Platform Holder Focus: Sony

Killzone 2 has just been released and is a flagship title for Sony and the PS3. Are you happy with the reaction to the game so far?
All of the reviews of Killzone have said ‘well done, you’ve lived up to the expectation from E3 all those years ago’. For me that’s really important because many people looked at that presentation and said our hardware wasn’t powerful enough to make something that good. But Guerrilla has pulled it off. And the reviews suggest it has exceeded expectations.

And at retail everyone is reporting really good sales. I am expecting a really good day one – but also for the game to be a good solid seller all the way through. We’ve got good bundles out there and that has picked up nicely according to our early numbers.

Do you see the game as a driver for hardware sales?
It certainly has helped drive sales. I think there were a lot of people out there who wanted something which really showed the power of PS3 – and now is a good reason for them to get on board.

What’s the UK PS3 installed base now? Are you pleased with the format’s progress?
We’re past two million units sold in the UK now, and we are really happy with it. If you track back from date of launch, comparing PS2’s run to 2m and PS3’s run to 2m, it’s pretty much the same. But obviously PS3 is a premium product with a premium price tag – it’s had to grow on a comparable basis with a higher price tag. That shows there is more interest in PS3 than there was PS2.

Interestingly, because it has done that at a higher price it suggests more longevity of the PS3 because we have chipped away at the top end of the triangle. In future there is no reason the PS3 shouldn’t exceed the 9.4m we have done on PS2.

And is that throughout the ‘ten year plan’ Sony has often talked about?
Yes. People have expected the life cycles to shorten for games hardware, but one great thing in PS3’s favour in that sense is that we have firmware updates – so the PS3 is constantly evolving. We have been adding more services and functionality into the hardware from the beginning.

Does that justify the price-tag from your point of view? The price is an emotive aspect of the hardware and is always under speculation.
Absolutely. The games side of the PlayStation 3 in terms of processing power and Blu-ray – all those messages have been made and, although some doubted why we chose Blu-ray for instance, are firmly established. What we are now trying to establish in people’s minds is that there are also great services around PS3 and how that will grow over time.

But price remains a key issue for PS3 – and a cut was even predicted by one analyst last week. Will there be any movement on that this year?
It always amazes me how many people predict price cuts without having seen any of the private financial data we have. Of course, it is key for us to have a price that is attractive to consumers – but at the same time we have a tough market at the moment. Especially here in the UK with the weaker pound. Sony Hardware, for instance, had to raise its prices.

PlayStation is doing its best to stay where we are – and whatever we will or won’t do this year it will come from us looking carefully at the financial landscape before we make any decisions. But 2009 will be a tough year – all the areas of our business will require careful management when it comes to finances.

Are hardware bundles a good compromise to those retailers or consumers sceptical about price?
That’s certainly part of it – and it adds great value for consumers. That was our strategy over Christmas, and it means that consumers can get our best games at the time of purchase. In that situation they win both ways – and we will continue to put product with hardware alongside our standalone offer as well.

Is there a focus for the platform in 2009 that you can sum up?
I think this is the year we build our communities. There has been a big shift in the way people consume our games. If you look at LittleBigPlanet or SingStar – they have their own communities. And that’s changing consumer mindset of ‘get a game, play it for a while, then trade it in’ to ‘get a game, play it as it evolves, the player evolves with it and engages with the community’. It creates more longevity to the product. So our products this year have a lot more stickiness with consumers.

Do these online connected games put the brakes on the pre-owned market?
It will alter it. It definitely changes the way people engage with and the attitude they have towards their games.

What are your thoughts on pre-owned in general?
There are strong arguments for and against. Everyone has a good point of view on it – they can all be argued. I don’t think either is particularly right or wrong. But now that we are getting into an offline/online world, the relationship between the IP holder and the consumer has more traction. It’s now down to the IP holder to see if they can create more online activities which keep that relationship strong and make sure the product remains in the hand of the consumers and is played and enjoyed.

New titles were announced for PSP last week. Where’s that format up to?
We’ve passed three million in the UK and 50 million worldwide. And there are surprisingly few formats that have sold that many units.

PSP is a strange one for us, in the respect that last year we didn’t have too much software for it. Yet quietly the base grew and grew and grew. Now third parties have realised they might have missed a bit of a trick on the format. This year, we’ve gone from famine to feast in terms of quality and amount of games. But if you look at the evolution of the PSP to a value-added proposition in terms of online content and the availability of snacking software – which gives a new business model for third parties – then you see that it’s an area publishers should invest in.

And they have woken up to that over the last nine months to a year – the format itself is a sleeping dragon, and it will awaken.

I also think that there was a renewed vigour from consumers once we had the Slim ‘n’ Lite out there as it emphasised the portability of the device.

On that point, Nintendo’s own revamped device, the DSi, is out soon. Do you think you are targeting the same set of users?
Our friends at Nintendo have been dominant in the handheld market since forever. Atari Lynx tried and failed, Game Gear tried and failed, Gizmondo tried and failed. But PSP has tried – and succeeded. That’s a good story in itself. I don’t think we’ve chipped away at the Nintendo model. We’ve added a new consumer to that area, and made the total market bigger in the same way as they have the Wii.

Do you likewise feel any pressure from iPhone/iPod Touch? That has a big games angle, and is a high-end games machine, much like PSP.
As I was saying from the evolution of our software offerings, it’s the online stuff, the small snacking games, which are an area of growth in the marketplace. What the PSP has is a great processor inside that can produce good quality games. The mobile phone market for games has been around for a number of years, and the overall quality – despite some strong titles there – has been limited because of the different handsets and infrastructure in that business.

iPhone has the advantage of being a single device and is growing a reasonable installed base, but doesn’t have the production power that a PSP has. As a specific games machine, the PSP is always going to win out. We’re in a great position to take on the interest in these snacking games and produce them at better quality, lower prices, with lower cost of development – that’s a great business model.

Is ‘snacking games’ a new strategy for PSP?
It’s one that is growing now we have started to sharpen our online activity.

Doesn’t that erode the sale of the format’s games at retail?
It’s the same situation as the business is facing all over – and goes back to what I was saying before about online content. Plastic discs, be that on PSP or PS3, are still an incredibly efficient way to get a huge amount of data in the hands of consumers. But from a point of view when it comes to creating communities and keeping that content fresh, that’s where online helps us all.

Do you think the 2009 software market can grow in the same way it did in 2008?
It was a storming year in 2008. And so far 2009 has started off pretty good.

My personal view is that it depends on whether the country as a whole feels that we are nearing the end of this financial cycle. Lots of people have stated that we have talked ourselves into this recession, so if we can talk ourselves into a recovery then consumer spending will rise. I don’t know whether that will happen; that’s a countrywide phenomenon.

The issue for games is if consumers buy four games or five games – if they buy four, then we will see a slight downturn in the overall business. But the basis of our industry is solid. We are seeing people buying into hardware at record numbers, so the intent is there. Luckily gaming is a cost-effective form of leisure – if you can’t afford to go away on holiday this year, then buy your kids three games.

There are fewer retail outlets out there as well, so we’ll all have to think about distribution policies, and how we reach consumers – that will mean more work on sampling activities to be sure people can touch, feel and experience our products. Sony will continue that this year and help consumers understand that what they are getting is best of breed.