At the E3 Media & Business Summit, Gamasutra had the chance to speak at length with Sony's Peter Dille, senior vice president of marketing for PlayStation. We discussed a host of issues, from Sony's difficulties with viral marketing, the PS3 price cut, the PSP redesign, and whether Nintendo platforms are still for kids. The conversation got a little heated at times, but no limbs were lost in the process, and the end result was forty minutes of discussion from the company that hopes to be the once and future brand leader of videogames.

I heard the Sony keynote was very humble this time, in terms of how it was presenting itself. Why is that?

Peter Dille: First and foremost, it's a reflection of Jack (Tretton). We've got a new president and CEO, and Jack's got a different personality than some of the folks in the past. I think it fits him well. He talked about the need to earn our consumers' business every day, and I think it's something that we've always taken very seriously, but maybe we haven't said it enough. I think people really responded to it, and were happy to hear us express those points of view.

What has been learned from the reaction to "All I Want for Christmas is a PSP" and so on?

PD: What was learned was that was never intended to be passed off as viral. Our promotions people and this agency we were working with came up with this notion of having a program where you could ask for a PSP. Unfortunately, the way we executed it gave the impression that we weren't behind it. The lesson there is that there was a violent reaction to Sony being a poseur and not standing behind its message. It wasn't our intent, we recognized it immediately as something that needed to be fixed, and we took it down. Lesson learned, and hopefully we'll avoid that type of thing going forward.

It seems like it wouldn't have been as much of an issue in the past. I wonder if you think that blogs are changing the face of marketing and PR in this way?

PD: Absolutely. There's no doubt about it. News travels so fast, and the community is so passionate about products like PlayStation that they're going to let you know about it, and now they have a voice where they can really make themselves heard. Getting back to what we're doing differently and what we've learned, we've launched our own blog. We've recognized that we need to be more relevant in the digital age in how we communicate with our consumer.

It's relatively recent, but we've had a really strong reaction to the blog, and our consumer loves the fact that we're talking directly to them. I think that quite frankly, many of them were very skeptical. "Is Sony really going to be serious about this? Will we really hear from them?" So far they've been very pleased that executives are on the blog, we're responding to posts, and we're paying attention to it. We take it very seriously.

That's different from Three Speech, right? What is the drive behind Three Speech?

PD: I'm the wrong person to ask, because it's the product of Sony Computer Entertainment Europe. Obviously the Internet shows up all over the world, but it's not an SCEA initiative, so I'd steer you to our colleagues at SCEE to give you more background on Three Speech.

In this age where everything is traveling so fast, information-wise, how can you stay ahead of the curve in terms of marketing to people? It seems hard to figure out what people are going to grab hold of now more than ever.

PD: Yes, and no. I think there's still things where you do your homework and you know via some tried and true methods of consumer research. Games take a while to develop, and while they're being developed, you get reaction to them. Hopefully by the time Heavenly Sword comes out, we've got a good idea that Heavenly Sword is a lot of fun to play. With Killzone, you get a reaction from people here at E3 who know a lot about games.

At the same time, there are things that can come out of left field and take the world by storm. Not all of those are as accidental as others. I think that when Little Big Planet springs out on the scene, it may appear to a lot of people that it came out of left field. But it's a product that we've been really excited about for awhile, and hopefully if you nurture it and launch it that way to get that type of response. And then there are things that really do catch you by surprise. Those are pleasant surprises, mostly.

Sometimes the surprise is something that you thought was going to be great doesn't turn out to be great. This is an entertainment business, and like the movie business, we'll make a new release every couple of weeks with a new game launch, and you hope that it finds its audience. Not every game delivers on its promise, though.

Can you give an example of good surprise and bad surprise?

PD: I'd rather not. I only recently rejoined Sony after some time away. I'm trying to think of a good example of both, but I'm coming up [blank].

Do you feel the way the PS3 has been painted in a negative light in some circles is going to have any real bearing in the future, in terms of mindshare?

