Case 3:21-cv-03361 Document 1 Filed 05/05/21 Page 1 of 25
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`Jeff S. Westerman (SBN 94559)
`WESTERMAN LAW CORP.
`16133 Ventura Blvd., Suite 685
`Encino, CA 91436
`Tel: (310) 698-7450
`jwesterman@jswlegal.com
`
`Michael M. Buchman (pro hac vice forthcoming)
`Michelle C. Clerkin (pro hac vice forthcoming)
`Jacob O. Onile-Ere (pro hac vice forthcoming)
`MOTLEY RICE LLC
`777 Third Avenue, 27th Floor
`New York, NY 10017
`Tel: (212) 577-0050
`mbuchman@motleyrice.com
`mclerkin@motleyrice.com
`jonileere@motleyrice.com
`
`Attorneys for Plaintiff and the Proposed Class
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`[Additional Counsel listed on signature page]
`
`UNITED STATES DISTRICT COURT
`NORTHERN DISTRCT OF CALIFORNIA
`SAN FRANCISCO DIVISION
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`AGUSTIN CACCURI, on behalf of himself
`and all others similarly situated,
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`Plaintiff,
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`v.
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`SONY INTERACTIVE ENTERTAINMENT
`LLC,
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`Defendant.
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`Civil Action No.
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`CLASS ACTION COMPLAINT
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`DEMAND FOR JURY TRIAL
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`Plaintiff Agustin Caccuri, on behalf of himself and all others similarly situated, brings
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`this Class Action Complaint against Sony Interactive Entertainment LLC for violation of federal
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`and state antitrust and unfair competition laws. Based upon personal knowledge, information and
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`belief, and the investigation of counsel, Plaintiff alleges as follows:
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`I.
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`INTRODUCTION
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`1.
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`This is an antitrust and unfair competition class action seeking damages and
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`injunctive relief for violation of Section 2 of the Sherman Antitrust Act, 15 U.S.C. § 2, and the
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`California Business and Professions Code § 17200, against Sony Interactive Entertainment LLC
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`(“Sony” or “Defendant”). Plaintiff brings this action on behalf of himself and all other similarly
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`situated Class members who purchased digital video games on Sony’s PlayStation Store (the
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`“Class”) between April 1, 2019 and the present (the “Class Period”).
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`2.
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`Sony manufactures the PlayStation, a line of video game consoles that launched
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`in 1994 and has become one of the most popular video game systems in the world. Sony’s most
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`recent model, the PlayStation 5, is expected to become the best-selling video game console of all
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`time. PlayStation 5 launched on November 12, 2020, and by March 31, 2021, Sony had sold 7.8
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`million units.1 Despite record sales numbers, Sony has been unable to supply anywhere close to
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`enough units to meet consumer demand.2 Sales are predicted to surpass 200 million units within
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`the next five years.3
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`1 See Sam Byford, Sony has sold 7.8 million PS5 consoles, The Verge (Apr. 28, 2021),
`https://www.theverge.com/2021/4/28/22407195/sony-ps5-sales-numbers-q4-2020-earnings.
`2 See N.F. Mendoza, PlayStation rakes in $2.6 billion in PS5 sales, TechRepublic (Feb. 25,
`2021), https://www.techrepublic.com/article/playstation-rakes-in-2-6-billion-in-ps5-sales/.
`3 Aernout van de Velde, PS5 Sales to Exceed 200 to 300 Million Units in 5 to 6 Years, Analyst
`Says; Could Terminate the Long-Running Console War, WCCF Tech (Oct. 17, 2020),
`https://wccftech.com/ps5-sales-200-300-million-700-console-war/; Lionel Sujay Vailshery,
`Forecast unit sales of the PlayStation 5 worldwide from 2020 to 2024 (Apr 12, 2021),
`https://www.statista.com/statistics/1124784/unit-sales-ps5-worldwide/.
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`Case 3:21-cv-03361 Document 1 Filed 05/05/21 Page 3 of 25
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`3.
