What Project Q tells us about Sony’s strategic thinking?

During Sony’s Showcase event last night, Sony unveiled Project Q – a handheld gaming device. It will come to the market later this year, though Sony did not specify the exact date or price yet.

Project Q will enable the user to stream the games that are installed on their PS5 device over wi-fi. While there was no mention of cloud gaming capabilities on the device, it is not unfathomable that Sony could add this sometime in the future. As it stands, what we have is a portable handheld device that requires ownership of a PS5 console to enjoy, and it may not offer seamless gameplay on the go.

While gamers are understandably pointing out the disappointment around some of these shortcomings, let’s assume that Sony didn’t simply forget to add cloud gaming, or the ability to play without owning PS5. More likely, they thought about it carefully and decided against. This is a move on a wider strategic chess board. So, what could be behind this all?

Ringfencing the super-premium, rather than going after new users

A few years ago, MIDiA wrote about Sony’s potential next strategic direction in response to the growing threat of Xbox’s cross platform ‘making games accessible for everyone’ play. We suggested that Sony will likely pursue the less populous super-premium (think iPhone versus Android devices) and the positioning of Project Q suggests that Sony could indeed be doing that now.

While PlayStation still leads console ownership, competition will likely erode engagement with ‘console-grade gaming experiences’ over time. Ultimately, Microsoft can afford to run its games division at a lower margin than Sony to grow its userbase, as well as being able to simply deploy more money into acquisitions, cloud, etc. Sony understands that protecting engagement, time spent, and dollars earned per hour of engagement are quickly becoming the most important KPIs in the industry, particularly with the rise of live service games and the limited 24 hours in the day. The future for Sony’s games-related efforts is therefore less likely about racing to capture new users, and more likely concentrates on monetising its existing users (the most valuable ones in particular). This will involve prioritising protecting their engagement and making sure they do not leave the ecosystem in pursuit of better value for money. To do that, Sony will likely be doubling down on its positioning as the ‘super-premium gaming experience’. Strategically, if executed well, it will help the company remove itself somewhat from direct value for money comparisons in eyes of consumers, particularly the most affluent ones (similar to Apple’s strategy).

PS5 owners are undoubtedly some of the most affluent and valuable consumer segments for Sony. They have the money to spend on the additional device, even if only for the convenience of enabling their partner to watch TV while still enjoying a PlayStation-grade experience from the couch alongside them.

Project Q will only capture a small subset of console gamers (a minority subset of PS5 owners at that), but those users that do buy it will be significantly more vested in the Sony device ecosystem and therefore less likely to leave or reduce engagement in the mid-term.

Defending against engagement cannibalisation by handheld devices

Time spent is a vital metric, and differing household opinions as to the preferred form of evening entertainment presents a direct threat of cannibalisation of time spent on console gaming. Until now, if the big screen was chosen for evening video streaming, and the other person wanted to play video games while still being physically present, Nintendo Switch captures a significant amount of that opportunity. Project Q will address this and, for a small subset of gamers (but some of the most valuable ones in monetary terms), will likely refocus some of that engagement back to Sony.

The question is, how much? In Q3 2022, 30% of PlayStation console owners also owned a Nintendo Switch. Therefore one of the things to watch when we think about the immediate impact of Project Q for Sony, is when exactly it hits the market and how far ahead will it be from the next release in the Nintendo Switch product line. Of course, distinction in terms of available games will play a role too.

The handheld market is heating up

The Project Q reveal follows Microsoft’s announcement about bringing Xbox Games Pass to ASUS ROG Ally. While handheld devices are nothing new, with the release of Valve’s Steam Deck in 2022 and the public eagerly awaiting a new Switch announcement in the mid-term, this will be the first time where all major players will be directly competing in the space at once. Each with their respective endgames, strategies, and IP, but all competing to capture more of gamers’ 24 hours in the day.

Game on.