PD: We've very confident in the PlayStation 3's long-term prospects of being the dominant console on the market. We talk a lot about ten-year lifecycles. I think Sony proved that we meant business with the PS1, with a ten-year lifecycle. With the PS2, we're approaching year eight, and we just released titles like God of War. We're serious about this ten-year lifecycle now being a reality.

With PS3, there was incredible anticipation, but the product was delayed, and there were some well-documented problems Sony had in rolling it out in its market. I think that resulted in some PR that wasn't optimal. The good news was that the product was worth the wait. It's a wonderful product, and we've gotten fantastic feedback from the consumers who got it. The product reliability is through the roof. PlayStation products have always been extremely reliable, but this is the most of any. Again, we take a ten-year approach. We're seven months into this, and if people want to add up the games seven months in, I think they're missing the point. From our perspective, we're just getting started, and when all is said and done, we're very confident that the PlayStation 3 will emerge as the victor.

I might have to call you on PlayStation products always being reliable - when the PS2 came out, the first iteration did have some bad drive problems.

PD: It did, right. But they've always had a high level of quality, and we stand behind them. And this one is the highest of any. The PlayStation 3 is a terrifically engineered product.

To what degree do you think the price cut is going to increase sales?

PD: We're already seeing a 2x lift. Sales have doubled at our top five accounts since Monday.

That's fast results!

PD: We get sales results every day, and we're in direct contact with our retailers. And we're talking about the middle of July, and before even the advertising has kicked in on the Sunday circulars. We're seeing an immediate, favorable impact. I think that can only go up from there, as retailers get behind it and as all the content that we talked about at the press conference starts rolling out between now and the rest of the year.

Konami's PS3 exclusive Metal Gear Solid 4

How is Sony going to go about retaking [the lead]? There's a lot of skepticism -- how is that going to be alleviated? Is that going to take a little time?

PD: The confidence that we have in the PlayStation 3 is really very high. There are a couple of things that people were hoping to see coming in to E3. One of them was a price cut, and we've addressed that. Another thing that we hear a lot is, "Do they have good games to drive this thing?" The reality is that we had a pretty good launch lineup; in fact, we're very proud of the launch lineup. After that, I think we went a little bit dark. It took awhile, and then things like MotorStorm showed up, and that's great, but then we didn't have anything for a little bit after that. It's fair to say that gamers wanted to see more games.

So then you fast-forward to E3, and you've got the price cut, and there are more than 200 games coming out this year. We're delivering Killzone, and [despite skepticism], the Killzone event didn't disappoint. You've got Metal Gear Solid as an exclusive. We've got a development organization that is larger than Nintendo's and Microsoft's combined that is able to crank out 15 exclusives up and down various genres, from RPGs to shooters to Little Big Planet, which you can't even put in a category. We're very confident that gamers are going to respond to the product offering going forward, and the passion that they have for that PlayStation brand will be there in spades.

Are you confident that Metal Gear Solid 4 is going to stay exclusive?

PD: Yeah.

Konami recently cast a little doubt on that.

PD: There was something that came out prior to (the Sony E3 keynote) announcement. Our folks have talked to the Konami folks, and until the announcement was out from our side, I think they were being a little bit cagey. But the agreement calls for exclusivity, the announcement's been made, and now people know the real story.

How aggressively is Sony going to be tackling online in consoles, going forward? What do you think of the other offerings that are up now?

PD: We're attacking online very, very aggressively. We do have a different approach. The other offerings are just fine, and they do things really well, but that's not to say that we feel like we have to do everything they're doing. First and foremost, we offer online for free, and our competition charges people to get online. We've got a different philosophy and a different business model. As Phil talked about in our press conference, we're building things specifically for our devices, and delivering them online. The devices themselves help show off that content. For example, whereas our competition takes a bunch of old content and catalogs content from previous generations and offers that in a download fashion, our development organization are making games specifically for PS3. When you download them, they're in 1080p, and they're showing off what's going on with Cell and the PlayStation 3 technology.

