Sony is the company that perhaps popularized the post-cartridge console generation with the PlayStation and PlayStation 2, both astoundingly successful. And yet it's had somewhat of a hard time of it in this console cycle, trailing the runaway hit of the Wii and -- at least in the West -- running into competitive issues from the PlayStation 3's pricing versus the Xbox 360.
Yet the company is hardly down and out, with the PlayStation 3, PlayStation 2, and PSP -- which even Sony admits was teetering on the edge with regard to Western software support before a renewed push -- all on the market and selling hundreds of thousands of units monthly.
But how does the company itself view its progress? How does it see its business? To get those answers. Gamasutra spoke to Peter Dille, senior vice president of marketing at Sony Computer Entertainment America, with additional commentary from SCEA corporate communications manager Julie Han.
To start, I want to get sort of your perspective on how things are going right now with all the platforms, not just the PlayStation 3. You just had your price drop with the PS2 as well.
Peter Dille: This is our new fiscal year; we just finished our last one. We had record revenues last year. PS3 had a healthy increase in business. PS2 is chugging along obviously into its latter stages towards that 10-year lifecycle, and the PSP hardware platform continued to go to close to 50 million.
Yet despite all those good things going on, some of our competition had even better years, particularly Nintendo, and that tends to overshadow some of our success. The other thing that sort of colors our performance is, from a corporate perspective, we were marching to a different drum than it appears Microsoft at least -- Nintendo maybe didn't have to worry about it as much.
But at Sony Corp the message was "Let's try to eke out a profit," which took certain cards out of our deck. We're not going to make a price move for PS3; we're not going to be packing five free games into a promotional strategy.
Again, we grew the PS3 base 40 percent, in selling a premium-priced game console in a tough economic environment, all things that we're very proud of, and yet I think we've got better things in store for the next fiscal year.
We've got just a fantastic line-up on PS3; PlayStation Network is really coming into its own and is going to enter a new phase in its life and help us sell hardware in its own right. So we've got big things planned, and we've got a lot planned to make clear at E3.
One thing that I've been curious about in terms of the PlayStation Network: Sony has a fairly high emphasis on getting original games and fostering interesting game development with thatgamecompany and stuff. At present, I'm not sure those games drive a lot of revenue. But is it a halo effect in the sense that having those interesting games draws people into the platform, or is it a pure revenue driver?
PD: I think it's more the former. From a revenue perspective, maybe an important point to make is that a lot of those games are profitable for us and for the developers that are making them right out of the gate.
As people talk about the games business maturing and how tough it is to make money, I think they're talking about how do you recoup investments in games like Metal Gear Solid, and obviously that's well-documented.
People can talk about how they can crack that nut and the importance of game quality and just massive releases on the scale of Hollywood. But a game like Flower or PixelJunk [Eden] --- these games are profitable the day after we release them.
They're made by small, boutique teams that are very creative, which breathes new life into the development community and gives us a chance to get closer to those folks.
But to your question, we see it as an extension of the core strategy of this business, which is exclusive content is what helps make people's minds up to buy a platform. That's the Uncharteds or the [Gran Turismo]s; it's the God of Wars. But everything can contribute to that, so it's also the platform where you can get Flower and Pain and all sorts of wonderful titles on the PlayStation Network.
I think it's kind of an interesting point. Because of the scale of the business with hardware manufacturing and stuff, those costs are not going to be offset by selling a couple PSN games per hardware unit or something. But at the same time Flower created a great deal of buzz; that's kind of where I saw the strategy.
PD: Absolutely. And again, there's a lot of downloadable content on Live Arcade. A lot of it is older, kind of rehashed games that have been around on other platforms, and there's a role for those types of games.
But what our studio organization and what we're doing as a company -- back to Flower or flOw before that -- these were games that were made specifically for the PS3, so they're made to show off a high-definition gaming experience that only the PS3 can offer.
They're not retreads; they're not experiences I've had before that are nostalgic -- and again, there's a role for nostalgia in this category -- but they're things that are new and imaginative and show off the technology under the hood in the PS3 in ways that other games just can't.
And when it comes to the PlayStation 3, you are selling units, but how do you see the battle to sell units of hardware? How do you see your performance relative to where you want to be, or do you look at it relative to your competitors? How do you balance that?
PD: Well, let's go back to something we talk a lot about. I hope that people know by now that we are serious when we talk about 10-year product lifecycles. I don't know; maybe sometimes guys in your business think that it's spin. If it were spin, you wouldn't have PS1 and PS2 doing it; we're the only company that's ever done it.
