Close
Are you sure? Are you sure you want to report this comment? I understand, report it. Cancel

Fixing PlayStation Now

Fixing PlayStation Now

Fri 27 Jun 2014 3:06pm GMT / 11:06am EDT / 8:06am PDT
BusinessOnline

Sony's service is in beta, but it's encountering significant issues with its business model; here are some suggestions

Sony Computer Entertainment

Sony Computer Entertainment is a Japanese videogame company specialising in a variety of areas in the...

playstation.com

Sony has made its PlayStation Now streaming game service an important part of its offerings for this year and into the future, featuring it during the company's E3 presentation. The service has the potential to allow any PlayStation game (from the PS1 through the PS4) to stream to most any device - for that matter, games or other content from any PC or other device could also be streamed. Sony paid $357 million for Gaikai for this capability, and has doubtless spent many more millions in continuing to develop the technology in order to bring PlayStation games to a wide audience. The overall investment must be in the neighborhood of half a billion dollars, when you consider the servers, network investments, and development of hardware to be able to handle serving up thousands (and eventually, hundreds of thousands or millions) of game streams.

Yet Sony is apparently on the verge of losing that investment, if it continues on its current path - not because the technology isn't working (apparently it does work pretty well, with some caveats), but because of the business model. The service is currently in beta, and recently Sony made a significant change to the beta by adding prices to the games, and requiring beta testers to start paying for trying out these streaming games.

Early reports from the beta say that the technology is functioning fairly well, as long as you have a high enough speed Internet connection. Sony is still recommending that users employ a wired connection instead of WiFi if possible, and keep others on the same Internet connection from using data-heavy applications.

The real problem for PlayStation Now is the business model that's emerging. According to beta testers, the cost of games is ridiculous. Prices to rent a title are greater than the cost to buy the game, especially if the game is a few years old. For example, buying Deus Ex: Human Revolution or Final Fantasy XIII-2 on the PlayStation Store will cost $20, while renting it on PS Now for 90 days will cost $30. Sony stated in an email to PlayStation Now beta users that "these prices are ultimately decided on by the participating developers and publishers."

A la carte rental has a terrific advantage for Sony: It's easy to implement. Let the publishers set the prices for the software, and all Sony has to do is take its cut and pass the rest along to the publisher. This minimizes the negotiations needed to get publishers to offer their games up on the platform.

Why is Sony doing PlayStation Now? What's the end goal? Clearly the possibility of selling more hardware because of the attraction of PlayStation games is important. Sony's TV line has been struggling for years, and adding PlayStation games to the TV line seems like a great unique feature to add. Bringing old PlayStation games to the PS4 or the PS Vita is also a potential sales booster.

Sony could also bring PlayStation Now to non-Sony devices; most any PC or mobile device or console could handle it, assuming there's a controller of some kind handy and sufficient bandwidth. A revenue stream from PlayStation games playing on millions of devices could be quite impressive.

"A la carte pricing is a great way to make PlayStation Now another footnote in the history of technology"

The Achilles' heel for PlayStation Now appears to be the business model, not the technology. Sony could easily kill this service before it even gets traction, merely by pricing it out of reasonability (and it makes no sense to pay more for a rental than for owning the game outright). A la carte pricing is a great way to make PlayStation Now another footnote in the history of technology.

Why has Netflix been growing rapidly, far faster than Apple's iTunes movies? While Netflix doesn't have the latest movies (mostly), it's one simple price monthly for whatever you want to watch. Sure, if you want the newest movie you'll have to rent it from Amazon or Apple or Google or your cable provider. But if you just want to watch a movie or a TV show, Netflix probably has something you'll enjoy. And you don't have to whip out your credit card to get it, once you've already subscribed.

Some suggested business models that would make more sense for Sony to consider:

The Subscription

Simple and straightforward, this is what most consumers probably expect from PlayStation Now. Pay a monthly fee of $9.95 or $14.95 (perhaps with a discount if I buy a year in advance), and play whatever games are provided by the service as often as you like. Perhaps this could be an add-on to PlayStation Plus (PlayStation Double Plus?), or if you really want to make the service popular, bundle it right into PlayStation Plus. You could always do that for a limited time, or perhaps with partial features, just to get the service going.

Subscription plus Premium

Perhaps you could charge a fee for premium games, like the latest PlayStation 4 games. Give people a large number of games that can be played for free, then they won't be as bothered by games they have to pay for.

The Rotating Menu

Your subscription provides you with a set of games to play every month, and some part of that list changes every month. Or perhaps, like PlayStation Plus, there are some games you get for free each month, but those switch out every month for new ones.