We also have a hard disk drive in every box, which means that we don't have to be constrained by an arbitrary file format size. We can make things as small or big as we want. People don't associate a game like Warhawk as a downloadable game, but it will be available for download. It's a different approach. And then you get into Home, which again I think is a major point of difference. Online communities have existed, and they're traditionally 2D and text-based. To date, they've done that well, but what Home does is that it leapfrogs the current offering and delivers something that people haven't even imagined yet.

Microsoft's offering is a little more streamlined, because it's been around longer. They've got friends, and leaderboards and stuff. Nintendo, on the other hand, is still using friend codes, and it's difficult to access. You seem to be in between in terms of the friends issue. How do you see that going?

PD: You're right. Microsoft has been doing it for awhile, and we've been doing it for seven months. We've been making improvements as we go, but there's still a lot more improvements that we need to make. The notion of friend lists and our version of Achievements -- you've probably seen plans for the Hall of Fame and trophies.

I think these things will greatly enhance the community and the ability to communicate with your friends. You can fire up the game directly from Home. All of these things I think will be great for the community. They're not all in yet, but I think it would be fair to give us a little bit of time not just to catch up, but to deliver our version and our vision. On Microsoft's side, I think they too are enhancing their service, and it wasn't so long ago that they got to downloading in the background. We can't get there in one day.

It's been striking me recently that having the best online platform may be more of a factor in terms of who is going to be a leader in the future. I'm not sure if you feel similarly. I know Nintendo is going to have to do a lot of catching up soon.

PD: I think it's an interesting theory, but do you put Nintendo in the same camp? Is online as important for the Wii as it is for the 360 and PS3?

It depends. It may be. If it were in great shape, it would be as important. Since it's not, it's got other things that are being focused on.

PD: I shouldn't speak for them, but my perception of their approach is that they're targeting someone very different for the Wii. They talk about bringing in non-gamers, and therefore the importance of delivering an online gaming experience to someone who has never played a game is probably not as critical as it is to the PS3 or 360.

It depends on the angle. Casual games are mostly online, and a lot of them are head-to-head online, and that's the market they're going for, with casual online games and (Ea's casual division) Pogo and things like that. Those are the kinds of experiences that they probably aiming for.

PD: Back to your question -- online is a very critical piece of the puzzle, and we know it's something we've got to get right. We're wildly excited about points of difference like Home, but the core online game playing environment that the PS3 offers is very robust already. The big differentiator for us is the content that you'll be able to download.

[We've got] games like Echochrome, Pain, Warhawk, SOCOM, and a bowling game that uses the Sixaxis controller. There's a broad range of content that we've offering on the PlayStation Network. In addition to those 15 Blu-ray games that our worldwide studio organization will make this year, there are 80 PlayStation Network offerings that they're making.

Sony's highly ambitious dragon action game, Lair for the PS3

I was wondering if the whole issue of finding out what people are really enthusiastic about or not is why we haven't heard about Lair in a long time.

PD: I'm not sure. People are really excited about Lair. It's been a big focus of ours, and the game is finaling soon and will be coming to market, so I think there's a lot of people who are really fired up about it.

I know it wasn't at this press conference, and it wasn't one of the major talking points. It feels like it's been pushed off to the side since the most recent previews.

PD: Certainly that wasn't our intent. I think it's more a function of having an hour and a half press conference and 50 games that are more forward-looking. Lair is having an imminent release, and the Lair PR cycle is coming to an end. We've got reviews on Lair that are coming out now. It wasn't as important to say, "Lair's coming!" because we feel that people already know that.

Why was the PSP redesign so subtle?

PD: Is this subtle? (hands over the PSP)

Well, it's lighter! But why keep the UMD?

PD: Delivery of media. Why get rid of it?

There have been problems with it in terms of how fast it loads, and it was having trouble getting sell-through on the movie content.

PD: This new design addresses the load times to a certain degree. The internal memory has been improved, so the load times are improved. The movie issue you're referring to is really a function of our not handling communication with Hollywood terribly well. When the PSP came out, it was a new format, and as with a lot of new formats, what Hollywood does is back up the catalog and say, "Come on guys, let's release all this stuff on the new video format." Unfortunately, we didn't do a good enough job communicating to Hollywood about who was going to be buying a PSP.