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`Sony has used the console’s popularity to build PlayStation into a multinational
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`and multifaceted digital entertainment brand4 which includes an online store for purchasing and
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`downloading digital video games directly to the console (the PlayStation Store),5 a unified online
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`multiplayer gaming and digital media delivery service (the PlayStation Network),6 a
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`subscription-based digital video game streaming service (PlayStation Now)7, a digital movie and
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`TV distribution service (PlayStation Video),8 and Sony’s video game development arm
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`(PlayStation Studios).9
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`4.
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`The bulk of the profits Sony derives from the PlayStation franchise come not
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`from sales of its consoles, but from the digital video games and other digital content sold through
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`the PlayStation Store and the PlayStation Network, which produced over $17 billion in revenues
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`for Sony in the fiscal year ending March 31, 2021.10
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`5.
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`The PlayStation Store launched in 2006 alongside the PlayStation 3 console,
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`allowing users to purchase digital copies of PlayStation games and download them directly to the
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`console as an alternative to buying physical disks and inserting them into the console’s disk
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`drive. Since the launch of the original PlayStation in 1994, the games had been available only on
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`disks. Now users can access the PlayStation Store from their console, purchase games, and
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`4 See About Us: We are PlayStation, Sony Interactive Entm’t, https://www.playstation.com/en-
`us/corporate/about-us/ (last visited Apr. 29, 2021).
`5 See About PlayStation Store, Sony Interactive Entm’t, https://www.playstation.com/en-
`us/about-playstation-store/ (last visited Apr. 29, 2021).
`6 See PlayStation Network, Sony Interactive Entm’t, https://www.playstation.com/en-
`us/playstation-network/ (last visited Apr. 29, 2021).
`7 See PlayStation Now, Sony Interactive Entm’t, https://www.playstation.com/en-us/ps-now/
`(last visited Apr. 29, 2021).
`8 See PlayStation Video, Sony Interactive Entm’t, https://www.playstation.com/en-
`us/playstation-video/ (last visited Apr. 29, 2021).
`9 See SIE PlayStation Studios, Sony Interactive Entm’t, https://www.playstation.com/en-
`us/corporate/playstation-studios/ (last visited May 3, 2021).
`10 See Sony Corporation, Financial Statements and Consolidated Financial Results for the Fiscal
`Year Ended March 31, 2021 (Apr, 28, 2021), available at https://www.sony.com/en/SonyInfo
`/IR/library/presen/er/pdf/20q4_sony.pdf. Dollar figure based on the following exchange rate
`from April 28, 2021: 1 JPY = 0.0092 USD.
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`download them directly to their console through the PlayStation Network. In 2020, digital
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`downloads made up 62% of sales for PlayStation games, compared to only 43% in 2018.11
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`6.
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`Until recently, consumers could also purchase download codes for digital
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`PlayStation games from the same online and brick-and-mortar retailers who also sell physical
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`games such as Amazon, GameStop, Best Buy, and Wal-Mart. The codes could be redeemed on
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`the PlayStation Store for digital copies of PlayStation games.
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`7.
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`On April 1, 2019, Sony eliminated retailers’ ability to sell download codes for
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`digital PlayStation games. Because delivering digital content to PlayStation consoles requires
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`access to Sony’s PlayStation Network, the new policy established the PlayStation Store as the
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`only source from which consumers can purchase digital PlayStation games, and the only source
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`to which video game publishers can sell digital PlayStation games. Sony also requires publishers
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`who sell digital games on the PlayStation Store to relinquish full control over the retail price. As
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`a result, the policy swiftly and effectively foreclosed any and all price competition in the retail
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`market for digital PlayStation games.
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`8.
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`Sony’s new restrictions established a monopoly over the sale of digital
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`PlayStation games. Sony’s monopoly allows it to charge supracompetitive prices for digital
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`PlayStation games, which are significantly higher than their physical counterparts sold in a
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`competitive retail market, and significantly higher than they would be in a competitive retail
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`market for digital games.
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`9.
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`A comparison of prices for the most popular digital games on the PlayStation
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`Store with prices for the same games available on disk from an array of retailers suggests prices
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`on the PlayStation store are, on average, about 75% percent higher than those for games on disk,
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`and in some cases closer to 175% higher.12 There is no legitimate reason digital games should be
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`11 Mustafa Mahmoud, 62% of all full PlayStation game sales were digital in 2020, Kitguru (Mar.
