi Waters. History. Teamed up with Nintendo in 1988 to produce a super disc to stay competitive with current consoles Attachment for Super Nintendo Sony & Nintendo

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Sony PlayStation Firm Presentation

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  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

  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

  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

  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

  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

  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

  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

  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

  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

  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

  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

  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

  14. Sales and Operating Revenue • Year ended march 31, 2004 • $7,247 million

  15. 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

  16. VRIO: Cell Microprocessor

  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

  18. 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.

  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

  20. 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) today’s most impressive technological features • Online gaming capabilities, WiFi

  21. 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

  22. Bibliography http://news.teamxbox.com/xbox/8545/DFC-Predicts-40-Market-Share-at-Best-for-the-Xbox-360/ http://www.wkconline.org/index.php/seminar_showcase/entertainment_2005_story/the_growing_gaming_industry/ http://et.sdsu.edu/saeria/670/670webquestgamemarket/Future.htm http://seattle.bizjournals.com/seattle/stories/2003/06/02/story7.html http://www.microsoft.com/msft/ar04/nonflash/10k_fr_no_01.html http://www.us.playstation.com/psp.aspx http://www.rockstargames.com/sanandreas/ http://retailindustry.about.com/od/seg_toys/a/bl_npd012703.html http://www.streetauthority.com/cmnts/cp/2005/01-18.asp http://www.streetauthority.com/cmnts/cp/2005/01-18.asp http://www.gamespot.com/news/2005/04/27/news_6123076.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

  23. Bibliography Contd.

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