This is a fake example, but it doesn't make sense to do On Golden Pond on the PSP, because that's not the demographic that's buying this thing. When we launched, there was a proliferation of UMD content, and it wasn't the best strategic fit with the demographic. Now we've done a better job of going back and interfacing with Hollywood and saying, "Look, here's what we're doing, and here's what makes sense." I think sense then, they've been a lot more selective in terms of what makes sense and what doesn't. You've seen people like Target come back on with UMD offerings. There have been some hiccups, but I think reports of the UMD's demise have been greatly exaggerated.

I know a while ago, retailers were scared of stocking UMDs. It may have partially been because of the movies, but it was also on the game side because certain types of games sell really well on the PSP, while other types don't seem to at all.

PD: You're right. Again, communication is a big part of what we have to do as a platform holder. It's a powerful device, and it's kind of a PS2-based technology, but the cross-ownership between the PS2 and the PSP owner is about 80 percent, so you can't just do a port, because people don't want to buy the same game twice. It's very important that you make the right game, and when you do, I think you see great results. People are really excited about God of War, but we're not just taking God of War from the PS2 and rereleasing it. We're making a standalone game. That's the right approach, and that's how you make the PSP work.

The PSP has its own demographic. The DS has its own demographic as well, but the PSP's is more traditional with the hardcore type.

PD: I think you're probably right. I know this more from my days at THQ, where we did a healthy handheld business -- the DS is a kid's market, it's a licensed market, and it's a Nintendo market. The PSP is probably more of a core gamer market, at least up until now. One of the things that we're doing is that we're broadening the userbase. We've already established it with the older guys, and we want to go down to the teen and tween audiences.

Part of what we announced yesterday was that we'll have some bundles with Daxter and Family Guy -- two properties that appeal a great deal to a teen audience. The Star Wars SKU is pretty broad. There's older guys who grew up with Star Wars, but it's still popular among kids. We think those types of content offerings will bring a new audience to the PSP.

I think the DS audience is somewhat growing. Most people my age that I know have one, yet Nintendo still has this stigma somehow.

PD: You have one, but you're a game journalist.

None of my friends are, though, and they have them too, especially girls.

PD: A lot of our research shows that there is a stigma, and I don't know what age it happens, but carrying around a PSP is seen as cool. It's a cool piece of electronics like an iPod or an iPhone, though I'm not saying we're that cool. Carrying around a DS is like, "Oh, my little brother's got that." There is that little bit of stigma.

I think your market research is different from other market research that may have been done, because I've found the opposite to be true.

PD: You think the PSP is less cool than the DS?

No offense, but I actually do. In San Francisco, I see the hipsters walking around with the DS, and I see the guys in the basketball jerseys, the jocks,and the fratboy types [with the PSP].

PD: No offense taken!

Do you think the changes that are being made to the PSP are going to convince non-believers or people with a "wait and see" approach to come over the fence?

PD: If you're interested in playing portable games and having access to video content and Internet access on a device, there's nothing to wait for. If that doesn't appeal to you and you're not going to be gaming on the go, you're probably not going to be convinced by this form factor. I think what might convince those people would be the advent of a service that allows people to put content onto a PSP in an easier fashion. There's been a lot of speculation as to when we were going to offer a video download service for either the PS3 or the PSP, and I think that could be more of a killer application that could get people off the fence. I don't necessarily think that this will get us there yet.

I have been wondering when that's going to happen. Can you speak to that at all?

PD: No! (laughs) I don't have a problem bringing it up, but we didn't have any announcements about that at the show. What I can tell you is that we're working on it. It's something that we see as critical, not just for PSP, but also for PS3. It's something that we know is super-important to get right. You're not going to have a second chance to make a first impression. If we launch it and it's not right, we're going to get creamed. We want to make sure we get the consumer experience right and get the right content, and we're working really hard on it. I don't think we're talking about years. This will be something we can get behind real soon.

Are you using the PS3's downloadable stuff as kind of a trial, in a way?

