Microsoft vs. Sony: Who's Winning The Video Game Console War?

Jun 9 2014, 9:48pm CDT | by

This week the annual Electronic Entertainment Expo—or “E3” among gamers—kicks off, and all eyes are on Microsoft  and Sony, makers of the Xbox One and PlayStation 4 game consoles, respectively [Disclosure: Sizemore Capital is long MSFT].  The focus this year for Microsoft—which presented first—was on getting back to basics of gaming.

In this latest battle in the “console war,” Sony is off to a commanding lead, due in no small part to some major gaffes made by Microsoft at last year’s event. The latest comparable sales statistics show Sony booking about 7 million PS4 sales compared to 5 million Xbox One sales for Microsoft.

Last year, Microsoft showed an almost unfathomable misunderstanding of its own loyal customer base.  Rather than focus on video games—which might be expected for the introduction of avideo game console—Microsoft chose instead to market the Xbox One as an all-purpose entertainment system for your living room, controlling your TV, music and streaming services like Netflix via its Kinect motion and voice sensor.

The execution couldn’t have been worse.  Unlike the PlayStation and popular consumer options like the Roku, Google Chromecast and Apple Apple TV, Microsoft required that users pay a subscription fee to use streaming services such as Netflix (that is, a fee to Microsoft in addition to the normal Netflix subscription fee).   Adding insult to injury, Microsoft also attempted to restrict second-hand game sales and to require an “always on” internet connection.  All of this dampened enthusiasm for what was otherwise a fine product and gave Sony a marketing advantage that Sony management couldn’t have even dreamed of.  Microsoft has since backpedaled and reversed all of these decisions.

Kinect, by the way, also added an additional $100 to the Xbox’s price relative to the PlayStation—which is the single biggest factor in Microsoft’s lagging sales.  The Xbox One initially retailed for $499 vs. $399 for the PS4.  Gaming enthusiasts had a hard time justifying paying an additional $100 for functionality that they didn’t need or want.  And Sony seemed to “get” them when Sony focused it presentation on gaming.

Call it the dying gasp of Steve Ballmer ’s Microsoft.  Under new CEO Satya Nadella’s leadership, there would be no repeat of last year’s ham-fisted performance.  Microsoft focused its energy on its popular titles, including new iterations on the Halo and Call of Duty franchises.

I spoke to CNBC’s Adam Bakhtiar and Oriel Morrison about the direction that video gaming would take in the years ahead.  Today, high-end PC gaming accounts for about 20% of the market, and low-end mobile gaming—the sort of games you could play on an iPad or smartphone—account for another 17% of the market, and growing. The remaining 63% of the market remains the domain of video game consoles, at least for now.

Console gaming probably has another good 5-10 years left in its current form.  Beyond that, we’re really left to speculate as to what the future may look like.  Might consoles get lost in the shuffle as games are increasingly available cross-platform and cross device?  Consider the precedent created by online streaming services like Netflix and Hulu, which can be viewed on virtually any computing device or any one of an infinite number of streaming set-top boxes.  In this future, it would be the content creators that reaped substantially all of the profits, not platform vendors.

In any event, this latest battle in the console war promises to be interesting.  Microsoft has ditched Kinect and lowered the price of the Xbox One to compete with the PS4.  Expect Sony to respond with some aggressive marketing moves of its own.  While Microsoft can afford to be an also ran in gaming consoles, Sony cannot.  Sony has seen its consumer electronics businesses wrecked by competition from Samsung and Apple, among others.  Outside of its movie studio—which may well be spun off as a separate business—the PlayStation is Sony’s last realistic chance at market dominance.

Charles Lewis Sizemore, CFA, is the editor of Macro Trend Investor  and chief investment officer of the investment firm Sizemore Capital Management. Click here   to receive his FREE weekly e-letter covering top market insights, trends, and the best stocks and ETFs to profit from today’s best global value plays. 

 
 

Don't miss ...

 

<a href="/latest_stories/all/all/30" rel="author">Forbes</a>
Forbes is among the most trusted resources for the world's business and investment leaders, providing them the uncompromising commentary, concise analysis, relevant tools and real-time reporting they need to succeed at work, profit from investing and have fun with the rewards of winning.