`12, 202), https://www.kitguru.net/gaming/mustafa-mahmoud/62-of-all-full-playstation-game-
`sales-were-digital-in-2020/.
`12 See ¶¶ 56-58 and Table 1, infra.
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`more expensive than their physical counterparts. In fact, given the costs saved on packaging and
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`distribution, prices for digital games in a truly competitive market would likely be lower than
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`they are for games on disk.
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`10.
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`Sony’s ability to maintain supracompetitive prices on the PlayStation Store while
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`consumers continue to switch from disks to digital game in ever increasing numbers, along with
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`Sony’s skyrocketing revenues from digital games, demonstrate that prices for digital games on
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`the PlayStation store are not responsive to changes in prices for PlayStation games on disk.
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`11.
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` The relevant product market in this case is the market for downloadable,
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`digitally-delivered video game content that is compatible with a PlayStation console (“digital
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`PlayStation games”).
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`12.
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`As a direct and proximate result of Sony’s unlawful acquisition and maintenance
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`of a monopoly over the sale of digital PlayStation games, Plaintiff and Class members have paid
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`and will continue to pay significantly more for digital games than they would have absent Sony’s
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`monopoly. Plaintiff seeks damages for himself and Class members equal to the amount they have
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`already overpaid, treble damages, and injunctive relief to end to the overcharges they will
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`continue to pay as long as Sony is allowed to keep its unlawful monopoly.
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`II. THE PARTIES
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`13.
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`Plaintiff Agustin Caccuri is an individual residing in Santa Monica, California.
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`Plaintiff owns a PlayStation 5 Digital Edition console, has purchased digital video games on the
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`PlayStation Store and downloaded them to his console during the Class period, and plans to
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`purchase and download more digital games from the PlayStation Store in the future.
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`14.
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`Defendant Sony Interactive Entertainment LLC (“Sony”) is a corporation
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`organized and existing under the laws of California, with its headquarters and principal place of
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`business at 2207 Bridgepointe Parkway, San Mateo, California. It is a wholly-owned subsidiary
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`of the Japanese consumer electronics and media conglomerate Sony Corporation, and is the sole
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`owner the PlayStation digital entertainment brand.
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`III.
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`JURISDICTION AND VENUE
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`15.
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`This action arises, in part, under section 2 of the Sherman Act, 15 U.S.C. § 2. The
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`Court has federal question jurisdiction pursuant to the Clayton Antitrust Act, 15 U.S.C. § 15, and
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`pursuant to 28 U.S.C. §§ 1331 and 1337.
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`16.
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`The Court also has jurisdiction over this action pursuant to 28 U.S.C. § 1332(d)
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`because this is a class action in which the aggregate amount in controversy exceeds $5,000,000
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`and at least one member of the putative class is a citizen of a different state than the Defendant.
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`17.
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`The Court has personal jurisdiction over Sony because Sony is headquartered in
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`California. The Court also has jurisdiction pursuant to Cal. Code Civ. P. § 410.10, as a result of
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`Sony’s substantial, continuous and systematic contacts with the State, and because Sony has
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`purposely availed itself of the benefits and privileges of conducting business activities within the
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`State.
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`Venue is proper in this District pursuant to 28 U.S.C. § 1391 because Class
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`members purchased digital video games from Sony in this District, Sony has its principal place
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`of business in this District, a substantial part of the events or omissions giving rise to Plaintiff’s
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`claims occurred here, and Sony is a corporation subject to personal jurisdiction in this District
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`and, therefore, resides here for venue purposes.
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`IV.
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`INTRADISTRICT ASSIGNMENT
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`19.
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`Pursuant to N.D. Cal. Civ. L.R. 3-2(c), (d) & 3-5(b), this action is properly
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`assigned to the San Francisco division because a substantial part of the events and omissions
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`which give rise to the claim emanated from California and from San Mateo County in particular.
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`Case 3:21-cv-03361 Document 1 Filed 05/05/21 Page 7 of 25
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`A.
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`20.
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`V. FACTUAL ALLEGATIONS
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`Industry Background
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`The video game market has grown substantially in recent years. Revenues in the
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`video game industry reached $180 billion worldwide in 2020, exceeding those from movies and
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`from the major North American sports leagues combined.13
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`21.