So when we say we take a long-term view, we firmly believe that the PS3 will not only be around in 10 years but it'll be driving the business -- driving this industry. I don't know if our competitors' platforms will still be viable in 10 years; I do know that the PlayStation 3 will be. So we're off to a strong start, I think; you can look at our PS3 sales versus the 360 after two years, and I think in that measure we're ahead of them.
Again, we look at our performance last year with PS3 sales up 40 percent, and we're happy with that -- and yet we're accustomed to being the leader in the business, so we're not happy enough. We have our sights set on bigger victories ahead and believe that we've got the plan to make that happen.
Relative to where the PlayStation 2 was at the same point in its lifecycle, do you make those comparisons, and have you made those comparisons?
PD: Well, sure. It's our data; it's our platform, and we're always mindful of what the PS2 accomplished and what the PS3 is doing to date. That's the bar that we've set very, very high. So again we're two years into this; a lot of folks want to write the last chapter. There's at least eight good years left ahead, so.
When it comes to software, certain multi-platform games might sell better on the Xbox 360, like Call of Duty. But do you see the need for differentiation where multi-platform games are concerned? You can buy them for either system, so what's the differentiator for you...?
PD: There's a couple of different ways to attack that question. One is: when companies are approaching us for co-marketing support or collaboration, then differentiation is a big deal. We like to talk to third-parties about, "Hey, if you can help us show off the unique attributes of our platform, whether it's through extra content -- the Blu-ray disc can store a lot more than our competition, and if there's ways to show that off. That's one thing we can do, or... using the Sixaxis controller with the Dual-Shock, that's another."
The fact that every PlayStation 3 has a hard drive, and the DLC -- our competition doesn't have that type of environment where every unit has a hard drive. Those types of differentiating factors are a big deal when we're talking about some of the co-marketing.
I think if you look at some other data more recently -- and this goes back to the point of Sony providing development support. If you look at how Electronic Arts titles are indexed as one example on our platform -- versus the Xbox 360 from last year to the previous year. We're seeing now EA Sports titles overindexing [selling more copies relatively] on PS3 vis-a-vis the install base.
We think part of the reason for that is the investment that EA made in their development tools. If you go all the way back to the launch of the 360, they had a year head-start, so development tools and environments across many third parties were set up to have a head-start on the other platform.
Over time, we also were confident that people would catch up, and again I think if you look at EA Sports and drill at that data a little bit, you can see that they're now starting to overindex on our platform. People are starting to gravitate towards the PS3.
There's not a lot of differentiation in those titles; EA didn't do a lot extra to show off sort of the first part of the answer. So we're starting to see some momentum shift our way, which we think bodes well for us in the future from a third-party perspective.
Julie Han: I was going to say Street Fighter [IV] in February actually sold 300k on each platform, and what we need to take notice of is that we had less install base than Xbox. [Sony subsequently provided a document explaining this in more detail, including a number of stats on titles that sold relatively better, taking install bases into account.]
PD: So even if they're at parity now, given the install base differential, there's something pretty dynamic going on behind the scenes.
Something Microsoft talks about a lot, though, is their attach rate, because they do have a very impressive attach rate. How are you guys tracking on attach rate?
PD: I think that one of the reasons their attach rate is higher is they launched against the core gamer a year earlier, and I think our install base has always been a bit more diverse.
Perhaps this becomes a blessing and a curse for them because they've proven on the previous generation -- they never really expanded their market outside that core gamer, which meant they kind of stalled after awhile.
In the independent market, they tried very hard with content that would appeal to folks who like games besides Halo and Gears, and I don't think those games really worked well on the Xbox 360. You compare that to PlayStation, which has always been a very big tent and a platform that stood for games that everyone could have fun with.
So it's not just about Killzone and Resistance but LittleBigPlanet and Ratchet -- these are the types of experiences you have on our platform. That means that we're bringing in multiple audiences at the same time as opposed to the typical "Okay, we're gonna get the core, and then the next group of guys are gonna come in," and so on and so on, and your tie ratios will dwindle or decrease over time.
I think what we've got is a more diverse install base out of the chute. Part of that too is that some of the folks buying PS3s are probably Blu-ray aficionados. So they're buying it -- and this is probably a smaller percentage of them -- but gaming is something that they're discovering: "Oh, this machine also plays games!" That's usually the flip [side]; people are like "Well now that I've got the PS3 I'm going to expand to the Blu-ray library," and it's actually doing both of those things.
