The past few years have been rocky for Playstation, the former master of console gaming. Mr. Katuragi's, commonly referred to as the father of Playstation, vision for the Playstation 3 platform was grande, too grande in fact in our view the company lost focus on creating a great gaming platform first and foremost. The grande vision also led to a platform that was too expensive for the core audience (gamers) and difficult to get to grips with for developers.
Fast forward to 2010 and lots has changed, both from an organizational and a market point of view. Nintendo keeps Sony and Microsoft safely in the rear view mirror while at the same time Apple is encroaching step by step into casual gaming and entertainment. Internally Playstation has seen the departure of several key figures, such as Mr. Katuragi and top management roles. Sony has also restructured its business groups to be more aligned and to encourage cross business unit collaboration (Playstation is now part of the Network Products & Services, along with amongst VAIO PC group). We see these internal changes as positive, as Playstation has a range of challenges it might face in 2010 and beyond.
Playstation 3
The PS3 is now in its fourth year running. It is still in the early stages of the life cycle in comparison to the predecessor PS2. Although Playstation has a strong line up of first party (often exclusive) publishers it has not managed to reach the level of first party sales to its rival Nintendo. Playstation has published hits such as Uncharted 2, Grand Tourismo 5, Littlebigplanet, Motorstorm or Resistance, and upcoming titles such as Heavy Rain and Modnation Racers could bring new energy to PS3 in 2010.
However, third party titles remain important, which Modern Warfare2 showed as it became the most sold game in 2009 according to reports. Multi-platform titles released on the PS3 have up until recently been somewhat plagued by an inferior quality experience or have been limited by (timed) exclusivity on downloadable content and add-ons on the competing platforms Going forwards we would like to see more from Playstation on how it will ensure that the gaming experience of multi-platform titles are superior on the PS3. This could be due to better game rendering, higher quality experience, integration of non-gaming aspects into the game or that the use of Blu-ray media provides real end user benefits (such as no need for disc swapping to play a game).
In our view the Playstation 3 software (meaning non-gaming applications) are ripe for an overhaul. Sony is not a software development company such as Adobe, Apple or Microsoft, yet it operates in a market where usability and software user experience is crucial. We challenge Sony to dramatically rethink its SDK policy and make the SDK much more widely available and affordable. Take a page out of the Apple play book and let developers around the world create new ways in which the PS3 system can be used. Why should users be confined to the PS3 music manager for music play-back? Few Iphone users would claim that the App store holds little or no value. Sony should replicate this model for the PS3 (and as later discussed PSP). This will be no easy task as we suspect that internal barriers to change and the legacy view that SDKs should remain a revenue source will hinder adoption to the new market condition.
Playstation Portable
The PSP business has gone through rough times. In the early days of the PSP games were under-invested and often ports of games doing well on the PS2/PS3 systems. This has steadily improved. The PSP suffered from some of the same issues as the PS3. The ambitions were too grande which led to a lack of focus on the core function of the devices; gaming. The multimedia aspects were too inconvenient in order to be practical for many people (for example the lack of persistent end user storage and how to manage media across the PC to the PSP, or from the PS3 to the PSP). As a device it still falls short as a web product.
With the PSP Go Sony took the PSP to the next step. It is essentially a slimmed down version of the PS without UMD support. All games and content are downloaded from the Playstation Store, thus cutting out the retail channel for games distribution. This upset retailers as they no longer would be able to sell higher margin games to PSP Go gamers. The Go however does solve two issues for Sony, it kills the second hand games market and it improves control over games (meaning improved games protection).
Going forwards what we would like to see more of on the PSP much the same as with the PS3; widely available SDK. This would encourage application developers to create new ways of using the PSP (communication, social networks, media and so on), additionally it would open up the platform further to games developers that are happy with reaching 10,000 customers at €2.99. Once again take a page from the Apple play book. We are also somewhat concerned whether Sony's control over games distribution could back-fire. Although the integrated Platstation Store has clear advantages there might be issues if Sony exerts pricing control in order to limit discounting.
Playstation Network
Along with software issues discussed above, Playstation Network is Playstation's second Achilles' heel. Sony has a lot of catching up to do to create the PSN and Store as a commercial store front. At the moment PSN and Store lack context awareness. It is not aware of which games a user already has and which are played the most. On the store any add-on to those games should be promoted (more likely to pay for add-ons for existing games than new games). The Store is also unable to use information on which games contacts (or friends) have and which they play. The store front looks the same for most if not all users. Sony needs to look to online vendors such as Amazon on how to improve its merchandising. There are also no integration with online review sites and no means for Playstation users to review, comment and otherwise share thoughts on PSN content and services. This is a critical flaw in Sony's online experience strategy and it quickly needs to address significant short-coming, especially as more games are distributed online and as Sony is pushing further into video distribution. In short, PSN needs to be much more aware of what you play, whom you play with, what they play, and what information is available on those games (why not integrate video reviews from review sites). These factors need to influence each specific user's store front. For example, currently for games distributed over PSN the only available information about those titles are game title, cover image, pricing and a short description of the title from the game developer. There is no means to find out anyone actually considers the game to be worth paying for. This is not how online merchants operate.
Playstation 2
The PS2 is without comparison the success story that established Sony as the king of consoles. The PS2 is shipping in volume in its second decade (still in millions per quarter) which very few technology products do. For the PS2 the main issue in 2010 and onwards will simply be how to keep demand high enough to justify continued support of the platform. There might be some limited opportunities, such as entering the hospitality market. It may be viable to create a business model where hotels install PS2 systems in hotel rooms (instead of these under-performing games that can be found from time to time on the hotel's TV/entertainment system). There could be a business model where customers rent games access per day for €5-10. Another option could be to create a PS2 run-time environment for PCs which would enable PS2 game owners to play their games on desktops and notebooks. This would probably lead to increased unlicensed copying of games, however if Sony would rather close down the PS2 business there is probably little to be lost. On the upside this model might actually drive some additional software sales from legitimate gamers.
On a related note, yesterday Sony released Q4 C'10 financials. Overall the results for the quarter are very positive given the economic climate and consumer spending. Revenue was not the key driver of interest as what caught out attention was Sony's strides in curbing costs and thus driving profits in otherwise difficult market conditions.
