E3 2014: Sony's Challenges

Sony is in a good place these days by some measures. The company's Game division had revenues rise over 38 percent last year with the successful introduction of the PlayStation 4. That new console has sold over seven million units so far, making it the undisputed sales leader among the new consoles. The latest exclusive release for the PS4, InFamous: Second Son, has garnered strong sales and solid reviews.

Yet all is not rosy for Sony, despite these successes. The Game division's rise in revenue was marred by the fact that it lost $78 million overall due to the expenses associated with launching the PS4. Overall, the company is still struggling to turn a profit, and the PS Vita continues to underperform. Lately, Microsoft announced a $399 Kinect-less Xbox One, erasing the $100 price difference with the PS4 and leading some analysts to say the Xbox One will outsell the PS4 in some markets. "It's good to be the king," (as Mel Brooks said in his role as King Louis XVI in History of the World Part I) but in the games business it merely means everyone's looking to take the throne for themselves.

Sony's going to have to work hard to maintain its leadership at E3, especially with Microsoft already stealing attention with several announcements ahead of the big event. What does Sony have up its sleeve, and what are we likely to see at E3? The [a]list daily takes a look at what's in store for Sony.

The level playing field

Microsoft has announced a $399 Xbox One, which puts it even with the PS4 in price. Never before have two consoles been so similar in architecture, features and price. Yes, there are differences, but they are so minor that they are important mostly to the hardest of hardcore fans - who have probably already bought one of the two consoles. The sales battle now will come down to exclusive experiences (games, services, and original video content), compelling exclusive technologies that help create those experiences, and marketing.

Sony's challenge at E3 2014 is to show what it's got lined up in all of those areas, and how it will be better than Microsoft or any other competitor. Remember, too, that Sony sees the PlayStation product line as important to the entire company's strategy. Sony wants PlayStation (in all its forms and variations) to help drive hardware sales (such as phones and tablets) as well as drive sales of entertainment created by its music and movie divisions.

Exclusive entertainment

This is what many gamers want to hear from Sony - what exclusive games are coming, and when will they actually arrive? Some compelling titles have been shown, like The Order: 1886 and Deep Down, but we're still lacking solid ship dates for many of these titles. Some titles, like DriveClub, have already been moved out from the original ship dates, and we're likely to see more of these. Sony needs to tell gamers what exactly they can expect to be playing this summer and especially this Christmas, in order to maximize sales.

The danger is that while many titles sound great and look good in early teasers, the reality often falls short of expectations. Microsoft could end up with better exclusive games this holiday season just through a lucky break, if fewer Xbox One titles slip than PS4 titles. Yes, there will be some compelling titles like Destiny for both consoles... but when a title is available on both consoles it's not going to help sales of one console more than the other.

"PlayStation Now has been in beta testing... What exactly will be offered to consumers? How much will it cost? When can we get it? These are crucial questions, perhaps even more so than how well the technology actually works"

More than games, though, there's also the original video content that Sony has announced. We know Microsoft will have some interesting things to tell us about (like the Halo series), but so far Sony's been rather shy about details of its new shows planned for PlayStation. Is it possible they've got something that could help sell hardware? We'll know more after E3.

Exclusive technologies

It looks like Sony has an advantage here, with PlayStation Now (based on Gaikai's streaming technology) and Project Morpheus (the VR headset demonstrated at GDC). So far, though, we know very little about when Sony plans to introduce these technologies and the business models for them. PlayStation Now has been in beta testing, streaming games generated on PS3 or PS4 to a variety of devices. What exactly will be offered to consumers? How much will it cost? When can we get it? These are crucial questions, perhaps even more so than how well the technology actually works.

PlayStation Now holds great promise, not just for streaming games, but for Sony's other media interests as well. Music streaming and video streaming are the hot commodities these days, as witness the rumored $3.2 billion purchase of Beats by Apple (to get its streaming music service) and the rumored $1 billion purchase of Twitch by Google. Yet the wrong pricing or restrictions could keep this promising business from going anywhere. What will Sony announce at E3? It's possible that Sony could continue to kick this can down the road and avoid any major news, but that would be a missed opportunity. Imagine if you could play PS3 or PS2 games through your PS4 at some very reasonable price - that would instantly create some killer gaming content that could boost PS4 sales.

The PS Vita is another exclusive technology that could become a sales booster for Sony. The prospect of enhanced or remote PS4 gameplay through the PS Vita could take off with the new $199 PS Vita Slim and the right combination of marketing and great games. Certainly you should expect some focus on the PS Vita from Sony at E3. The amount of attention Sony gives to the PS Vita, its position in Sony's presentation and its presence in Sony's booth will go a long way towards telling you what Sony thinks the prospects are for the PS Vita in the year ahead.

Project Morpheus is doubtless further out, but Sony could create more interest by announcing price and availability and showing some games for the technology. It's likely this will be an expensive peripheral and thus may not gather an enormous audience, but the cool factor could be a useful marketing tool for Sony. This might even help sell PS4s, if people buy one with the idea that someday they'll get a VR headset to go with it. Again, the attention Sony gives this at E3 will tell us much about how important the device is to Sony.

The marketing strategy

Looming above all of this for Sony is the follow-up to its successful marketing strategy. Last year the theme was Greatness Awaits. Will Sony continue with this theme, expand it, or abandon it? How will Sony draw together the exclusive entertainment and technologies offered to create a strong alternative to Microsoft? Overconfidence is perhaps the greatest danger facing Sony. It's all too easy to start believing your own press releases when you are the number one selling console.

Sony's execs are a savvy group, though, and they are likely to keep the pressure up internally to do better and move forward. "Great job last year, let's do better this year" will probably be the message internally. Microsoft will be driving hard to take away Sony's top position, so Sony has to keep pressing forward strongly. And let's not forget Nintendo, which will be trying to drag some attention back to itself. The 3DS has been beating the PS Vita handily so far - can Sony change that situation this holiday?

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