PD: No, because that would suggest that the PS3 is just...

I didn't mean just as a testing ground. Are you taking any experiences learned from that in order to build?

PD: Yes. The pipe that the content comes down already exists, so the PS Store exists for downloading content right now. It would be very easy to add a tab or whatever to access other content like movies, music, TV shows, and so on. It's really just a matter of getting that whole thing wrapped up in a bow and making sure that everyone believes that it's the best service it can be.

Has the battery life changed [on the PSP]?

PD: It's the same battery life via a lighter, more efficient battery. There's no loss of battery life, but the benefit of it is a small battery.

From your personal opinion, how much longer do you think the PS2 is going to keep going?

PD: A couple more years, easily. Again, it's the ten-year lifecycle, and we're around year seven or eight. We're going to do 11 million PS2s this year worldwide. It's a huge number. What we've told our third-parties is, "Don't get off this year, and certainly don't get off next year either." There's another couple of good years left, and then we'll see. Does the PS2 extend longer than ten years? I think that's possible, but [it'll have] at least ten years.

I feel like it may have a longer life in Europe, somehow. They're still going a little more aggressive with the casual or different markets than the U.S. is. I've actually been wondering why it's not being tackled as much here.

PD: We're tackling them now. It represents a bit of a shift for us, but I think it's the right shift. Our hat's off to SCEE, who did a great job with things like SingStar and Buzz!. This fall, we're getting behind both of those brands in a big way. I think God of War II will probably be the last core gamer game that you'll see from us, and going forward, there will be a shift to more social gaming experiences like SingStar and Buzz!. We need to launch those the right way this year.

Casual karaoke game series SingStar

It seems to happen toward the end of a console's life. Sony's policies get a little less stringent, and then more content can come out on it. There have never been many straight budget releases here (in the U.S.), which has always distressed me, because I love those less high-quality games because they're quite fun, like the stuff that D3 publishes in Japan with their Simple series. They've got 120 of them over there, and the first one just came out two weeks ago [over here]. It's called The Adventures of Darwin -- it was one of the highest-rated ones, in Japan and only just came out over here.

PD: It's an interesting question from the third-party view, but your premise is correct. I think the standards do go down a bit, and you see more content that maybe wouldn't have passed muster earlier. Whether that means it's stuff that you're looking for would make it or if it would be a wholesale shift in the approach, I couldn't say.

With the PS3, is it mostly going to be PSN stuff that's going to be targeting a casual or broader market?

PD: No. You mentioned SingStar, and we at SCEA didn't get behind SingStar at the same time Europe did on PS2. But on PS3, SingStar will launch this fall on the PS3 both in the U.S. and in Europe. We want to make sure that we're there on the outset with that. That's one example. Other examples are games like Ratchet & Clank Future -- core gamers will like it, but it's an accessible action platformer in a 3D world. That genre is very accessible.

I think something like Little Big Planet has great crossover. I think core gamers will love it, but I also think that it's very accessible to casual gamers to mess around with it and upload content and share it with their friends. It meshes well with the current trends in user-created content and community that you're seeing across the broader Internet.

It strikes me as a chicken-and-egg situation. My perception is that the casual users have yet to pick up a PS3 for various reasons.

PD: Price among them.

Certainly. Do you think this kind of content is going to lure people in, or is there another way?

PD: Well, price has certainly been an issue, and we've got a lower price now. I think that will open up some more people. Maybe not all the ones down to the certain level that are playing with the Wii, but before we know if they'll come, we have to build content. We're building some things now. A lot of it is PlayStation Network casual games, but we'll also be doing some Blu-ray stuff. The way it'll probably work is that it's not just core gamers -- we're going out to the next concentric circle.

We're still at $499 -- we're not down to the PS2 pricing. What will happen is that maybe the primary purchase driver is you, but maybe your spouse, sister, or brother starts to say, "Hey, I saw this cool game on the Network store," and we've got a game downstairs where you're bowling with the Sixaxis. It's very un-PS3-like in many respects. Some people are thinking that the PS3 is just Killzone and Resistance, but you get a whole different experience.

