IndustryGamers - Informing the Games Industry

Sony: Latin America Ready to Explode as Next Major Market

Posted November 15, 2010 by James Brightman

IG: When you look at the demographic in Latin America, how would you say the spending ability compares to North America? Obviously, the average family probably has more money to spend on PlayStation products in the U.S. How does that affect your business in Latin America when you look at these bundles and your marketing and kind of trying to push to the right demographic there?

MS: That’s a great question. Spending and ability to spend is a huge part of the region. At the end of the day, we have roughly 550 million people in Latin America. If you think about it, this is broken down into different classes as far as income classes. If you compare the average income in the U.S. which I believe is somewhere around $32,000/year per capita, in Latin America it’s (on a good day) it’s approaching $4,000/year. You can imagine what priorities there are to a person that’s earning that kind of money on where to spend their money. Granted, the U.S., because of its GDP per capita, there are a lot more people who can actually afford any kind of entertainment product. It’s beyond just food, and clothing, and the basics in life. In Latin America, though, we have a wider base of younger people in Latin America than we do in the U.S., comparatively percentage wise as far as the population, and they tend to be more focused on doing their research ahead of time, and quality plays a big part. The Sony brand is very, very well accepted. In fact, it’s got one of the top two quality recognition factors in Latin America. We’ve been able to successfully leverage that with the quality of PlayStation and been able to get even some of that percentage of the population that would not have traditionally spent on an entertainment device; we’ve been able to get those consumers on board, because they see the overall family entertainment value. There’s other factors that come into play, as well, such as security in the region, making sure that family and the kids are home playing with the family, versus out there getting in trouble. Things like that factor into the success of the brand.

IG: Would you say the spending is sort of a factor into which platform to get? Do you see maybe that there's more focus on PlayStation 2 instead of PlayStation 3 because it’s an older console and it’s obviously significantly cheaper? Or has that not really been an issue? How would you say that breaks down between PS3 and PS2?

MS: As the price ranges in the spectrum of pricing, PlayStation 2, because of its pricing, is much more attractive to more people because of the spending power. And this is part of why, in our efforts to develop the region, we’ve developed value bundled programs. You might have read about it. We have a PS2 and a PSP value bundle. We have a one-stop shop box where you have a PS2, two controllers, a memory card, three games, and it’s a significant discount. Those families that just want to get their foot in the door in entertainment value can be able to do so with all-in-one entertainment value. These are some of the things that we’ve tapped into. Not everybody can afford a PS3. We’ve continued to lower the barrier to entry to all our products. That’s our ultimate goal in the region: to continue to drive and provide more and more access to our products. In lieu of that, and as we’ve developed that point, we are sensitive to the fact that there are different income levels in the region and we’re trying to continue to offer that entry level entertainment option whether that be PSP or PS2.

IG: What’s your take on the PSP in the Latin America region? Overall, the PSP, at least in the United States, has had some pretty significant declines in the last few years. It’s doing great in Japan; it seems to be a very, very strong platform in Japan. Quite frankly, here in the West, the PSP has struggled a bit. I guess Sony is fully aware of that. Looking specifically at Latin America, what do you see there for PSP?

MS: We’ve been able to leverage the full value of PSP in Latin America. We’ve really made sure that we focus on the benefits of the handheld versus other offerings out there. We’ve been very successful with that. PSP, proportionally, through other options there, sells a lot better in Latin America. We’ve been able to also leverage value game titles. In Latin America, we provided a full range of what we call the entry level or budget software titles, a full breadth of library titles that are very, very affordable. That’s been able to engage a lot more of the Latin American consumers to jump on the platform, because that’s been of concern to us in the past.

PR rep: And James I would also call attention to the fact that the bundles in the media bulletin today also include PSP in it.

MS: A Pro Evolution bundle. Also, you’ll see we have another key bundle in the Pro Evolution Soccer PS3 bundle. It comes with a silver PS3, which is not available anywhere else. That’s a little example of exclusive Latin America product that we can only offer.

IG: I don’t see prices for these bundles. Is that something you’re not announcing yet?

