The mood at camp PlayStation has changed.
It’s subtle, almost imperceptible, but speak to any of its execs now and they are confident and assured. They are no longer facing the crisis of confidence that surrounded the firm when the once-expensive PS3 first arrived and was suffering from the clichéd label of ‘Sony arrogance’.
Sony dropped the swagger, but not the momentum – and the result for SCE has been a fantastic last 12 months.
PS3 software sales are up 38 per cent year-on-year, and hardware sales are up even further by 57 per cent. The PS3’s global installed base is now rapidly closing in on its Xbox rival, with 38 million units sold worldwide.
It seems no-one told Sony that there was a recession going-on.
So it’s understandable that Kazuo Hirai, president and CEO of Sony Computer Entertainment, was in a buoyant mood when MCV spoke with him at Gamescom.
He says that the tide has turned for PS3, thanks in large part to the release of the new, more-affordable version of the console last year.
“Since we launched the new PS3 at £299.99, we have had a lot of uptake,” explains Hirai.
“We’ve been talking about this ten-year lifecycle since the launch of the original PlayStation. To a lot of consumers, that message of longevity and the value proposition that we bring has always been there, and I think it has just been enhanced.”
Japanese-born Hirai took the role as PlayStation’s top dog just after the birth of PS3 in 2006, following over a decade’s hard work building the SCE business in America. He replaced the soon-to-retire Ken Kutaragi – but no one was fooled into thinking this was just replacing one Japanese innovator with another. Hirai brought with him a new global outlook for the PlayStation business, a fitting shift for the division of a previously staunchly Japanese company now run by a Welshman, Sony CEO Howard Stringer.
“I ran SCEA for 12 years, so I bring that region perspective,” he says. “Before, that perspective was focused on: ‘If it’s right for Japan it’s right for the rest of the world.’ But in fact, if it’s right for Japan it’s probably not right for the rest of the world, because the rest of the world has a different retail environment.
“So I made sure that with everything we do, we try and bring an international perspective on things.
“That’s not to say that was wrong in the past. Because back then the Japanese market was such a dominant part of our business.
“But now the Japanese market is probably about 20 to 25 per cent of our business. This is a very much overseas market driven organisation. So our new perspective is very important.”
Gamescom is a fine example of Sony’s new focus on international markets. For two years now Sony has used the European expo to make a string of major announcements – this year it unveiled new PS3 SKUs and two new titles from long-time development partner Insomniac.
But Hirai hasn’t stopped there. In the last two months alone he has reorganised SCEI – the Tokyo-based company – into three business units: one for consoles (PS2 and PS3), handhelds (PSP) and accessories. SCEI will no longer focus heavily on Japan, finally living up to the International part of its name by taking a more global approach to its business decisions.
“Before, SCEI looked after their own P&L, as did each region, and we basically combined it at the end of the year to come up with a consolidated number,” he reveals.
“That worked well in the past. But because of the importance of the overseas markets, as of July we formed three business units.
“The heads of these business units are responsible for the overall P&L for each of these platforms.
“It has only been two months since we’ve done that, but it’s so we can take that worldwide perspective a step further and make sure the business heads of these three divisions are looking at the totality of the business, not just what’s going on in Japan or their own little section of the world.”
PS3 VS PS2
A global outlook, Hirai says, is what the PS3 needs if it is to be as big as the PS2 – a machine that has sold an incredible 146 million units since its 2000 debut.
But can PS3 really beat its predecessor? For all of its success over the past 12 months, whether you compare it to its competitors or its predessors, there’s a way to go to hit that target. The Sony flagship console is still in third place behind Xbox 360 and Wii. And, four years into its ten-year lifespan, the machine has shifted 38m units. Only 108 million more to go.
“PS2 is the most successful platform we’ve ever had, and obviously we want to try and be one better than it in terms of the install base,” says Hirai. “There were two things we wanted to accomplish with PS3. One was to extend the video game experience beyond what we’ve traditionally been able to do with PlayStation and PS2 – so things like 3D and Move.
“But at the same time, take advantage of the fact that it is a networked device, and beyond downloading your games – which we need to continue to improve upon – provides other forms of entertainment.
“There is a whole raft of things that we do in terms of video content, as well as digital comics and non-game interactive experiences, and we wanted to bring that to the consumers through one console – the PS3.
“We have come up with something new literally every year to enhance the experience, either through hardware or through services. So there’s no reason why we’d want to stop doing that.”
