Milke Fischer, Senior Analyst
May 24, 2022
During a May 18 investor briefing in Tokyo, Sony’s CEO, Kenichiro Yoshida announced the company’s cross-media metaverse strategy. He envisions the metaverse as, “A social space and live network space where games, music, movies and anime intersect.” If Yoshida can deliver on this vision, it will be a game-changer for the company and for the entertainment industry in general.
Sony’s metaverse entry comes later than other major players such as Meta, Microsoft, Roblox, and Epic Games. The fact that most of its strongest competitors had already laid claim in the metaverse was not enough to prompt its entry. Rather, it was Netflix’s announcement last July it would enter the video game sector that spurred Sony to action.
As far as what makes Sony’s play a bit different than its predecessors is its vision to combine Sony’s core strengths in gaming, music, and video into a single strategy. This may seem like an obvious approach, but Sony’s media divisions have a reputation for not working together well. If this announcement represents a top-down directive to prioritize divisional cooperation, it will be great news for investors.
Sony is strengthening its immersive media efforts with several other big bets, including the development of its own VR headset, PSVR2, which will connect to its PlayStation console. This product (expected in 2023) will give Sony an advantage in the metaverse sector. While the metaverse is much more than just a VR experience, virtual reality is the most disruptive aspect of the metaverse. Currently, Meta’s Oculus VR headset dominates the market, with no other serious contenders. This situation exposes a risk that Meta could control access to VR much like Apple does in smartphones—owning a platform that becomes the world’s onramp to the metaverse. I know several developers putting their support behind PSVR2 simply to help prevent Oculus from monopolizing the VR headset market.
Sony’s biggest bet on metaverse is its recent $1B investment in Epic Games, the developer and publisher of Fortnite. This comes on top of a prior investment of $200M, which further fuels speculation Sony will eventually acquire Epic and its Fortnite franchise, then leapfrog to the front of the pack in the metaverse race. Not to be outdone, Microsoft recently announced the acquisitions of major video game companies Activision (for $68.7B) and Bethesda Softworks (for $7.5B).
The competitive landscape discourages the development of a single metaverse in which all brands, all hardware, all services, all ecosystems combine to create a unified consumer experience—common credentials, payments, avatar, etc. That was the original promise of the metaverse, but the marketplace had a different opinion. The current model is defined by multiple siloed metaverses, each owned by a tech-media giant with its own hardware, games, music, video, etc. that, fully integrated, create a single end-to-end branded media experience.
This puts pure-play content companies at a distinct disadvantage, as they must share revenue with their direct competitors: the same tech giants that own a metaverse ecosystem that creates original content, sells branded hardware and services, and has built an audience to which studios need access. Thus, the gatekeepers will dictate terms to their content partners, as very few companies can afford to develop and maintain a metaverse ecosystem.
The big question is whether a single company will come to dominate this landscape or whether Sony, Microsoft, and Meta (maybe Amazon) will all share the metaverse media market. There is a case to be made for each company’s advantage in this emerging landscape, but Sony is undoubtedly in a strong position, thanks to owning its own content pipelines across games, music, and film/television, its market leadership in consumer electronics, and its global reach.