07-046-Sonys-Battle

07-046 Rev: September 17, 2008

Sony's Battle for Video Game Supremacy
John Sterman, Kahn Jekarl, Cate Reavis

As Sir Howard Stringer, CEO of Sony Corporation, settled in for his flight back to Japan from New York, a number of pressing issues occupied his mind about Sony’s future. At the forefront, Sony’s next generation video game console, the PlayStation 3 (PS3), was set to launch worldwide on November 17, 2006, a mere week away. Despite PlayStation 2’s (PS2) dominance in the last generation of gaming consoles, Stringer understood that past successes were no guarantee of future success in the intensely competitive game industry. Microsoft had launched the first volley in the last console war by releasing the Xbox 360 in the fall of 2005. Within one year, almost 4 million Xbox 360s had been sold worldwide, giving Microsoft a significant head-start in the race for market dominance. Meanwhile, Nintendo, a competitor thought to be dead due to the lackluster sales of its previous console, the Nintendo Gamecube, had generated significant “buzz” around its new entry, the Nintendo Wii (pronounced “we”). Targeting more of a mainstream audience than Sony and Microsoft, the Wii, scheduled to launch just two days after the PS3, posed a serious threat to Sony’s market share, particularly due to its $249.99 retail price, half the price of the PS3. Stringer also knew that there was much more at stake than winning the console war. The next generation of the DVD market was at stake as well. In addition to being a gaming console, the PS3 was a Blu-Ray disc player. Blu-Ray was a next-generation optical disc format that held more than five times as much information as DVDs and allowed high-definition television (HDTV) owners to watch movies with an unprecedented level of image quality. The PS3 was, in effect, the “Trojanhorse” for the Blu-Ray format.

This case was prepared by Kahn Jekarl, MBA 2007, and Cate Reavis under the supervision of Professor John Sterman. Professor... [continues]

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