Summary
Sony is following what has been an extremely successful model with Apple's iTunes stores for both the iPods and iPhone in selling songs and applications.
Analysis
It appears Sony is going to try and take a page from Steve Jobs on how to make money with little or no effort. Apple's closed loop on both the iPod and iPhone has proven successful beyond anyone’s imagination. IPhone ads now claim to have 75,000 applications available for download. You can only get these directly from Apple. None of the independent Apple resellers can sell them.
The game dealers now join Apple’s resellers in a limited market of add on sales where no software is available for sales. Compared to hardware the software market is the profit maker on any product line. To view this look back at the old concept of give away the shaver and sell the blades.
In the case of Sony it might be a little more of a gamble, as it is lacking a network of company owned stores to push game hardware. If all the retail outlets push other products this could backfire on Sony. But it also reduces the cost of software distribution as all packaging, distribution and transportation costs go to almost zero. I am certain this will be closely followed by the other game manufacturers. If Sony can pull this off, watch the others to follow and the big losers will the retailers.
The game dealers now join Apple’s resellers in a limited market of add on sales where no software is available for sales. Compared to hardware the software market is the profit maker on any product line. To view this look back at the old concept of give away the shaver and sell the blades.
In the case of Sony it might be a little more of a gamble, as it is lacking a network of company owned stores to push game hardware. If all the retail outlets push other products this could backfire on Sony. But it also reduces the cost of software distribution as all packaging, distribution and transportation costs go to almost zero. I am certain this will be closely followed by the other game manufacturers. If Sony can pull this off, watch the others to follow and the big losers will the retailers.
Joe Weingarten consults with leading institutions through GLG
Analyses are solely the work of the authors and have not been edited or endorsed by GLG.
