Sony v Microsoft at E3

SuperData CEO Joost van Dreunen is at E3 this week. Here’s his take on the platform war between Sony and Microsoft.

Off the top, recent commentary indicates that the current console cycle is coming to a close, but leaves us with the question what’s next. It is possibly the most important question for the traditional console-based business today. We already know that it makes most sense for content creators to be platform-agnostic (see: Fortnite) and that therefore releasing a title exclusively on one or the other needs to come at a premium.

So what are the platforms up to?

For Sony and Microsoft, this year’s E3 isn’t so much about the upcoming holiday season as much as it is about both companies’ long-term future.

What Microsoft did well this year was to overwhelm people with an abundance of content: its showcase held 50 titles (compared to 42 last year), announced a string of studio acquisitions, a doubling of its effort behind Game Pass, and an allusion to a future in which game streaming is a reality. In particular this last part is promising: although Microsoft has failed to win the center of the living room as it originally set out to do,  it is setting itself up to become the leader in the digital games market by equally amassing content and focusing on distribution rollout.

Following the initial success of its Game Pass program, Microsoft is doubling down on its subscription offering by (1) obviously expanding its offering and adding titles like Forza Horizon 4  and Crackdown 3  at launch, and (2) introducing FastStart, a feature that should half loading times. In terms of infrastructure, Microsoft seems committed to gaming for the years to come with a confirmation of a cloud-based device agnostic streaming platform under development and expected readiness in 2 to 4 years, and is working on the next Xbox consoles.

Sony, on the other hand, doubled down on its content yesterday, which made its showcase feel like one you’d expect from a publisher and not from a platform. The message many got is that Sony is intent on bringing single-player gameplay that centers on high production values and, essentially, costume drama. With an install base of 75 million that makes sense for now. But it does not provide an answer to the question what the future holds. Worse, it is inconsistent with the direction senior management recently revealed plans to focus on subscription revenue from online gaming and streaming music and video. In particular since it pushed back on new PlayStation hardware.

Further down the value chain we see a similar shift as publishers see an opportunity to own more of the pie. Electronic Arts, for instance, is clearly looking to vertically integrate and enhance customer loyalty. It revealed a subscription service, EA Origin Access Premier, that includes early access to notable titles like Battlefield V and Anthem and will cost $15/month ($100/year) starting this summer. Following its recent acquisition of GameFly’s infrastructure subsidiary, EA is clearly on a path to become the alpha and omega of sports gaming, and beyond.

If we look outside of gaming for a moment, there are several new contenders busy trying to buy up land in the content segment to combine it with their distribution channels. The broader consolidation taking place with Disney and Comcast vying for 21st Century Fox’ assets, Netflix and Amazon writing checks left and right to get their hands on fresh content, the ceaseless string of IPOs coming from the Tencent mothership (now with the immanent public offering of Douyu valued at $700MM), the landscape is shifting dramatically. It both presents an opportunity for gaming platforms to carve out a valuable business for themselves, or lose it altogether.

It is possible that a few years from now Microsoft will be the Netflix of gaming and Sony more like HBO. But a digital future is about scale and infrastructure, which means that Microsoft may yet claim the center.

Let’s see how the rest of the show plays out and loop back on this.