Sony vs. Microsoft – Generation gap.

Reply to this post

RFM AvatarSmall

 

 

 

 

 

Sony looks to be at risk in the next generation.

  • Sony is continuing to dominate the current generation of gaming consoles, but the user experience needs so much work that Sony must act now.
  • In Europe the PlayStation 4 is scoring market share of 70%-90% while it trades leadership in the US back and forth with Microsoft.
  • In many ways, I think that Microsoft has gifted this position to Sony as its dreadful launch strategy and the PS4’s slightly better gaming performance made it the strongest contender for any gamer.
  • All credit goes to Sony for really capitalising on the PS4, but when management says that it is “happy with the value proposition” I get very nervous.
  • There is no doubt that the PlayStation 4 is a fantastic games machine but for any other aspect of the ecosystem, its offering is very poor in my opinion.
  • This is not because the PlayStation is incapable of running these services effectively, it is because the user experience is so weak that users are unlikely to ever find them.
  • Sony’s PS4 user experience is little more than a bare bones user interface that a user can use to load, purchase and launch games.
  • Attempting simple tasks like uploading a gamer picture, finding other services or even giving Sony money, can be frustratingly difficult.
  • If Sony wants users to do more with the console, it has to make the experience easy and fun to use.
  • Easy and fun will encourage users to have a look around at what else is on offer before launching a game.
  • This is the key to enticing users to do more with Sony other than just playing games and I believe it is also the key to any recovery that Sony may make.
  • It is here where the Xbox One is streets ahead of PS4 and it is quite possible that in the next generation this is going to really matter.
  • Cable cutting, streaming media services and the digital ecosystem are now really taking off which combined with a concerted effort by Microsoft to make all of this easy and fun to use could make a huge difference next time round.
  • Microsoft has great coverage of Digital Life and is actively pushing greater software consistency across all of its devices.
  • This will make its user experience more consistent and more easily recognised by users who use Microsoft on other devices.
  • In contrast, Sony seems to have returned to a more siloed structure where cross device co-operation and synchronisation could be much harder to achieve (see here).
  • Consequently, I think that in the next generation, how well Digital Life services outside of gaming are provided will be a major factor in the user’s purchase decision. (This assumes that Microsoft does not make the same mistakes again.)
  • If this is a factor, then I think that Sony will be in big trouble unless it moves quickly to address this issue.
  • Sony has time as the console cycle is a long one, but developing a delightful user experience is not something that is accomplished in a heartbeat.
  • I still feel that Sony has won this battle but is at increasing danger of losing the war.
  • I think that Sony is still the only Japanese company with a chance of making it in digital ecosystem but Microsoft has better prospects and has embraced what it needs to do going forward.

 

 

RICHARD WINDSOR

Richard is founder, owner of research company, Radio Free Mobile. He has 16 years of experience working in sell side equity research. During his 11 year tenure at Nomura Securities, he focused on the equity coverage of the Global Technology sector.