Sony Digital Entertainment Case

Executive Summary

SDE develops a wide range of digital content offerings for mobile phone users by its subscription model in order to compete in the new keitai novel market, although the model does not work so successful as expected due to the dominated competitor. It may be much wiser for SDE to pioneer a new market and make a new culture by facilitating Sony's competitive advantage.

Introduction

SDE was made to produce attractive keitai contents site. At the same time, there was keitai novels boom among young women in Japan. SDE also joined the keitai novel market, but it was difficult to making profit. Now SDE is at the moment of reconsidering its strategy to be profitable.

The keitai novel site market

Keitai novel users, mainly young female, try to find a story they can sympathize and to meet friends sharing ideas or thoughts. They are unwilling to pay much money and to read so-called professional and well written novel. Instead, they feel comfortable with novels which are free of charge, and can exchange thoughts with the author through poor characteristics.

SDE's marketing strategies toward keitai novel site market

SDE tries to attract users by providing a wide range of high quality contents. Its keitai novel site, "Puchi-bun", collects genres such as love stories (the most popular genre in the market), mystery, and non-fiction stories. However, there are only 3,500 novels on the site while the market leader, Magic i-Land has about one million novels. In addition, readers have to pay a monthly fee of \315-525 to read the novels.

Was it smart for SDE to compete with Magic i-Land?

SDE should not have launched its strategy to the keitai novel market since there is only little chance that "Puchi-bun" will win against Magic i-Land in terms of "network externality".

"Network externality" makes new users join the group with the largest number of users in order to maximize their utility. For example, if you are a keitai novel writer, you are likely to sign with Magic i-Land because there are much more readers than "Puchi-bun". Also, new readers are likely to sign with Magic i-Land because there will be more kinds of stories and they can find more "friends". Therefore, in order to receive favors of "network externality", you have to take initiative in the market. And in terms of "network externality", SDE should not have targeted the same target as Magic i-Land because there is less incentive for users to sign to SDE.

In addition, keitai novel site users feel uncomfortable with SDE's subscription fee system because they don't think there is enough incentive to sign to SDE's site.

Marketing