china

One to Watch – SONY

20140528-080133.jpg

SONY announced plans this week to enter into a Joint Venture with Shanghai Oriental Pearl, a Chinese State owned media company to facilitate the manufacturing and selling of the PS4 to a fraction of 1.3bn potential new consumers. I know some of you are wondering why this is such a big deal. Well, for the past 14 years in Mainland China there has been a ban on foreign made games consoles being sold to the citizens of the country. This was ended in January and now it seems like SONY want to tap into the Chinese gaming market – a market which saw revenues grow 38% year on year to $13.75bn, the largest growth rate since 2009 according to the China Games Industry Annual Conference.

Firstly lets look at how those revenues are broken down:

•65% is derived from client-based PC games
•15% is down to online browser-based games
•Mobile gaming accounts for 13.5% (with Apple’s iPhone and iPad take a quarter of Chinese      
mobile games revenues) and finally
•6.5% are as a result of the sales of Game consoles 

Is this a good move for SONY? No doubt about it – 100% yes in my opinion. There is a huge multibillion that can be tapped into legitimately (Playstations and Xbox Consoles have been available on the black market in the country for a very long time at over inflated prices) and could lead to long term strategic growth for the company. Microsoft are one step ahead of SONY after they announced their Joint Venture with BesTV New Media and have plans to launch the Xbox1 in September. The advantage SONY have on their American competitors is their price to value. They have been able to offer a console roughly £100 cheaper without compromising on the main specifications of the console. The value for money obtained if translated into sales could prove very profitable for the company in the long run. There is a huge market of multiplayer online role-playing gamers in the country for console producers to tap into – 129 million to be precise which accounts for 73% of all Chinese gamers. Games such as Final Fantasy proving to be best selling RPG’s on previous consoles, so if SONY can repeat their success with upcoming games the future looks bright for the company. How has the markets reacted to the news? As you can see on the below chart the share price went up by 3% when the news was announced so it was definitely viewed as a positive signal.

20140528-080314.jpg

It will be interesting to see how this developes over the next year or so – will SONY be able to break into the Chinese gaming market? Only time will tell.

@Capitalmoments