It has been another tough year for Sony. The electronics giant was forced to recall 9.6 million laptop batteries after a safety scare, while the launch of the long-awaited PlayStation 3 (PS3) was delayed, with it finally going on sale in the US and Japan last month.
But the PlayStation brand has been Sony’s jewel in the crown in the past and Sony chief executive Sir Howard Stringer will be hoping it can work its magic again.
As a result of its troubles this year, Sony announced last month that it will post a net income of around ¥80bn (£360m) for the year to end March 2007, down from ¥130bn (£584.5m), with operating income forecast to fall 62%.
Sony Computer Entertainment (SCE), the gaming division, showed an operating loss of ¥43.5bn (£186.6m) as sales dropped 21% in the three months to September 30.
The European launch of PS3 in March will be supported by a “This is Living” campaign, with a focus on experience and community (MW last week) as Sony plays catch-up with its rivals.
PlayStation, credited for bringing gaming to the masses, first launched in 1994 with the slogan “Do not underestimate the power of PlayStation”. Alan Duncan, SCE UK marketing director, says the strapline is as true today as it ever was. “We have a great product and a strong brand,” he adds.
But not everyone agrees. Although the PS3’s launch in Japan and the US sparked frenzy among consumers, just 197,000 of the target 400,000 units have sold in the US, according to NPD. Nintendo’s Wii sold more than 350,000 units in its first two days in Japan, while US analysts say the Wii is outselling the Xbox 360 and PS3 combined and that demand is outstripping supply. Indeed, in the UK consumers queued overnight to snap up the Wii last week, while the consoles sold for double their retail value on eBay.
But, despite a promising start for Nintendo’s Wii and a year’s head start for rival Microsoft’s Xbox 360, Duncan is confident the PS3 will succeed. He acknowledges that the delays have not helped, but promises the PS3 will be worth the wait. He refuses to be drawn on the performance of rivals, insisting that competition is good and serves to expand the $30bn (£15bn) games industry. But he adds: “Do not underestimate us.”
Nonetheless, the PlayStation Portable launch earlier this year appeared to stumble. Sony put £3m behind PSP advertising this year but was criticised for failing to reach a broad enough audience. The ads were designed to promote the PSP’s functionality, focusing on the icons for its movies, photo storage, MP3 music and wireless internet capabilities. But the campaign, by TBWA/London, came under fire for being offensive, sexist and encouraging anti-social behaviour, although the Advertising Standards Authority decided against a ban.
Screen Digest games analyst Piers Harding-Rolls says sales of the PSP have been steady, although below Sony’s expectations. “Sony failed to deliver on the aspirations of PSP as a media hub,” he says. “There is a lack of content. It has not delivered on its promise, while Nintendo’s DS has sold fantastically well.
“But they have different capabilities and are chasing different consumers. Once content is addressed it will be more attractive to consumers. PS3 is not dead in the water.”
Duncan says “content, connectivity and community” are key to the PS3’s success – hence the experiential strategy. He says the chosen launch venue, Three Rooms in London, will allow all stakeholders, from brand partners to the local community, to experience the PS3.
Duncan explains that as part of the “This is Living” strategy, Three Rooms allows consumers to interact with the PS3 and experience its capabilities in different environments but in an intimate setting.
“We want to take the concept out to events and festivals, tie up with brands and take the PS3 experience out to consumers,” he says.
But Harding-Rolls adds: “The challenge Sony faces is not to tell gamers what a fantastic machine it is, but to educate the wider market.”
He believes Sony must educate consumers because of the console’s higher price tag: “For the technology, it’s actually good value for money, especially considering that Xbox 360 consumers have to pay for add-ons to increase capability. But PS3 must show its capabilities. Sony has always positioned PS3 as an entertainment hub, but Microsoft is moving into Sony’s space.”
Although Harding-Rolls says the strategy is right, he adds: “The launch period is exciting but it’s not lost or won then. The delays to the PS3 won’t have a significant impact in the longer term. It’s about the next three years.”
He says it is doubtful Sony will achieve the market domination that it did with its firstand second-generation consoles. “We expect it to be a closer contest,” he adds. “The PS and PS2 dominated, but sales of the PS3 will be nothing like that. Take-up will be slower and we forecast a fairly even market in 2010.”
There may be doubts about PS3 dominating the next-generation market but everyone is clear on one thing – the strength of PlayStation’s brand. Harding-Rolls says: “There is no question that PlayStation is the strongest brand in gaming. It’s had 12 years of success and two generations of market domination. It’s Sony that has the head start.”
Facts and figures
1994 Sony PlayStation launches
2001 Sony unveils PlayStation2
2006 Sony announces it will post a net income of around ¥80bn (£360m) for the year to end March 2007, down from ¥130bn (£584.5m), with operating income forecast to fall 62%.
Nov 06 Sony Computer Entertainment (SCE), the gaming division, shows an operating loss of ¥43.5bn (£186.6m) as sales drop 21% in the three months to September 30.
PS3 launches in Japan and the US.