21 October 2016
Market leader Sony is facing a challenge from Microsoft in console gaming. Photo: Bloomberg
Market leader Sony is facing a challenge from Microsoft in console gaming. Photo: Bloomberg

Sony faces gaming challenge from Microsoft

Sony, which leads the console gaming industry worldwide, is facing a challenge from Microsoft, which is pursuing an aggressive strategy for its Xbox One.

If Microsoft fails to boost its market share, Sony could dominate next-generation consoles for years.

Sony’s counterattack includes virtual-reality headset Project Morpheus and exclusive games.

Microsoft’s exclusive Xbox One titles are set to launch this year, while Sony’s new games are scheduled for release next year, giving Microsoft’s console a window of opportunity.

Sony has sold 22.7 million PS4 units globally as of mid-May versus 12.6 million for the Xbox One, figures from video game website vgchartz show.

Sony’s strategy for next year could help PlayStation continue dominating game markets outside the United States.

As PlayStation has historically been more popular in Asia and Western Europe, Microsoft may struggle to gain market share there.

Consoles’ lackluster profit margin history has shifted attention to content and subscription services.

The PS3 likely cost Sony more than US$3 billion over seven years, while Microsoft’s Xbox 360 either lost money or had low margins.

Sony has increased its focus on subscription growth for its PlayStation Plus service, after the success of Microsoft’s high-margin Xbox Live service.

A key catalyst for profit growth for Sony would be its partnership with Activision, whose bestseller Call of Duty had earlier helped Microsoft.

This could widen gaming margins as users are encouraged to sign up for PlayStation Plus.

Sony targets an operating margin of 5-6 percent for its gaming unit by fiscal 2017.

The views expressed in this article are those of Jitendra Waral, an analyst at Bloomberg Intelligence.

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