We think, over time, we'll continue to build the install base against the core gamer, whether it's things like Killzone and God of War coming up and those great titles that we'll continue with. But we'll also be broadening the market to social gamers, casual gamers, A/V aficionados that we can get involved in gaming for the first time.
One thing is that I think the core gaming thing can be a bit limiting a perspective; there's probably more diversity in the audience potential between just core/casual or core/social. I think there's a lot of different taste ranges out there and I think that's maybe what you're speaking to a little bit.
People who would traditionally be the hardcore don't only want to play shooters, and that's a potential differentiator. I think that's kind of what the PS2 was like; there was actually a broad variety of games that were not just targeted towards sort of one silo. You think there's a more narrow targeting on the Xbox 360 right now?
PD: I think you said what I wanted to say better; you're right. We'll go head-to-head with them on the shooter genre; if you love shooters, you're going to have a wonderful time on the PS3.
But like you said, core gamers -- I believe LittleBigPlanet is a fantastic core gamer game. It's also a game that my ten-year-old daughter plays; it's always been something that touches both sides of that fence. Uncharted, Heavy Rain... I could go on and on.
We've got a lot of games that core gamers like, and it's not just with a headset playing a shooter online; core gamers do have diverse tastes. Then you get to the broader part of that message because I think whether it's my daughter playing LittleBigPlanet or people playing Uncharted for the movie-like experience and not sort of the game-centric aspects of it.
We always run out of time in these interviews where we're not diligent enough to make sure we're mentioning Flower and flOw and The Last Guy. Those games play into diversifying the audience with games that give you maybe a shorter form of entertainment but games that core gamers appreciate for their design.
This is the back door to this question, but I'll take it: Social gamers and some of the more family-oriented gamers are more value-conscious than the core gamer audience. So there it goes. How do you feel about the price situation on the PlayStation 3?
PD: Oh, is there an issue on that?
PD: We get this question all the time. I can tell you we just made a move on day one of our fiscal year on PlayStation 2. We're not making any announcements, but we've got what we believe is a great plan for the year.
We've talked about this next year being the most aggressive marketing year in PlayStation's history. It clearly falls into the "we can't comment on rumor and speculation," but we're confident in our plan, and we'll just leave it at that.
Some of the third-parties have now been coming out and saying they'd like to see a move; it's not just the audience or people's suppositions about what the market might or might not want, or analysts. That's got to be a little bit delicate.
PD: We have a big event every year called Destination PlayStation. All the third-parties attend; all the retailers attend. We don't have the press there for a reason -- because we want to be very candid in our plans and not have sort of the implication of having the PR aspects to those conversations.
When we lay out the plans to those folks there -- I think it might be fair to say that some people came into Destination PlayStation curious about what our plans were; I think they all left really fired up about the year ahead because, once they understood what our plans were, we didn't hear any of that grousing that you're talking about -- certainly not from the folks that attended.
And I was quoted as saying recently that third-parties want our hardware to be free. We understand that; we have a business to run, and they have a business to run. As I said earlier, we were marching to a mantra to be profitable, which meant we weren't going to be cutting the price of the PS3 last year, and going forward we'll have a different plight.
I actually wanted to come back to a point -- we were talking about core gamers, and before we get off the subject and I forget about it... A lot of stuff gets thrown out there, and our competition makes a lot of claims; but recently the guys at Xbox were talking about Metacritic ratings on Xbox 360, and it got our attention.
We did a little digging on our own, and when you look at the data [subsequently provided to Gamasutra by Sony], one of three games on PS3 has a Metacritic of 80+, and on Xbox 360 I think it's less than one out of five or about one out of five.
Their quote was, "Oh, we have more games." You've been in business longer, and this sort of quantity versus quality message I think got lost in the shuffle. Clearly, from our perspective, there's two things going. One is there's a quality message on PlayStation 3 when you look at 33% of the games that have been released have a Metacritic over 80.
The other thing gets back to my point earlier about the EA Sports or Street Fighter phenomenon more recently; I think the games that are coming on now onto PlayStation 3 are higher quality than our competition, and maybe they've got some things that are older that they're touting but as you know with gamers it's kind of a "what have you done for me lately?" mentality.
We're seeing tremendous momentum now; we're seeing tremendous game quality, whether it's Killzone, LittleBigPlanet -- as well as sort of the anticipation for the Uncharteds and the Ratchets and the MAGs. When you think about one out of three versus one out of five, I think that's something that didn't get reported as well as we would have liked, so: food for thought.
Sony/Guerrilla's Killzone 2
To get back to this concept of tracking the social gamer, it sort of plays into the blue ocean/red ocean metaphor that Nintendo's been using a lot. Can you attract them away from the Wii, or do you think it's such a broad audience that you can find your own success in it?