Sony's unique PS3 sandbox title LittleBigPlanet

Does the price drop extend the time before which the business becomes profitable, on the hardware side?

PD: We're comfortable with the price drop from an overall business perspective. There's already a lot of efficiencies from a manufacturing perspective, getting the first several million PlayStation 3s out, and Blu-ray as a format is coming down across the board with standalone Blu-ray players. Some of these things are a natural progression, and others are a chicken-and-egg part of this business.

The more hardware we sell, the more money we make from a software perspective. You weigh all that together, and we think in this territory that the price move was the right thing to do. Having said all that, we're seven months in, and I don't think we're going to float to a profitable model in July of this year, but we thought that it was the overall right thing to do for health of the platform.

In the past, it used to be that the five-year console cycle was in part to reach profitability on the hardware side, and now we're on the ten-year thing for everyone except for Nintendo.

PD: And except for Microsoft, too.

No, they're not profitable.

PD: They're also not ten-year. The first Xbox was around for four or five, and then they stopped making software for it.

I'm saying five years before you're going to reach profitability, and then you have to go five years past. I feel like Sony and Microsoft are both in that camp. It's like a longer tail before your hardware makes you money.

PD: I don't want to be argumentative, but I take issue with Microsoft either having a long tail or being profitable, because they've never done either. They've never made a dime in this business, number one. Number two, they've never had a tail. They've never been successful enough to have a tail, so the notion of a back half of the curve doesn't exist for them. They stopped the Xbox, and I feel for the guy who bought an Xbox a month before they said, "We're out of business, and we're moving on."

The reason I get a little emotional about that is that it's a stark contrast to our approach. If you buy a PlayStation system, we're going to stand behind you for ten years, and we're going to deliver games like God of War II in the seventh year of the cycle.

I'm saying they've got to if they want to stay in this business.

PD: I agree with that. They do have to, and we'll see if they do.

I was just saying that for this generation, it seems like a similar boat, but you can certainly take issue with that.

PD: Let's just pose a couple of questions. So their prospect for a ten-year lifecycle with the Xbox: you've got an inconsistent design. Some of them have a hard drive, and some of them don't. None of them have a Blu-ray player, and the HD-DVD will be out of business in a matter of months. Is this a ten-year product? By the way, it doesn't even work, so do they want to be selling it for ten years and refurbishing them all for ten more years? I don't think that's a ten-year product. You or they could disagree with me, but I'd put that up against the PS3 anyday.

What they have now is a lead, and I wonder if the PS3 will be able to get enough exclusives to where it's really going to matter to enough people to buy more of them than the 360.

PD: What they talked about at their press conference was GTA and Rock Band, and both of those are on our platform. What we talked about was Metal Gear, Haze, and Unreal, which actually will have exclusivity. Some are forever, and some are for a period of time.

What we also talked about from a first-party perspective was that we've got a development organization that will deliver 15 Blu-ray exclusives and 80 downloadable exclusives, so I think there's an awful lot of exclusives that we have. They have some, one of which is a big deal, and the others are not. It's a good question. It's really where the rubber hits the road. Does the consumer respond to one thing, or many things?

It's also a question of how big of a deal that lead is when things are coming out on multiple consoles. It'll be interesting to see how this shakes out. I was talking to someone about the Wii's lifecycle, and how they can afford for it to be short if they want since they're profitable out of the gate.

PD: I agree. We get asked about the Wii a lot, as you might imagine, and I actually like to hear about people like you. I'm not convinced that it's a long-term proposition just based on whether gamers want to fundamentally shift the UI that drastically, or is it more of a fad that you take out during the holidays and the whole family's visiting? It's fun to play that type of game sometimes, but is it the way you want to play games all the time?

We'll see if gamers have that issue, because it may be the non-gamers that make this whole thing happen. Are they going to buy a second game? Who knows. They might buy it for Wii Fit, and that's all they do. It's certainly going to get more people to think they can have fun in this space though.

PD: If they're successful at that, I think it's good news for everybody.