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Ian

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What's the size of the PS5 market?

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!

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!

I would approach this problem via a top down approach. My rationale behind this would be that the the supply of PS5 (given a price) can easily meet the global demand. Then I would Segment the global market into 2 buckets - Developed markets (i.e. Europe, North America, Japan, South Korea, Australia Singapore possibly couple Eastern countries) & Emerging markets (Africa, Middle East, LatAm, South Asian and South East Asian countries) this is off-course subjective. With the second bucket you can discount a lot of people (given PS5 is a high ticket item a lot people in developed countries) and then make the assumption x% of an age bracket plays video games. Of those % would be play on specifically PS game and of x % would be earlier adopters in the first year (possibly a small fraction). Sanity check - look for proxies (e.g. past PS3/4 market size whilst factoring a lot more have more disposable income and global population has increased e.g. PS3/4 was released around the FS crisis people reduced their spending on essential items). — Anonymous A on Nov 13, 2020 (edited)

I agree. interesting approach I can see how you side step the circular reasoning — Anonymous A on Nov 13, 2020 (edited)

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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.

How to properly do market sizing

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.

How to properly do market sizing

(edited)

So I take your approach to estimate PS4 users and then continue with % replaced per year and % of new user based on addressable population? — DairyQueen on Nov 13, 2020

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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

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.

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.

(edited)