THE 3D FUTURE
There’s every reason to believe PS3 will have another big Christmas. Move is out in a little over a week, and that’s followed by some big name titles – including Gran Turismo 5 and LittleBigPlanet 2. That’s 2010 sorted.
But the key element for PlayStation in 2011 is Sony’s plans for 3D.
3D has become central to Sony’s overall business strategy. The firm’s mantra is ‘from the lens to living room’, with the company creating 3D movies, manufacturing 3D TVs and of course, creating 3D video games.
Hirai says PS3’s role in this revolution is crucial: “38 million PS3s in the market are already 3D compatible if you do the firmware upgrade. So we are a very important driving force for 3D adoption with consumers across the world.
“That’s not to diminish the role of other Sony companies, like Sony Pictures, which has been very aggressive in adopting 3D for both theatrical and home video releases. Obviously Sony Electronics has a very important role, so too does the 3D Technology Center that Sony Pictures established last year.
“This is not just for Sony, this is for anybody that wants to get into 3D content creation. We will share the expertise that we have developed over the years in creating good 3D content, that doesn’t tire the eye and doesn’t have images jumping out at you all the time. This is to make sure we are playing our part to drive mass adoption of 3D, not just for Sony but as an industry.”
Hirai also questions Nintendo’s glasses-free 3DS system, and is confident that Sony’s solution is the best for the market.
“I think 3D is best enjoyed on a big screen,” he insists. “And the important thing for us is 3D combined with Move. The Move controller is not just about up, down, left and right, but also depth control as well. And all that is really a home-based console experience, which to me is the right 3D experience given the state of the art we have today.”
For all the praise heaped on Sony for its PS3 success over the past 12 months, the same cannot be said for PSP.
The console is far from a failure – after all it has sold over 60 million consoles worldwide. But the platform has been hurt badly by piracy, something Hirai is keen to stamp out.
“Piracy has been a big challenge, especially in Asia,” he admits.
“We have done a lot of different things to the PSP hardware to make sure that we are combating that issue as quickly and as often as possible, because that is a very important part of the integrity of our business.”
Last September, Sony took a bold step and launched PSPgo, a download-only version of its handheld. However, a lack of retail support, no UMD drive and high price point has seen the machine fail to do big numbers at retail. But Hirai is defiant.
“I think we did cater for a market, albeit not as big as the traditional PSP-3000 market,” he says.
“It is the first time we have done that with any of our devices, and we did get a lot of feedback, both good and bad. I think we need to make sure we have as many titles available to download as possible, to make the experience as easy as possible. But also pricing is perhaps an issue. Because of the cost reductions we’ve been able to do over the years, the traditional PSP has benefited. But the PSPgo is a completely different design, so the cost trend is different.
“Those are some factors. But I’m happy with the results that we’ve seen on PSPgo, including the invaluable feedback that we’ve been getting from our consumers. I think it has done well for us.”
So what did Sony learn from PSPgo? Could PSP2 or PS4 be download-only platforms, too?
“We are doing business not just in the developed nations of the world, but also in regions where network infrastructure just isn’t as robust as one would expect or hope for,” he explains.
“There will always be requirement for a business with the size and scope of our magnitude to have a physical medium.
“So to say we are going to put all our eggs into a network-only device basket? I think that is taking that a little too far. In general, to think everything will be downloaded in two to three years or even ten years from now is taking it a little bit to the extreme.”
Early last year, Hirai took on a second job at Sony. As well as being the CEO of SCE, he is also president of the firm’s Networked Products & Services Group.
This, he says, means he “lives on planes” and is “constantly jetlagged” as he travels the Sony empire, helping it make connections to exploit web technologies in different ways. As a result, he has big plans for PSN.
As Microsoft rolls out Xbox Live onto mobiles and PCs, Sony has ambitions to do the same – and it has an even wider range of electronics to play with.
“We just started the Qriocity video delivery service in the US for Sony Bravia TV sets, and we’ll obviously expand that to other territories,” says Hirai. “That is one way for us to leverage the infrastructure we have on PlayStation Network. We will be expanding it to a lot of Sony devices that we have within the group. So more to come from that.”
Only five years ago Sony was the king of video games – but now in numbers terms it is catching up with Nintendo and Microsoft. And quickly. With innovations around 3D, Move and PSN, Sony could well see itself as the driving force behind the next big era for the medium.
Hirai concludes: “This industry brings so many different experiences to the consumer that it changes literally every year. It is very exciting for me to be part of and drive that change.”