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`Video games are played on one of several different electronic platforms,
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`including: (i) smartphones and tablets; (ii) personal computers; (iii) video game consoles; and
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`(iv) specialized handheld devices. This case concerns video games consoles, specifically the
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`market for downloadable, digitally-delivered video game content that is compatible with a
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`PlayStation console (“digital PlayStation games”).
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`22.
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`For the past two decades, three companies have dominated the market for video
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`game consoles: Sony, which manufactures the PlayStation console; Microsoft, manufacturer of
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`the Xbox; and Nintendo. All three companies periodically release new models of their consoles,
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`with updated hardware and software and new design features.
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`23.
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`The original PlayStation launched in 1994, and Sony recently released the fifth
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`iteration of that console.14 Microsoft has released eight versions of its Xbox since 2001, when it
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`entered the market.15 Nintendo has the longest history of the three, having released seven console
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`models since its 1985 debut.16
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`24.
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`Games are not cross-compatible on different consoles, so once a consumer
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`purchases a console, he or she must purchase games that are designed for that particular console.
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`13 Jordan Williams, Video game industry bigger than sports, movies combined: report, The Hill
`(Dec. 23, 2020), https://thehill.com/blogs/in-the-know/in-the-know/531479-video-game-
`industry-bigger-than-sports-movies-combined-report.
`14 See Jimmy Thang, The Evolution of PlayStation Consoles, GameSpot (Sept. 7, 2020),
`https://www.gamespot.com/gallery/the-evolution-of-playstation-consoles/2900-899/.
`15 See Gabe Gurwin, The History of the Xbox, Digital Trends (Mar. 16, 2021),
`https://www.digitaltrends.com/gaming/the-history-of-the-xbox/.
`16 See Jeff Dunn and Kevin Webb, A visual history of Nintendo's video game consoles, Bus.
`Insider (May 16, 2019), https://www.businessinsider.com/nintendo-consoles-in-history-photos-
`switch-2017-1.
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`The consoles are substantially differentiated, with distinctively designed controllers and other
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`factors that lead to a different experience for the player, even where the same games are
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`available on more than one console. Consumers, therefore, tend to prefer one console over the
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`others, and are far more likely to continue buying the new models of one console than to switch
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`to a different console entirely.
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`25.
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`The supply chain for video games has historically been characterized by three
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`players: (i) developers, who design and execute the creation of games and produce the software;
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`(ii) publishers, who handle funding, marketing, and distribution to retailers; and (iii) retailers,
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`who sell games to the console-owning public.17
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`26.
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`The relationship between developers and publishers is akin to that between book
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`authors and publishing houses. The author produces a manuscript and then relies on a publishing
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`house to print and market the books, and deliver them to bookstores. Similar to the way that
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`publishing houses often offer advances to authors who agree to write manuscripts for them,
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`video game publishers also provide funding to developers.
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`27.
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`The three major video game console manufacturers also develop and publish
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`games for their consoles in-house, called “first-party games” which are often available
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`exclusively on that company’s console. Nintendo relies heavily on first-party games, which make
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`up about 85% of game sales for its Switch console.18 Most PlayStation games, on the other hand,
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`are developed and published by third parties, with about 17% of game sales being first-party in
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`2020.19
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`17 See Intro to the Industry: The difference between game developers and publishers, Gaming
`Street (Sept. 18, 2019), https://gamingstreet.com/intro-to-the-industry-the-difference-between-
`game-developers-and-publishers/.
`18 Ben Gilbert, Nintendo's recent success highlights a critical risk to the gaming giant's business,
`Bus. Insider (Feb. 4, 2019), https://www.businessinsider.com/nintendo-reliance-on-first-party-
`games-huge-risk-to-business-2019-2.
`19 Sony Corporation, Supplemental Information for the Consolidated Financial Results for the
`Fourth Quarter Ended March 31, 2021 at 9 (Apr. 28, 2021), sony.com/en/SonyInfo/IR/library/
`presen/er/pdf/20q4_supplement.pdf
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`B.
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`28.
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`The Rise of Digital Video Games
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`Historically, video games were sold exclusively on disks that users inserted into
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`the console. Games could be purchased or rented from a variety of online and brick-and-mortar
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`retailers, including many that bought and sold used copies. The disks could also be traded and
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`shared amongst friends.
