ZhugeEX provided a report from an institutional investor that interviewed both Microsoft and Sony last year. The interviews touch on how both companies view their current business and what they are looking toward for the future.
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I think the acquisition focus on infrastructure and middleware makes a lot of sense for Sony. Their strengths are as good as they have ever been. They just need to improve their weaknesses (software/services) to make their overall standing that much better.
MS viewing their game lineup as force to propel Game Pass makes sense too. The subscription service has the potential to become a core aspect of their gaming business if they can nurture growth properly.
What y'all think?
I'll drop this here. A report from an institutional investor that held a meeting with MS last year.
Microsoft views the Xbox Game Pass, which now includes new first-party titles, as a compelling value to consumers at $9.99 per month. Xbox Game Pass can also help to drive monetization for smaller third-party titles that would otherwise garner little attention relative to their much larger peers. The inclusion of Microsoft's new games in the service has resulted in a lift to the overall retail sales of those titles as a key point of friction to gameplay has been removed. With that said, it doesn't expect to see new AAAs from the third-party publishers included in the service any time soon. Instead, it expects multiple subscription services to emerge over the next several years, although individual publishers may not have enough breadth to provide a compelling product to consumers.
In Microsoft's experience, subscription services generally boost gameplay time, engagement, and monetization. Within Xbox Game Pass, it is seeing core gamers who want to consume more content that they otherwise couldn't afford, as well as casual gamers who prefer not to pay $60 upfront for a given title. Overall, it has seen a boost to net dollars in its video game ecosystem, with more games translating to more hours of gameplay. It intends to bring the subscription service to PCs at some point.
Microsoft is working on a game streaming service that will deliver console-quality experiences on mobile. According to the company, there are two billion gamers worldwide. It believes that a streaming solution needs three components to be successful: good content, a strong community, and a robust cloud offering. It has termed these items as "the three Cs." It envisions a scenario where it can eventually deliver games to consumers who don't own a console, and believes that cloud gaming is closer to being a reality than it has in the past. A successful streaming provider needs a regional footprint with scale to drive efficiencies for the provider and the consumer.
Microsoft believes that its new studios will help it to achieve a primary goal, the delivery of one AAA game per quarter in order to drive Xbox Game Pass. With that said, it does not want to rush its new studios into delivering games before they are fully baked, and believes that any acquisition takes time to get its legs. Its ideal acquisition targets have proven content and strong development teams.
Microsoft acknowledged that it is developing a new console, but timing is uncertain.
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I'll drop this here. A report from an institutional investor that held a meeting with Sony last year.
When asked about streaming, Sony discussed PlayStation Now, its cloud gaming service, which already provides low latency delivery. Although it is pleased with the service, which incorporates technology from the acquired assets of Gaikai and OnLive, it does not view it as a big part of its game business at present. It views streaming as more of a distribution play than a business model at present. It sees many predators circling its games strength at present, but believes that nobody has better technology than it does at present, a reflection of the billions of dollars that it has spent to differentiate the experience that it provides. In addition, Sony benefits from a walled garden of roughly 90 million monthly active users and PS4 consoles that should keep its competitors at bay for the time being. Over the past twelve months, almost 95% of Sony devices have communicated with its network, a reflection of the strong engagement of its user base.
Sony noted that the PlayStation platform remains heavily game-centric, and while there has been some takers for their music offering (for gamers wanting to listen to music while gaming), users coming to PlayStation for movies/TV content have been limited. It was noted that management will have to consider strategies for the business – whether to build it as a comprehensive entertainment platform, or as a comprehensive game platform – with an eye to developing subscription services and the user base. This is a key strategic question Sony is deciding currently...whether to build PSN as a comprehensive entertainment platform, or double down on games.
Regarding the struggling PS Vue business, Sony reiterated it was a supporter when the business was developed and launched, with a key attraction being the value of the data generated by viewers, rather than intrinsic profitability. Sony acknowledged that the sustainability of the business in the face of "power player" rivals must be a point of internal discussion. Sony Pictures management hinted at "interesting" plans for the business while acknowledging competitiveness of the space. Sony also wants to turn smartphone games into a cash cow business, and will continue efforts to ramp up SIE's investment in it.
Sony would not fully comment on whether the PS5 is in development, but did foresee a future for PlayStation beyond the PS4, which is on a ten-year cycle. It continues to believe that the PS4 can sell as many console units as the PS2 did over its lifetime, implying over 150 million units. Sony noted that they have yet to decide how much further to market the current console before launching a new console; the current G&NS targets exclude the impact of PS5. Sony has indicated that the timing of a PS5 has yet to be fully decided and has not yet been factored into Sony's three-year plan.
Sony views itself as having the largest developer network at present that is larger than those of Microsoft and Nintendo combined. Any future acquisitions are more likely to center on infrastructure and middleware than on individual developers. A primary goal is to extend the gamer population to the family. It sees a future for Sony's mobile titles in China. Finally, it believes that outside expectations for virtual reality may have been overinflated, and that new AAAs will be needed to jumpstart sales. Developers will need to see an installed base of over 5 million units to become believers in PlayStation VR, a threshold that it may come close to this year.
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I think the acquisition focus on infrastructure and middleware makes a lot of sense for Sony. Their strengths are as good as they have ever been. They just need to improve their weaknesses (software/services) to make their overall standing that much better.
MS viewing their game lineup as force to propel Game Pass makes sense too. The subscription service has the potential to become a core aspect of their gaming business if they can nurture growth properly.
What y'all think?