 

blog comments powered by Disqus

Latest stories

Bigger Batteries And NFC, Everything We Know About The iPhone 6 So Far
Bigger Batteries And NFC, Everything We Know About The iPhone 6 So Far
There may very well be a day when Apple executives set up an iPhone X rumour publication that consists of nothing but endless, daily, rumours of the next iPhone. They can call it the iPhone Bugle, or iPhone X Times....
 
 
SymantecVoice: Android vs. iOS: Which Is More Secure?
SymantecVoice: Android vs. iOS: Which Is More Secure?
By Solange Deschatres The two most popular smartphone operating systems are selling like crazy, with no sign of slowing down.  It’s an exciting time for enterprise mobility, given Apple’s recent partnership with IBM,...
 
 
Google Chromecast Hits 400M 'Casts' As It Turns One Year Old
Google Chromecast Hits 400M 'Casts' As It Turns One Year Old
Google Chromecast, the $35 digital media player dongle that competes against Roku and Apple TV, has turned one today. To celebrate the milestone, Google announced that the Chromecast has powered over 400 million “Casts...
 
 
Google, Apple And Facebook Are In The Clear. So Why The Angst?
Google, Apple And Facebook Are In The Clear. So Why The Angst?
When Google reported its earnings last week eMarketer ran an article that showed how Google along with Facebook accounted for over 72% of the increased ad spend in mobile in 2013, and that they were going to surpass...
 
 
 

Latest from the Network

Commonwealth Games Day 1 medal standings
Glasgow, July 25 (IANS) England led the medal standings at the end of first day of the 20th Commonwealth Games followed by Australia and hosts Scotland. India was at the fourth position with two golds, three silvers...
Read more on Sport Balla
 
CWG 2014: Indian shuttlers outclass Uganda
Glasgow, July 25 (IANS) Indian shuttlers registered their second successive win in Group B of Commonwealth Games 2014 by defeating Uganda 5-0 in the mixed team event at the Emirates Arena here Thursday. World...
Read more on Sport Balla
 
China's yuan weakens
Beijing, July 25 (IANS) The value of the Chinese currency renminbi, or the yuan, weakened by 18 basis points to 6.1597 against the US dollar in its central parity Friday, authorities said. In China's foreign exchange...
Read more on Business Balla
 
Poland cancels cultural project with Russia
Warsaw, July 25 (IANS) The Polish government Thursday announced that it has cancelled plans for celebrating Poland Year in Russia and Russia Year in Poland, a cultural project planned for 2015. "The decision was taken...
Read more on Celebrity Balla
 
Bieber bags Calvin Klein endorsement deal
Los Angeles, July 25 (IANS) Singer Justin Bieber's has landed an endorsement deal with Calvin Klein (CK) and shot a campaign for the brand's underwear range. The 20-year-old joins the ranks of supermodels Kate Moss...
Read more on Celebrity Balla
 
US House panel supports lawsuit against Obama
Washington, July 25 (IANS) The US House Rules Committee Thursday approved a resolution allowing the full House to vote on authorising a lawsuit against US President Barack Obama, accusing him of abusing executive...
Read more on Politics Balla
 
Algeria confirms missing aircraft crashed in Mali
Algiers, July 25 (IANS) Algeria Thursday confirmed that the missing flight AH 5017 of Air Algeria with 116 people on board crashed in Mali, media reports said. "We can confirm that the plane crashed in Malian...
Read more on Politics Balla
 
Tori hopes to discuss relationship issues with kids
Los Angeles, July 25 (IANS) Actress Tori Spelling she hopes to one day have a "candid" with her children about problems in her married life so that they can understand the nuances of a relationship. She was devastated...
Read more on Celebrity Balla
 
Kaka set for Sao Paulo return after 11 years
Rio de Janeiro, July 25 (IANS) Kaka is set to make his long awaited return for Sao Paulo Sunday, 11 years after his last appearance for the Brazilian club. The 32-year-old, who joined his former side on a six-month...
Read more on Sport Balla
 
Chris Pratt's wife to 'fatten' him up
Chris Pratt's wife is trying to ''fatten'' him up. The 35-year-old hunk dropped more than 60lbs in just six months for his role in 'Guardians of the Galaxy' but now that filming has wrapped up, he admits his spouse...
Read more on Celebrity Balla