Sony's steep learning process
Can the firm grasp how much the market has changed - in time to save the foundering Vita?
Every company in the console business - publisher, developer, platform holder - is on a steep learning curve right now, but none more so than Sony. Since the departure of PlayStation founding father Ken Kutaragi, whose shadow had loomed large over the organisation for many years, Sony's performance has been far from impeccable - indeed, financially, it's often verged on the disastrous - but nobody can deny that the company is learning and adapting.
"PS3 hasn't done badly; it hasn't crashed and burned, as some feared at the outset; but by god, it's had to endure a rough few years"
Of course, Kutaragi left the company in a position that required a hell of a lot of learning. PlayStation 3's launch was the culmination of a development cycle that was suffused with extraordinary hubris. The console was birthed from an almost wilful ignorance of the realities of the games market, with Kutaragi and those around him choosing to believe that Sony's market-dominating form with the PlayStation 2 ensured that no matter what they did with the PS3 - its extravagant price point, its alien architecture - the company would continue to rule supreme.
Well, it didn't. In the end, the new management who took over after Kutaragi's departure have managed to turn the generation around to a degree - which is no mean feat, especially given the awful business conditions for Japanese export companies - but even at that, Sony has had a miserable generation in the home console market. It's watched Nintendo run away with the kind of sales the PS2 enjoyed once upon a time, while it carves up the rest of the market with Microsoft - an also-ran last time around, yet now easily a match for Sony. PS3 hasn't done badly; it hasn't crashed and burned, as some feared at the outset; but by god, it's had to endure a rough few years in order to ensure a "joint-second" market position, and that's no fun for the former all-conquering champion.
In that time, though, the company really has been learning. It's learned that off-the-shelf components and technologies may limit your engineers' imaginations, but they keep your price tags low and your developers happy, since they don't have to reinvent the wheel every time you launch a console. It's learned that if it's going to outpace Microsoft, online services will be a big part of things - and it's notable that while Sony's core online gaming experience may not rival Microsoft just yet (not shipping with a headset still feels like a crucial mis-step to me in this regard), it's streets ahead of its competitor in terms of its digital content offerings. PlayStation Plus has matured into an excellent and high-value service, in content terms, while the company's investments into developers like thatgamecompany have also paid rich dividends.
The problem is, there's still more to learn. There's more to learn every day, because the industry is changing faster than ever - and even if Sony today is clearly a chastened and vastly wiser company than the Sony of six years ago, I'm not sure if the company is learning fast enough.
PlayStation Vita, of course, is the canary in the coalmine. It's the first Sony console to be created and launched in the post-Kutaragi era, by the team that had supposedly learned from his mistakes. It does a lot of things right. It's packed with technologies that are pretty developer-friendly, it's got a host of flexible, interesting control systems, and it's even relatively cheap for a new piece of hardware. It supports the idea of launching cheaper software that has been forced on the industry by the uptick in mobile games. It takes all the great hardware design that runs deep in Sony's DNA and combines it with a degree of understanding of the market that was painfully lacking from the PS3's launch.
"Third parties are agnostic, and in some ways, they recognise that Apple and Google are better platform holders for them"
It's also doing genuinely miserably in the market. I wish that wasn't true, because the console is a joy to hold and plays host to a handful of genuinely great games, but it's unavoidable - the sales figures are extremely weak, even in Japan, which was the bright point on the global map of PSP sales.
This week, Shuhei Yoshida told Gamasutra that he was disappointed and surprised at the poor support for the system from third parties. "In retrospect," he said, "there are so many options for publishers now that we cannot take it for granted that our new platform would be supported by third parties, like [it would have been] many years ago."
Learning. Learning fast, even, and let's not underestimate what a difficult recognition this is for a company like Sony - which formerly had every major third-party publisher and studio hanging from its every word. It must be even tougher for a man in Yoshida's position; as Worldwide Studios president, he would have regular contact with many of the third parties who now seem to have hung the Vita out to dry. All the same, he understands. He knows that the question for publishers is no longer "how much support are you giving the 3DS, and how much the Vita?". These companies are asking themselves whether the dedicated handheld market (okay, the non-Nintendo dedicated handheld market) has any future at all in a world that's filled with iPhones, Galaxy S3 phones, iPads, Nexus 7 and Kindle Fire tablets.
So now Sony knows new things. It knows that it's not just facing the prospect of iOS and Android stealing a slice of market - it's facing a genuinely existential threat to the whole handheld console business. It may even recognise that the same threat, a little further off, applies to the console business too, and it knows that third-party companies may no longer be natural allies. Third parties are agnostic, and in some ways, they recognise that Apple and Google are better platform holders for them than the much more hands-on Sony, Nintendo and Microsoft ever were.
There's an equation in all of this which we often ignore, but which bears repeating. We talk about the idea of a sector of the market - handhelds, in this instance - losing support, and sometimes we forget the calculation that underlies that. As a developer or publisher, you look at the size of your addressable market, and the kind of product you're making, and you figure out what your sales might be. If your addressable market - the installed base of a platform - falls to a certain point, the equation no longer makes sense, and you stop supporting that platform.
"Sony believed that the old model of doing business in handheld consoles was still in good enough shape to sustain Vita. It was wrong"
That number isn't zero. It's actually very high, because games are expensive to develop, and you need to sell a lot of them to break even - and you'll only ever sell to a small percentage of the installed base. So for some developers and publishers, a console with a 20 million installed base might be worth a punt, but a console with a 15 million installed base is of no commercial interest whatsoever (think of how many publishers bailed on the GameCube, a console with around 20 million installed base). In other words, you could have a system that sells tens of millions of units and still doesn't develop much third party support, because the equation never spits out an answer that makes commercial sense.
How does Sony extricate itself from this situation? There are various approaches - none of them foolproof, and none of them without extraordinary costs and risks, but any of them better than staying still and hoping the good old days magically come back. Sony could follow Nintendo's strategy, focusing its efforts on first-party and second-party development, building a platform for people who want to play amazing Sony exclusives and letting third parties come along for the ride as they see fit. Alternatively, it could go the opposite direction and follow Apple's lead, opening up a platform that anyone can develop for cheaply and release on with the minimum of fuss (with Sony's gatekeeping duties reduced to keeping an eye on technical quality and safety). That could work, although giving developers a distinct reason to work on Vita rather than on iOS could be a tough prospect (the controls might help). Perhaps there's also a third way, which creates a whole new business model, or a middle way, combining aspects of both of the above.
Of course, in the short term, a price cut would help a lot - but if Sony is really learning anything from what's happening here, it must be learning that Vita's flaw isn't just a high price point (because it's really not that high by historic standards). It's a basic problem with the whole business model; a flaw in the reasoning that created the Vita and the assumptions which placed it on the market. Sony believed that the old model of doing business in handheld consoles was still in good enough shape to sustain Vita. It was wrong. Now it has to take its newfound wisdom and some of those chastening lessons it's learned, and show us all that it has the bravery and the boldness required to turn this boat around - before it sinks.