PD: I think "both" is the answer. Our view on the Wii: number one, our hat's off to them. They've created this huge phenomenon that's captivated people's imagination -- and captivated a lot of dollars. No one around here is in the camp of "Oh, it's this fad" sort of spin. Again, hats off to them. We think it's good for the business, to be honest.
There's a perspective here that, if we all believe that the Wii and Nintendo are doing something that hasn't been done -- i.e., bringing more people into gaming -- that's a good thing. Now, if those people get hooked on gaming and they want to continue with their gaming habit, then many of them will figure out "Okay, what else can I do?" and "wouldn't a high-definition gaming experience be of interest to me?"
If those people get to that point, we believe we're in a really good position because, if you think about the types of games you're playing on the Wii and the profile of the Wii consumer, and then their choices to get into next-generation high-definition gaming, then the PlayStation is the perfect place for them to end up.
It's always been a platform that's inclusive; it's got something for everyone. We believe that the family that's been involved in Wii gaming -- having a PS3 as the centerpiece of their living room is a great thing that the whole family can enjoy much the same way that you can enjoy Wii but perhaps on steroids; it does so much more.
Again, the Wii is not positioned as the digital entertainment hub in the way that the PlayStation 3. So we think that over time all those folks will migrate back to the PlayStation 3 -- when I say "back," that takes the view that they were PS2 gamers, went to the Wii, and then would come back.
As I said earlier, if they didn't come from anywhere, if they're just new gamers, then that's good for all of us. We believe that we'll have a fair shot as selling them a lot of our products down the road.
Obviously, Sony has a long-term strategy, we have a 10-year cycle, you're in it for the long haul -- we understand that. But there is a now. I'm not saying you're doing badly now, but some of your answers do certainly take the long view. How do you balance that?
PD: Let's stick with now: We had record revenues last year with seven billion dollars at retail. I'll challenge you; take Sony out of the picture. Take seven billion dollars out of retail; take seven billion dollars out of this industry -- take seven billion dollars out of the third-party performance.
People want to discount the PS2 and pretend it doesn't exist, but it was the most-played system last year. It's a profit-driver for every third-party. Ask them what their business would look like without PS2. We'll talk about now all day long; I think a lot of folks want to talk about the future, so we'll engage with them in that conversation, but we're extremely proud of our performance.
As I said, it's a record year. I think it's the second or third consecutive seven-billion-dollar year. No one else has done that. We're doing things people haven't done before; we went to Destination PlayStation and said we're going to do it again -- and we try not to say things that we don't think we can back up. It's kind of the way Sony operates.
So when we say we're planning another seven-billion-dollar year in an economy like this -- we've got three platforms that we've got successful at one time -- we think that speaks volumes about the math, and we're not embarrassed in any way, shape, or form about that performance.
Something that I think is interesting is the question of attracting the Wii consumers. Do you find that it's important, from your perspective, to attract people from the Xbox 360 to the PS3? Or are they near enough as an audience that it's a challenge or irrelevant?
PD: It kind of comes down to the consumer. There are many consumers -- hardcore gamer audience in particular -- who buy more than one console, and so getting people to convert or to buy both is part of that dynamic.
I think, as you get further into a cycle, you've got folks who are more characterized as the followers. Marketers always come up with names for these groups of people. Those are people who are going to make a decision and buy one or the other, and so it becomes increasingly important that we convince them to buy ours.
You have lots of data -- years of data. What percentage of people actually do buy more than one console in any given generation? Do you have any data on that? Because that's a phenomenon that I would guess is overrepresented in the enthusiast press and the enthusiast audience compared to the broad consumer.
PD: It might be overrepresented. I'm not sure I have a percentage for you, but you're probably talking millions of people and not tens of millions because we know that there are tens of millions of consoles that get sold. It's not the majority; it's the minority of folks.
But they happen to be the 80-20 rule, right? They may be in the minority, but they're buying an awful lot of software, whereas once you get to the broader audience of folks who buy a lot of hardware, they buy fewer games -- back to your tie ratio question.
JH: The other point, I think, to what Peter said earlier, is that PlayStation products tend to be at the living room hub. Even if folks are playing playing the Wii and have a PS3, the Wii tends to stay in the closet, and the PS3 is...
PD: Yeah, I don't want to steal [CEO] Jack [Tretton]'s quote, but he's fond of saying: "Microsoft owns the office; Sony owns the living room; and Wii owns the closet." And that's an aggressive, probably quotable line.