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`29. More recent versions of all three consoles also allow users to purchase and
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`download digital copies of games directly to the console, which connects to the internet, thereby
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`avoiding the need for any physical disk. Sony, Microsoft, and Nintendo each operate their own
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`virtual store where consumers can buy and download digital games directly on their console.
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`30.
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`Sales of digital games for the three consoles exceeded sales of their physical
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`counterparts for the first time in 2020, and the trend is likely to continue, with video game disks
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`following the path taken by DVDs and CDs towards the history books.20
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`All three digital stores operate in a similar fashion: game publishers provide the
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`game software to the digital store, which then makes the games available for purchase. The store
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`collects payment, and facilitates digital delivery to users’ console. For their services maintaining
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`the platform and the necessary infrastructure for delivering digital content, Sony, Microsoft, and
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`Nintendo take a cut of every sale on their respective stores, remitting the balance to the
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`publishers.
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`32.
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`Sony’s PlayStation Store differs from both Microsoft and Nintendo’s digital
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`stores, however, in that game developers must cede total control over the retail price to Sony.21
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`Microsoft and Nintendo, on the other hand, allow developers who sell games through their
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`20 See Dylan Warman, For the First Time, Digital Game Sales Outnumber Physical Sales,
`ScreenRant (Aug. 12, 2020), https://screenrant.com/digital-game-sales-consoles-outnumber-
`physical-first-time/
`21 See PlayStation Global Developer & Publisher Agreement ¶ 15.2.2 (effective Mar. 23, 2017)
`(“Each SIE Company has the sole and exclusive right to set the retail price to Users for Digitally
`Delivered Products sold or otherwise made available for purchase on or through [PlayStation
`Network].”), available at https://www.sec.gov/Archives/edgar/data/946581/00016282801700
`5833/ex10-48.htm.
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`platforms to set the retail price, and then take 30% of that price on each sale for platform fees.22
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`Sony follows a similar revenue sharing model with some publishers, and is reported to take the
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`same 30% cut.23 With other publishers, however, Sony maintains agreements whereby it pays the
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`publisher an agreed upon “wholesale price” for each game sold, with the full retail markup going
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`to Sony.24
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`C.
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`33.
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`Competition in the Retail Market for Digital Video Games
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`In the retail market for digital video games, price competition occurs principally
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`in one of two ways. First, where publishers maintain some control over the retail price, they
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`compete with one another to gain market share by offering a lower price to consumers. Second,
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`where download codes are available from outside retailers, the retailers compete amongst
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`themselves and with the in-console stores to offer the best price.
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`34.
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`For Xbox and Nintendo games, consumers can buy these download codes from
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`the same retailers who sell games on disks, which they then use to download the games directly
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`to their consoles.
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`15
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`35.
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`PlayStation games were previously sold in the same manner, but as of April 1,
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`2019, Sony stopped allowing retailers to sell download codes for PlayStation games. As a direct
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`and proximate result, the only place consumers can purchase digital copies of PlayStation games
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`18
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`is directly from the PlayStation Store, where Sony has complete control over retail prices.
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`19
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`20
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`D.
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`36.
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`The PlayStation 5 Launch
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`On November 12, 2020, Sony launched the PlayStation 5. As of March 31, 2021,
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`Sony had sold over 7.8 million units, making the PlayStation 5 the fastest-selling console of all
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`22
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`23
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`24
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`25
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`26
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`27
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`28
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`
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`22 See Frequently Asked Questions, Nintendo Developer Portal, https://developer.nintendo
`.com/faq (last visited Apr. 28, 2021); Microsoft Store App Developer Agreement, Version 8.6
`(effective July 10, 2020), available at https://query.prod.cms.rt.microsoft.com/cms/api/am/
`binary/RE4o4bH
`23 See Tom Marks, Report: Steam's 30% Cut Is Actually the Industry Standard, IGN (Jan. 13,
`2020), https://www.ign.com/articles/2019/10/07/report-steams-30-cut-is-actually-the-industry-
`standard.
`24 PlayStation Global Developer & Publisher Agreement ¶ 15.2.1.
