Sony – Game off.

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Sony misses the wood for the trees. 

• Sony has decided to have another go at the mobile gaming market but the structure of the company and its lack of understanding of the ecosystem will make success very difficult.
• Sony appeared to up its commitment to mobile gaming at IFA by stating that it was aggressively getting into mobile gaming but how it intends to succeed remains unclear.
• I suspect that incredible rise of Pokemon Go has reminded Sony that although it has the by far the strongest multiplayer gaming community outside of China, it has failed to do anything with it beyond the console.
• I have long believed that gaming in developed markets is by far the biggest opportunity for a new entrant because it is the biggest slice of the Digital Life pie (31%) and currently completely unoccupied by a dominant player.
• Almost every other Digital Life segment has a strong player (Google, Facebook, Amazon) but in gaming there is currently no-one.
• This is exactly why I think Activision bought King Digital (see here) and why Tencent is buying Supercell (see here).
• It is also why Google wanted to buy Twitch but failed much to the benefit of both Sony and Microsoft (see here).
• To become dominant in this space, a gaming offering has to have both a good stable of games but most importantly a thriving community of online players.
• Sony has neither of these things in mobile and its efforts to date to bring PlayStation Network into mobile have been ignominious failures.
• These failures came before Sony was re-carved up into a series of independent legal entities with each being focused on their particular activity.
• This gives them greater autonomy, allowing them to act quickly, but it also makes them hostile to any form of co-operation with the other members of the Sony group. (see here).
• One of these entities is called ForwardWorks which was tasked in April 2016 with producing games for mobile devices.
• ForwardWorks is a fully owned subsidiary of Sony Interactive Entertainment which also owns PlayStation and PlayStation Network but it appears to operating in a vacuum.
• Consequently, I see ForwardWorks as nothing more than a game studio and not an attempt to really create a thriving community in mobile by leveraging its existing world leading gaming assets.
• For me, the top contenders in this field are Activision, Tencent and Amazon but all of these remain pretty far away from having a thriving community on mobile in developed markets.
• However, they understand the importance of the community and they have some grasp of the importance of bringing together as many Digital Life segments as possible.
• Sony appears to have none of this understanding and its moves in the last year to re-organise into silos is a case in point.
• Consequently, while Sony may make some extra revenues if it has a couple of mobile hits, it is almost certain to miss out on the incremental value that a thriving gaming community on mobile could bring.
• RFM estimates that if Sony was to migrate its PSN network successfully into mobile, it could generate at least $1bn in incremental revenues per year not including sales from games or content.
• With its current trajectory, this opportunity is likely to accrue to others, of which Tencent is by far my favourite way to play the opportunity in mobile gaming.