But the point he's trying to make is something that we find backed up in a lot of our research and focus groups: that people who are playing the Wii bring it out when friends come over and then put it back away -- that the console that stays connected to the TV is a different system.
I don't know if that's your experience or of guys you talk to or the way you play the system marries that with some of the stuff we hear in our focus groups and in actual research, but we believe the PlayStation 3 is, again -- if you buy the PlayStation 3, you're going to connect it to your TV, you're going to connect it to the internet, and you're going to leave it connected; it's not going to be something you take out from time to time.
JH: What's at your living room hub; what's connected to your TV?
I live in the city, so I have several roommates. In the living room, there's an Xbox 360 there now -- primarily because I have all my stuff in my bedroom. My roommate wants a PS3; he was unemployed for a while, so it has more to do with that.
PD: And that gets back to the price issue. Again, this -- we hear it in all of our focus groups. These guys will tell us that they are convinced PlayStation 3 will emerge victorious. If they haven't bought it yet, they're intenders, and what's keeping them back is largely the price issue.
Every console that was launched has reduced the price over time, and when that day comes for PS3 we think a lot of these guys -- it's going to be like ringing a bell: "Come and get it!"
We're encouraged by the fact that there's still tremendous loyalty behind the PlayStation brand and our products; they're saying wonderful things about the PlayStation 3 and are highly aspirational. If they see a different price, I think it's going to be an entirely different conversation.
But one thing that engendered a lot of loyalty to the PlayStation brand -- on the PS2, you had a huge variety of exclusive games, and a lot of them were third-party games. The era of platform-exclusive third-party games is -- I don't want to say "drawing to a close" because it's a bit melodramatic and maybe not accurate -- but it's certainly reduced significantly. Short of funding and developing games, which you do a lot of, how do you handle that?
PD: Well, our answer to that is pretty straightforward. We know that the world has changed; we know that third-party exclusives are perhaps not extinct but not as abundant as they once were based on the economic model the third-parties are working under.
Because of that, we know it's our obligation to make sure that there are great exclusive games on our platform that we've made, and so we've invested in a studio organization that's larger than Nintendo and Microsoft combined. We've got a line-up that we're incredibly excited about this year; we had a great line-up last year.
We've got some tremendous momentum: Killzone, MLB, Infamous, Heavy Rain, MAG, SOCOM, Ratchet, God of War -- I'm not even including them all; there are some I'm being careful not to mention because they haven't been announced. We're keeping a couple of surprises, but you begin to see the depth and breadth of that.
I think, again, our competition has some great software titles; it's my view that they tend to talk about one or two things at a time, and I run out of time to say all the things that we have. I just don't know any other first-party that has that many exclusive titles going on.
I'll say it again: I haven't even mentioned any of the PlayStation Network exclusive titles that we've got going on: Fat Princess, Flower -- some wonderful games that people like yourself at judging conventions are saying are some of the most innovative products that they'll see in the marketplace this year.
We really have a great line-up; it's something that we're very excited about and believe will help us drive hardware sales, but it's a long answer to a short question. It's that breadth and depth of content across multiple genres and multiple demographics that addresses that exclusivity question; we'll do it ourselves.
It's a tough road.
PD: It's something we have to do.
This isn't really your realm, but you can probably comment on it at least a bit: In terms of developer relations, a big part of the equation is you look at some of the really successful third-party games. Some say that Fallout 3 is not as good on the PS3. Technically, sites like GameSpot claim it's inferior, and the game doesn't support DLC. Those are big hits for a game that just won the Game Developers' Choice Game of the Year Award. You don't want to see games like that handicapped, so how do you address those issues?
PD: Well, I can't speak to if the game doesn't play as well on PS3, but whenever we have a situation -- if something's not supporting our platform from a DLC perspective it certainly gets our attention. We try to work aggressively with our third-party publishing group to understand what the issue is.
Sometimes the issue is that our competition has paid people a lot of money for DLC; there's some notable titles that fall into that category. Sometimes they're things that we have to be smart about, and we're working to improve those types of situations. If our model or our platform is creating questions for publishers that they'd like to work with us in a different fashion, we want to be open to that.
The days of Sony saying, "This is the only way it's going to work; it's our way or the highway." that's not the way we want to work; we want to make sure that the publishers have an opportunity to make money on our platform, and so we want to hear their feedback. But I can't speak specifically to the Fallout situation; I'm sure that the answer is there.
As you alluded to earlier, there had been complaints about the difficulty of developing for the PlayStation 3 compared to the Xbox 360 -- or the tools not being mature compare