How competition challenged Sony’s gaming console – the Playstation

Martin Altmann 10850260 [email protected] Information Science: Business Information Systems

Keywords. Sony, Playstation, console, competition, adaptation, adaptive cycle

Abstract

Releasing the Playstation in 1994 was a great success for Sony. Without serious competitors in the console market at this time Sony could even continue this progress with releasing the Playstation 2 in 2000, which is till today the most sold gaming console worldwide [1]. Nevertheless the release of Microsoft’s Xbox360 in 2005 and the release of Nintendo’s Wii in 2006 spawned serious competitors that were able to catch up to Sony and even pulled ahead. Sony saw his console market share decreasing and acted accordingly to win back the market leader position. In this report Sony’s behavior is illustrated according to the Adaptive Cycle of Resilience and its different phases.

1. The Adaptive Cycle of Resilience

The Adaptive Cycle of Resilience consists of four phases: Equilibrium, Crisis, New combinations and Entrepreneurship. These phases are passed through by every organization in this order. The ideal phase of Equilibrium is left because of a disruptive event in the organizations environment forcing it to proceed to the Crisis phase. In this phase the organization faces challenges that only can be overcome with adaptations and changes (Unfreeze phase). After New combinations have been found to continue the purpose of the organization, these will be applied in the Entrepreneurship phase. These phases are also called the Change phases. Once the changes took place the Refreeze phase starts until the Equilibrium is reached again, awaiting the next disruptive event. Figure 1. The Adaptive Cycle of Resilience

2. Sony’s Adaptive Cycle of Resilience regarding the Playstation

Sony’s gaming console the Playstation has gone through the Adaptive Cycle of Resilience from its very first Playstation console until the current Playstation 4. The history of the Playstation will be aligned with the phases of the Adaptive Cycle and each phase described accordingly.

Equilibrium When Sony was entering the console market in 1994 with the release of the first Playstation it rapidly became market leader. The quality of the Playstation’s three- dimensional graphics and the introduction of entirely new game genres contributed to this success. Serious threats by competitors like Nintendo, focusing mainly on handheld game consoles like the Gameboy, were simply not present. Being the market leader without serious threats, Sony was able to develop the Playstation 2 and excel the success of its predecessor after releasing it in 2000. Until today the Playstation 2 is the most sold gaming console worldwide [1]. However, Microsoft was entering the console market in 2001 with the release of the Xbox one year after the Playstation 2. That is why the Xbox was still no threat for Sony but initiated the slow transition from the Equilibrium phase to the Crisis.

Figure 2. System sales of Playstation and Playstation 2 and its competitors in millions [2] [3] [4] [5] [6] [7] [8] Crisis The introduction of Microsoft’s Xbox in 2001 started the transition from Sony’s Equilibrium phase to the Crisis. Although the Xbox had the better hardware and graphics it was not able to threat Sony’s Playstation 2 [9] [10]. This was about to change when Microsoft was able to release its corresponding successor in 2005 – the Xbox360 – about one year earlier then Sony’s Playstation 3. Not only the earlier release and the lower price [9] [10] but also introducing online multiplayer gaming made the Xbox360 a serious threat for Sony’s Playstation 3. Adopting the online feature, Sony released its third console in 2006, seeing its market share already decreasing [12]. At the same time the situation for Sony Figure 3. System sales of Playstation 3 and intensified when Nintendo released the its competitors in millions [7] [11] [12] innovative gaming console Wii that was focusing on a new form of player interaction. Betting on the Blu-ray technology and the overtrumping hardware made the Playstation 3 an expensive gaming console. On the other hand, both competitor consoles were significantly cheaper.1

New combinations Being set in a serious competition about the console market share, Sony was forced to react. The online feature of the Xbox360 was adopted for the Playstation 3 with its release. Sony wanted to overtrump Microsoft in this point by offering their service at no charge whereas the Xbox360 online feature needed paid subscription. Also the innovative form of player interaction of Nintendo’s Wii was adopted for the Playstation 3 in 2010. Nevertheless was the Playstation 3 never able to recover and reclaim the market leadership. Sony seemed to be resigned with that and focused on its next generation console – the Playstation 4.

Entrepreneurship Having lost the market leadership, Sony was preparing for the competition of the next generation. This time Nintendo was able to release its Wii successor in 2012, one year before Sony entered the market of next generation gaming consoles together with Microsoft in 2013. The success of the Wii was yet not repeated [13]. It would depend on Sony and Microsoft to satisfy the market when both entered the eighth generation. This time Sony was able to benefit from a lower launch price of its console compared to Microsoft’s.2The Playstation 4 is also overtrumping hardware aspects of the Xbox One [14]. Together with many controversial announcements regarding Xbox One’s restrictions [15], Sony’s Playstation 4 was able to reclaim the market leadership in 2014 [16] and therefore approaching the next Equilibrium.

1 European launch prices: Xbox360: 179€ - Wii: 249€ - Playstation 3: 599€ 2 European launch prices: Xbox One: 499€ - Playstation 4: 399€ 3. Conclusion

After reviewing the release histories of popular gaming consoles, it can be stated that Sony’s Playstation has been running through the Adaptive Cycle of Resilience. This is illustrated in Figure 4. When Sony entered the console market in 1994 it rapidly became market leader with its Playstation and Playstation 2 and found itself in the Equilibrium phase. The transition was initiated with Microsoft’s market entering in 2001 and Crisis phase of Sony was reached with the release of the Xbox360 in 2005. Crisis intensified by the release of Nintendo’s Wii in 2006 at the same time when Sony released its Playstation 3. It eventually adopted features of its competitors in the New combination phase but could not reclaim the market leadership that it has lost to Nintendo’s Wii. Sony was focusing on the next generation console – the Playstation 4. Although Figure 4. Sony’s Adaptive Cycle of Resilience regarding the Playstation Nintendo’s Wii U was released in 2012 one year before the Playstation 4, it was not able to repeat the success of its predecessor. In the Entrepreneurship phase Sony’s Playstation 4 was able to benefit from a higher launch price and controversial restrictions of its competitors console the Xbox One. Both were launched in 2013 and this time Sony was able to reclaim the market leadership in gaming consoles approaching the next Equilibrium. Nevertheless is the market leadership not equivalent to the success of the Playstation and Playstation 2 as the gaming console market overall decreased in volume as it loses consumers to Smartphone and tablet gaming [17]. This could be considered an approaching crisis phase not only for Sony, but for the whole gaming console market.

References

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