The Strat · Episode 24 · The Rise Of
26 June 2026 · 10 min
PlayStation
Sell the console at a loss, make the money on every disc, and let a betrayal by Nintendo start the whole thing.
From the show notes
The Rise of PlayStation
Published as
24- The Rise of PlayStation
§01 — What to listen for
PlayStation exists because Nintendo walked away from a deal with Sony in 1991, in public, and Ken Kutaragi refused to let the work go to waste. Listen for the internal fight — most of Sony did not want to be in games at all — and for the decision to use CDs when the industry was on cartridges, which made every third-party developer's life cheaper.
The strategy is the razor-and-blades model applied to a living room. The console is priced near or below cost and the profit arrives through the licence fee on every game sold. The full teardown runs the numbers on what that means today, when the disc has become a subscription.
The episode tells the story. The written case does what twelve minutes cannot: the business model, the moat, the statements, the valuation, and a verdict. Read the PlayStation teardown.
§02 — The strategy, named
The mechanisms this episode demonstrates, in the same vocabulary the case library uses. Where a pattern has been written up, the claim is here; otherwise the tag is still in the queue.
- razor and blades
Tagged across the library; the write-up is in the queue.
- subsidise hardware
Tagged across the library; the write-up is in the queue.
- platform flywheel
Subsidise the thing customers count, and earn on the thing they do not.
- ecosystem lock in
Tagged across the library; the write-up is in the queue.
§03 — Go deeper
PlayStation
Wide moat · Own it
Your turn
The console loses money on every unit sold. What makes that a strategy rather than a mistake?
Ken Kutaragi · 1993
Verdict
Own it
If G&NS operating margin fails to expand beyond roughly 10% in a full fiscal year with PS5 at peak installed base and no new console launch — that is, at the single most favourable point in the entire cycle — then the services mix is not doing the work the thesis requires and the hardware drag is structural rather than cyclical. I would move to Watch. A second, faster trigger: a major third-party publisher launching a AAA title day-and-date on Xbox, PC and mobile but not PlayStation would mean the network effect has stopped being arithmetic.
§04 — More from The Rise Of
How twenty-four of the world's most valuable brands were actually built.
- 01NikeOwn the design and the demand, rent the factory, and sell what the shoe says about the person wearing it.6 min
- 02AmazonLose money on purpose for a decade, and build the infrastructure everyone else will have to rent.8 min
- 03AppleControl the hardware, the software and the store, and make leaving cost more than staying.13 min
- 04LululemonCharge double for a pair of leggings, and recruit the yoga instructor to explain why.10 min
- 05StarbucksSell the place, not the coffee, and charge a rent premium on every cup.12 min
- 06SephoraTake the makeup out from behind the counter, let the customer touch everything, and become the shelf every brand needs.11 min
- 07LongchampMake one folding nylon bag the entire company, and keep the family in charge of it.7 min
- 08McDonald'sSell hamburgers to the public, and sell real estate to the franchisees.11 min
- 09IKEAMake the customer do the assembly, the transport and the carrying, and give them the saving as the price.8 min
- 10ChanelStay private, never discount, and let the founder's myth do a century of work.10 min
- 11DiorLaunch a house with a textile magnate's money, change the shape of women's clothes in one show, and license the name to the world.10 min
- 12GoogleGive away the best product on the internet, and charge whoever wants to stand next to the answer.13 min
- 13GucciNearly destroy the brand through family and licensing, then rebuild it around one designer at a time.9 min
- 14PradaMake luxury out of nylon, keep the company in the family, and treat the intellect as the brand.13 min
- 15Miu MiuLaunch a second house with the founder's nickname, aim it younger, and let it outgrow the first.8 min
- 16Tiffany & Co.Own a colour, put it on a box, and make the box worth more than most of what goes inside it.11 min
- 17HermèsLet the artisans set the pace, and turn a production constraint into the most valuable waiting list in retail.10 min
- 18GlossierBuild the audience before the product, and sell them what they told you they wanted.14 min
- 19NARSLet a makeup artist with a camera be the brand, and price the point of view.9 min
- 20M.A.C.Make the product for the makeup artist first, and let the professional's endorsement sell it to everyone else.10 min
- 21JBLBuild the speakers the cinemas and studios use, then sell that credibility to everyone else at a lower price.12 min
- 22BoseStay private, give the company to a university, and spend on research the way a public company never could.13 min
- 23XboxLose billions to buy a seat in the living room, then change the product from a box to a subscription.13 min