Sony has recently adopted the new business model of digital distribution. End of last year they launched their new portable console PSP GO. It has being positioned as a digital, online entertainment device, not simply a games machine. The main difference between its previous portable consoles and the new one is that the video games are distributed online. It means, instead of buying video games in a retailing store, PSP GO owners log into a website and download the video games directly from Sony.
Using this new business model, Sony is not using its traditional distribution channel such as retailing stores and video games distributors. Also, Sony is retaining an additional 30% margin that was usually the retail margin.
It seems that Sony is moving from a retail brick and mortar store model to a new digital model.
However, the question is whether this strategy will be sustainable. Stores such as BestBuy and Game Stop have been taking lower margin in console hardware in order to secure a higher volume of video games sales. In this new business model the distributors are out of the game. The problem is, with no physical games to sell for the PSP Go, why would retailers want to stock the system? However, Sony still need the retailers support to sell the hardware and the other consoles.
Without the full support of the US and international retailers, the new PSP GO console haven’t had the number of estimated sales. It seems that it will take a long time until the new digital distribution model works for Sony.
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