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`CLASS ACTION COMPLAINT
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`Case 3:21-cv-03361 Document 1 Filed 05/05/21 Page 11 of 25
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`time,25 but Sony has nevertheless been unable to meet demand for the console. Upon release,
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`PlayStation 5 consoles were almost immediately sold out at every retailer. Today, it is still very
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`difficult for consumers to get their hands on a PlayStation 5 gaming console, with inventory
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`restocks at major retailers and on Sony’s website selling out almost instantaneously.26
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`PlayStation 5 sales are expected to eventually surpass 200 million units.27
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`37.
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`The PlayStation 5 is available in two versions: the Base Model which is available
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`for $499 retail, and the Digital Edition which is $100 less expensive at $399 retail.
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`38.
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`The Base Model includes the previously-standard optical disk drive, allowing
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`users to choose whether to purchase physical disk copies of games, available from retailers such
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`as those mentioned above, or to buy digital copies and download directly to their console. The
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`less expensive Digital Edition does not include a disk drive, so users can only purchase games in
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`digital format at Sony’s monopoly prices.
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`E.
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`39.
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`Sony Eliminates Retail Competition for Digital PlayStation Games
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`Until recently, consumers could purchase download codes for digital PlayStation
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`games from the same array of retailers that sell physical games. This allowed PlayStation users
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`to purchase a digital copy of a video game from their preferred retailer at the retailer’s chosen
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`17
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`price.
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`40.
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`However, starting on April 1, 2019, Sony implemented a new policy preventing
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`retailers from selling digital download codes. Since access to Sony’s PlayStation Network is
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`20
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`required to enable digital delivery of PlayStation games, the result of this scheme is that
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`consumers can purchase digital games only through the PlayStation Store or not at all. For
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`22
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`23
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`24
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`25 See Andy Robinson, Sony reports 7.8m PS5s shipped in ‘PlayStation’s best year ever’, Video
`Games Chronicle (Apr. 28, 2021), https://www.videogameschronicle.com/news/sony-reports-7-
`8m-ps5-sales-in-playstations-best-year-ever/.
`26 See Kevin Webb, Sony’s PlayStation 5 remains hard to find months after its launch, Bus.
`Insider (Apr. 14, 2021), https://www.businessinsider.com/where-to-buy-ps5.
`27 See See Aernout van de Velde, PS5 Sales to Exceed 200 to 300 Million Units in 5 to 6 Years,
`Analyst Says; Could Terminate the Long-Running Console War, WCCF Tech (Oct. 17, 2020),
`https://wccftech.com/ps5-sales-200-300-million-700-console-war/.
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`CLASS ACTION COMPLAINT
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`Case 3:21-cv-03361 Document 1 Filed 05/05/21 Page 12 of 25
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`owners of the PlayStation 5 Digital Edition, that means the only place they are able to purchase
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`any video games for their console is through the PlayStation Store.
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`41.
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`Sony, at all relevant times, retained exclusive control over the design, features and
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`operating software for PlayStation consoles, and over the necessary software for delivering
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`digital content to PlayStation consoles.
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`42.
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`Sony specifically intended to and did eliminate price competition from other
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`digital video game retailers. As a result, Sony has an unlawful monopoly over the market for
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`digital PlayStation games, from which it derives supracompetitive profits.
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`43.
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`Before the April 2019 policy changes, publishers could sell both physical
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`PlayStation games and digital games, via download codes, through a variety of retailers.
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`Retailers profit from markups on the final purchase price, but price competition among them puts
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`downward pressure on retail price markups. Sony also charges a Platform Royalty Fee on each
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`game sold by retailers for use on its gaming consoles, including PlayStation 5. On information
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`and belief, Sony’s Platform Royalty Fee for physical games sold at external retailers is 11.5%.
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`44.
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`By foreclosing retail competition for digital PlayStation games, Sony effectively
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`takes the retail markup for itself in addition to its royalty fee. It also charges a higher total fee
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`than the sum of both the retail markup and the Platform Royalty Fee for games sold by retailers.
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`Consumers, limited to a single source for purchasing any digital PlayStation content, are forced
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`to pay a higher price for digital PlayStation games than they would in a free and unrestrained
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`competitive retail market.
