Since Microsoft (MSFT +1.77%) and Sony (SNE 2.26%) launched their game consoles last November, some interesting trends have emerged. While Sony currently has a sales lead, Microsoft still has five to seven years to make up the ground. Indeed, Sony knows that early leads are not insurmountable, as it eventually came from behind to outsell Microsoft in the previous generation, despite Microsoft launching a year earlier.
Both companies are looking to capture those long tail consumers by offering living room entertainment features above and beyond gaming. But with Amazon.com (AMZN +1.79%) and Google (GOOG 0.26%) making TV-connected devices potentially capable of gaming, they'll have to find a way to attract an audience to their expensive devices.
Sony's unoriginal originality
Sony is venturing into Netflix and Amazon's territory, and is producing original content for its PlayStation Network. The company announced its first original show, a one-hour serial drama, will be available exclusively to PlayStation owners.
This isn't a unique strategy, but as they say, "if it ain't broke, don't fix it."
Netflix has had excellent success with its original programming, garnering awards and, more importantly, subscribers. Amazon followed suit with original programming for its Amazon Prime Instant Video service, and the results are, like many things at Amazon, unknown. The programming has been met with mixed reviews.
Google even began commissioning original features on its YouTube platform to maintain its dominance in online video. Finally, rival Microsoft has been working on original programming since late 2012.
But Sony has one advantage none of these other companies have: a freakin' television studio!
Indeed, Sony has come under fire before because there isn't enough synergy between the disparate parts of the conglomerate. Last year, Dan Loeb called for the spin-off of Sony's entertainment division. Now, Sony is leveraging that entertainment division to boost its PlayStation unit.
Amazon and Google fight back
Amazon will reportedly release a dongle similar to Google's Chromecast next month. What's more, the dongle might come with an optional wireless game controller that would allow gamers to play games streamed over the Internet. This fits well with the company's recent acquisition of Double Helix Games last month.
Google is seemingly interested in gaming as well. The company bought parts of Green Throttle Games earlier this month.
Both companies are interested in capturing the section of gamers that use their consoles just as much for entertainment as for gaming. Many people access over-the-top services like Netflix through their PlayStation and Xbox consoles. Google and Amazon would prefer for the over-the-top services to be their own. If they can attract a part of the gaming market, they can feature their products front and center on user's television sets.
The ability to stream games over the Internet, which is the promise of these rumored devices, is something both Microsoft and Sony have yet to deliver. Sony plans to unveil PlayStation Now, a cloud gaming platform, this summer, however, and Microsoft is expected to follow suit.
But, Sony is the only one of these companies that doesn't have its own cloud platform. That could cut into its margins if gamers take to streaming games over buying physical media.
Differentiation is getting harder
Amazon is set to release a product that's similar to Google, but it might differentiate it through gaming capabilities. Not to be outdone Google might add a gamepad to its Chromecast.
Sony has a slight edge over Microsoft in hardware sales, but knows that lead isn't insurmountable. It plans to leverage its film and television studio to offer exclusive programming. Microsoft is planning exclusives of its own.
The point is, all of these companies are converging toward products similar to smartphones. For now, however, Sony looks strong enough to fend off all of them with its established brand and its strength in entertainment. It's a lot easier to build a cloud platform than a successful television studio.
