I'm pondering what's the best approach to size the market for Sony's Playstation 5.
I assume it's the global market.
My initial guess would've been to go via # people having PS3/4 and replacing with PS5 + # new customers (by age group ~14-30). But this leaves me with estimating the current PS3/4 market, which makes it a circular problem.
Any hints would be greatly appreciated!
Hi there,
Totally wrong approach! (Sorry)
What's the point of estimating users of PS3/4? You're going a very veyr indirect route (unless you happen to already know this number)
For this case, I would break down world population, then age demographics in large bands (young + middle-aged), then % of pop sub-segment with a PS4.
Remember that there's rarely a "best" answer with market sizing. What's important is that you break down the problem the way it makes sense to you. Importantly, break it down so that the assumptions you make are the ones you're most comfortable in.
For example, do you know all the major brands? Great go with that. Do you understand all the segments of that country's population (either age or wealth or job breakdown)? Go with that. Do you know the total market size of the tourism (or hotel) industry? Then break it down that way.
Hello!
The problem with your approach is that it leaves you with the issue of calculating the market for the previous machine, hence you haven´t really tackled it.
I would use a methodology of "closing the circle":
Total population > Total households -since you don´t have more than one of this per house- > % of them who buy it
Best,
Clara
How about this?
Lets estimate the market size in USA and then estimate how much % US constitutes of the global market to get the answer.
Assumption: Market size is in terms of users
The population of US is 320M with an average life expectancy of 80 years.
Let's divide that into 4 age groups: 0-20, 21-40, 41-60, 61-80, and assume only the first 2 age groups are most relevant. That gives us 160M (80M per age group)
Off those 160M about 40% purchase video games. That's 64M.
PS% is quite expensive, so off those 64M, let's assume 60% people can afford it. That gives us 38.4M,
Let's say, 10% off those already own a PS4 or video games of other companies and hence, won't consider buying PS5.
So 90% of 38.4M is approx 34M~ people.
Adding 20% for PS5's kept in commercial areas/offices etc approx 40M users in the US.
The US constitutes 10% of the global market. Hence, the global market is 400M users for PS5.
Note: I have absolutely no knowledge about the gaming world and its popularity. These are rough estimations done without any research to simulate a real interview experience.
Here's how i tackled it
Ask whether it is Voume Sale or Dollar Sale Size
Also ask size for 1 year or lifetime because consoles have a lifetime
US Populatio is 300M with 100M households
Breaking down households
Low Income, Middle Class, High Income (split 10, 80, 10) = 10M, 80M, 10M households
Assuming penetration of 50, 40, 50% that makes it 5M, 32M, 5M = 45 Million Households that would be interested in PS5
Not all 45M would buy in same year. Assuming they buy over a 5 year period. That would make it 9M Sales.
From there I would say the US represents ~70% of sales so total market size would be 13 Million PS5s per year. That would be 13 Billion USD in $ volume assuming $1000 per console.
You should clarify a few points before answering this [ o Yearly or lifetime sales o Consoles or share of revenue from individual games o volume sales or dollar sales]
I would prefer the top down approach > # of HHs --> Potential to buy (price based) --> Willingness to buy (requires qualitative estimates) --> how many purchases per HH
You can take the above approach for developed and developing markets and make a calculated estimate
Expert case by