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`45.
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`Additionally, by taking complete control over retail prices for digital PlayStation
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`22
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`games, Sony foreclosed price competition among video game publishers to a significant degree,
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`23
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`because they can no longer execute a strategy of offering lower retail prices to gain a higher
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`24
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`share of sales. Instead, Sony sets the price to maximize its own profits, and Sony’s interests in
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`choosing a retail price strategy conflict with the interests of video game publishers. Because
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`Sony is responsible for all the marginal costs associated with each sale, it is incentivized to set
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`the price higher to obtain a greater margin on each sale. Publishers, who incur no additional costs
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`CLASS ACTION COMPLAINT
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`Case 3:21-cv-03361 Document 1 Filed 05/05/21 Page 13 of 25
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`with each additional game sold, would maximize their profits at a lower price point but greater
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`sales volume, relative to Sony.
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`46.
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`Sony owns, possesses or controls 100% of the PlayStation Store, maintains and
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`operates the PlayStation Store with Sony employees or agents, and controls all of the sales,
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`revenue collections and other business operations.
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`47.
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`The revenue Sony generates through sales of digital video games has been
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`increasing sharply since it established its monopoly on digital PlayStation games. In 2019, Sony
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`made $12.48 billion through sales of digital PlayStation games and associated content.28 For the
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`fiscal year ending March 31, 2021, that number was $17.32 billion.29
`
`VI. MONOPOLY POWER IN THE RELEVANT MARKET
`
`48.
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`The relevant product market in this case is the market for downloadable, digitally-
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`delivered video game content that is compatible with a PlayStation console (“digital PlayStation
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`games”). The relevant geographic market is the United States, its territories, possessions, and the
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`Commonwealth of Puerto Rico.
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`49.
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`As discussed above, the market for video game consoles is dominated by three
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`companies of roughly equal market share: Sony (PlayStation); Microsoft (Xbox); and Nintendo.
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`17
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`The price for the consoles is generally between $300 and $600. Games are not cross-compatible
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`18
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`on different consoles, so once a consumer purchases a console, he or she must purchase games
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`19
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`that are designed for that particular console.
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`20
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`50.
`
`Due to the high cost of consoles, the differentiation among them, and the lack of
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`cross-compatibility, each console creates a separate aftermarket for games that can be played on
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`22
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`it. Games that cannot be played on the same console are not substitutable. A small but
`
`
`28 Ravi Sinha, PlayStation Network Generated 2nd Highest Revenue Ever in 2019, GamingBolt
`(Feb. 2, 2020), https://gamingbolt.com/playstation-network-generated-2nd-highest-revenue-ever-
`in-2019
`29 Sony Corporation, Financial Statements and Consolidated Financial Results for the Fiscal
`Year Ended March 31, 2021 (Apr., 28, 2021), available at https://www.sony.com/en/SonyInfo
`/IR/library/presen/er/pdf/20q4_sony.pdf. Dollar figure based on the following exchange rate
`from April 28, 2021: 1 JPY = 0.0092 USD.
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`CLASS ACTION COMPLAINT
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`Case 3:21-cv-03361 Document 1 Filed 05/05/21 Page 14 of 25
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`significant, non-transitory increase to the price of games for one console will not, therefore,
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`cause a consumer to switch to one of the other consoles.
`
`51.
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`Prices for digital games on the PlayStation Store are not responsive to changes in
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`prices for physical games available from other retailers, and physical games are not substitutes
`
`for digital games. A small but significant, non-transitory increase in price for digital PlayStation
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`games will not cause a significant number of consumers to switch to buying physical copies of
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`PlayStation games instead.
`
`52.
`
`Historically, there was vigorous price competition among retailers and among
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`publishers within the console-specific game markets. Retailers tried to offer the best prices to
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`consumers and thereby gain a higher share of the market while maintaining profits. Publishers
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`had an incentive to lower their wholesale prices so retailers could offer a better price in turn,
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`resulting in pricing and sales volumes that maximized profits for both publishers and retailers.
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`53.
`
`By prohibiting sale of digital PlayStation games except through the PlayStation
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`Store, Sony established a complete monopoly in the market for digital PlayStation games. Sony
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`has a 100% market s