MS: The problem with announcing for the region is pricing varies from country to country. Unfortunately, import taxes vary from country to country, and state taxes, etc. so it’s tough to provide a list of nineteen different price points. On average, the pricing keeps continuing further and further down to better the access to consumers. On average, you could find pricing, percentage-wise, for Mexico anywhere from ten to fifteen percent above U.S., and then it varies from country to country.

IG: Any other thoughts before we wrap up?

PR rep: We'd like to share a little bit about why Latin America is so important for SCE and our global targets. I know we just announced our earnings numbers where our fiscal targets are pretty lofty goals; we’ve raised them for the PS3 twice in a row. They’re up to 30%. We talk a lot about emerging markets being an area where this is going to help fuel that.

MS: Just to dive in deeper there, with the complexity of Latin America as a region, it’s critical for us to be able to find key success factors in every country. Every country is critically important to us, from Brazil to Argentina, Chile, where you find the hardcore gamer and the real fanatic is just as strong if not even stronger in the region and thirsty for entertainment. When you look at the global landscape, emerging regions such as Latin America, and emerging key markets, like Brazil for example, is a country of 200 million people that is really a key market for us to be able to serve fully; we can commercialize and distribute product in a way that’s not just taking you as a product or global product, but providing a regional- and country-specific solution to consumers. That’s a big mission for us, to go from a global brand to a country-specific brand that has relevance. We’re fortunate enough that the PlayStation brand in Latin America has a huge awareness and has been served by product from many, many parts of the world that; based on that, we now have the opportunity to focus our brand message and our explosive growth of the region and put a lot of the worldwide focus of PlayStation into the region.

The type of growth we’re experiencing in Latin America, you don’t see it anywhere else in the world right now. That’s key for the company as SCEI, as a global company. We’ve only begun to tap into the full potential in the region. Our sales and our growth continues to double and double and retailers are responding, so everyone’s aligning all the way from not only corporate in Japan, and SCEA as a U.S. and regional headquarters, but down to retailers where they had initially just really concentrated on selling consoles. Now, they’re seeing the benefits of pushing software launches and really making events out of software launches. We’re starting to see this real great change in the noise around the community and the noise around video games and we’re an integral part of that, so it’s a pretty exciting time right now. We’re approaching that tipping point where an outlet like IndustryGamers that hasn’t traditionally covered a region like that is now paying attention. There’s incredible momentum and a lot of excitement on a country basis when we have a specific launch. You know, God Of War, we had a Kratos touring a mall in São Paulo, Brazil and with 10,000 people waiting for the title; you’d never think that there was that kind of excitement and demand in the region. That’s what we’re creating consistently with every launch of not only software, but hardware, and you’re going to see a lot more of it spilling over into the U.S., because that kind of momentum and energy will undoubtedly end up north of the border.

IG: So do you see it becoming one of the really truly major, major markets alongside the U.K., Japan, and the United States? Do you see Latin America reaching that level in the next few years?

MS: Absolutely James, and I think Latin America is going to start becoming even part of the media outlets in the U.S. dialogue. There’s the explosive growth opportunity that we’re already seeing and we’ll continue to see down the road. With no bars in place, it is going to make it a superpower. Talking about the pure economics, Latin America is very healthy and in a very healthy state right now. We do have countries that are still what we call “emerging,” but also there’s risky countries like a Venezuela, for example, with Hugo Chavez, but overall the region, as a whole, is very, very stable. You have Brazil, which is going to be undoubtedly one of the five superpowers in the next five years. They have more oil than a number of countries combined. Chile is one of the most successful countries, one of the highest income per capita, one of the biggest mining countries in the world. Latin America, historically, has gone through a lot of turmoil in the past two hundred years and the region has become very good at bouncing back from turmoil. If you look at a recent recession that started with the housing bubble bursting years ago, that hit Latin America, but Latin America has already bounced back. This year Latin America was in a growth stage, where in the U.S. we’re still recovering from that economic impact. That quick turnaround has helped everybody get back on their feet and purchasing to increase, and purchasing intent to increase, and the overall mood of the society to be at a level where they are willing to buy and they’re willing to enjoy themselves and spend a little bit extra.

IG: Ok, thanks for your time Mark.

James Brightman has been covering the games industry since 2003 and has been an avid gamer ever since the days of Atari and Intellivision. He was previously the EIC of GameDaily Biz.