Oriental Opportunity - Sony Brings PlayStation to China

A magnificent opportunity for Sony’s PlayStation brand has emerged which could lead to many years of new revenue, market share and added optimisim on top of the current success of the brand. Sony has just announced a partnership with China’s Oriental Pearl Group to produce and sell games consoles in China. This follows a change in policy from China earlier this year relaxing a 14-year ban on games consoles for their ‘corrosive cultural effects’. The world’s largest consumer market is now open for business to the video games manufacturers like Sony.

This follows rival Microsoft’s announcement back in late April when it announced its own plans to produce and sell consoles with BesTV in China. Sony clearly isn’t willing to let the Xbox One find any way out of its slow sales predicament and knows that it cannot afford to leave that market potential to its rival alone. It essentially presents a new opportunity for all games companies to grow and with a market as large and entertainment-hungry as China, the bounty is high.

What’s Sony’s plan for PlayStation in China’s $14bn / €10bn gaming market?

China Ban on Consoles Lifted

The games market is different in China and it has a few key differences compared to Western markets. Until now games consoles weren’t even legal. Despite this, PC gaming continues to thrill the market (including internet gaming) with mobile gaming now chewing on that trend. Back in the year 2000, the government at the time claimed that video games posed a threat to youth particularly because of many games violent nature. Clearly the term ‘video games’ targeted consoles since PC and mobile games are legal and thriving. This idea has clearly been waning in the current government, as PC and mobile games aren’t restricted to Disney themes and are in fact legal. Also, somehow, the ‘legal’ gaming market has accumulated about a $1bn in value for every year that consoles have been banned for the past 14 years.

The ban also failed to dent the rapid rise of PC, internet and mobile gaming in China. Tencent, China’s most valuable internet company, now makes more than half of its $6.9bn annual revenues from gaming.

The Financial Times

There are rules for foreign companies to note if they wish to produce and sell products in China. Chief among them is the stiff requirement to partner with a Chinese company. That ties a Chinese company to the success of any foreign company that sees profit to be made. That’s where Oriental Pearl Group comes in. Sony is creating two ventures with this group to sell games consoles in China. The term ‘games consoles’ isn’t intentionally ambiguous – Sony has not declared which games consoles – or when they will arrive. Given the long-term plan for the now profitable PS3, we can expect that console and the PS4 at the very least to invade living rooms and bedrooms in China. Plus, if rival Microsoft is aiming for a September launch of the Xbox One, then Sony will try to match or beat that.

Doors are Open for Sony in China

PriceWaterHouseCoopers estimates that the global gaming market in 2012 was valued at $63.4bn and will reach $86.9bn in 2017 (€46.5bn-€63.7bn). As of 2014, China accounts for $14bn before games consoles even arrive (that’s just PC, internet, mobile to date). All economically growing countries represent possible market growth for Sony and India, South America and several African countries will come later but the very high economic growth in China for the past 10 years has lifted hundreds of millions of people into middle class – and they are hungry for entertainment. This presents a surprise opportunity and a lucrative time for Sony to bring PlayStation to China. It’s unlikely that Sony and rivals were planning on this happening during the development phase of the latest consoles, so new doors are open.

What part will the Game segment represent within Sony Corp. in its future? We know that Sony is a changing corporation. It’s once-revered VAIO PC brand is being sold, it’s TV division is being spun out of the company. They tell us that their 3 pillars of potential are in Game, Mobile and Imaging. The success of the PS4 alone has defied market expectations of consoles dying out and that’s in so-called ‘saturated’ Western markets alone, never mind gigantic markets to be tapped like China. Just imagine what tapping the world’s largest consumer market could do for Sony.

On a smaller commercial/cultural note, both Sony and Microsoft have challenges to overcome in the East. Japanese companies are suffering a period of unpopularity amongst consumers in various Asian markets due to current political tension and past diplomatic policies. Microsoft on the other hand has demonstrated spectacular cultural insensitivity in the Japanese market by selling a cornucopia of gun-games to a culture infused with Taoism, Buddhism and other non-gun-happy philosophies and religions only to wonder why sales are miserable. Both companies have a big bounty to play for but if Sony’s progress with the PS4 in Western markets is anything to go by, then they’re in to win.