Sony PS Now with Premium Store

Offer the subscription for games Sony owns, and give publishers a place to put games up for rental. Sony could let publishers set prices, but far better would be setting the prices to a uniform low cost, much as Apple did with the iTunes Store (over the outraged howls of music publishers). As long as Sony can keep a good selection of games available, the subscription price would represent a good value. Customers should be able to avoid the subscription and just use PlayStation Now for premium games if they choose.

Advertising Supported

One way to keep content available while still providing a revenue stream for the publishers is to use advertising support. Find a way to let players watch a video in return for an hour of game time, or perhaps put some branding on a free game stream. Publishers might well want to support a free stream of a game in order to generate awareness and interest and sales, even if for a limited time. This may be advertising or sponsorship.

Summary

Sony should keep in mind some key features for PlayStation Now. It should be possible to keep your save games and other data as long as you maintain a subscription, and transfer that information if you buy a game. Sony should look at PS Now both as a service in itself and as a way to sell more games.

There's still time for Sony to fix the business model. Everything is listed as tentative, and there's some time before Sony fixes all the technical issues. But it's important to get out in front of the issue right now, when a bad image is beginning to be attached to PlayStation Now. Sony should not let this early misstep color impressions of the service going forward. Charging beta customers outrageous prices should stop, and swiftly, along with some statements from Sony discussing some more reasonable business models that the company is considering. If not, fixing the technical issues of PlayStation Now won't matter, because Sony will find itself with very few customers.

Republished from the [a]list daily. For more, read the [a]list daily and subscribe to the newsletter to get the latest in game and entertainment marketing news, cool videos, incisive opinions, exclusive interviews and industry data.

5 Comments

Jakub Mikyska
CEO

196 1,036 5.3
Popular Comment
It is quite simple. Publishers are not "allowed" to release digital versions of their games for lower price, or with better features, than the disc-based retail versions. That's how the relationship with retailers work and it will take a long time before retailer chains are no longer needed.

That is the reason why digital games cost more and is perhaps the reason why PlayStation Now games will cost more than buying them in physical form. I don't think Sony has the power to change that... PS Store isn't to games what iTunes is to music. If they regulate the prices, they won't get AAA games in there. If they won't regulate the prices, publishers will put some older games there, for ridiculous prices, so that they keep good relationship with both Sony and retailers. A vicious circle, really.

They need to do something ridiculous with PlayStatoin Now. It will be either a game-changer, or a gimmick.

Posted:25 days ago

#1

Anastasios Hatzis
Community Manager

9 12 1.3
Popular Comment
The technology behind streaming games is very different from streaming video and so is the cost structure. I've made some calculations. With-out knowing what kind of hardware Sony exactly uses, I have tried to find configurations comparable to PS3 in CPU/GPU and RAM. I also used the bandwidth requirements for calculating the traffic (although traffic is only a small part here).

Based on my assumptions, the costs to only host a single game session (including capable hardware in the cloud, storage, and traffic) is somewhere between 50 and 80 US cents per hour. It doesn't even include the costs for the IP (i.e. the money for the devs and publishers) or marketing costs or profits for Sony.

Even so costs might go downhill in the next years, I'm not sure how anyone could offer a game streaming service for the same bucks as video streaming.

And as a side-note... this is exactly the reason why I think that Microsoft is selling snake-oil with their recently revived "power of the cloud" claim. If a demo shows how the cloud delivers factor 30 (!) power of an XBox One to a single player, I wonder, who is going to pay 10 or 20 bucks per hour for this experience. The next-gen consoles will hit the market before consumers can afford this scale of cloud gaming.

Edited 1 times. Last edit by Anastasios Hatzis on 27th June 2014 5:17pm

Posted:25 days ago

#2
This is a key issue. It's worse too because latency issues mean the datacenter that hosts the game must be in your own region- and therefore it's impossible to make use of quiet hours to cover peak demand elsewhere. From what I hear Sony have effectively racked up lots of PS3 circuit boards in the datacenters- so when you use the service you have to pay your share of the cost of that machine, its power consumption, its connection, its supervision, its datacenter rack-space cost and overheads on the lot. In comparison I would guess that Netflix can hang hundreds of users of a single dumb server to stream movies.

Posted:25 days ago

#3
The subs model might work, but, its highly unlikely anyone will consider paying more money for titles for a limited day stream, personally I already restrict myself from online game purchases on console due to the prices, not to mention lack of sales, I stick to amazon for consoles, but 95% of the games I buy on PC are via steam, (4.9% to other digital services like origin and gamestop and desura(origin is not by choice, I did actually buy one title before origin was called origin by choice from ea, but then they decided to force everyone to use it, so now I shun it for everything but titles I consider must haves, I vehmently dislike it, and its forced advertising for games you pay for) and 0.1% physical (for those few that never show up on digital).

I cant help but think its silly how much more it costs to buy games digitally on say my PS4, some are charging £15+ more per title on the ps store, sure it might may sense to them, and existing sales agreement's, but consumers are and never will be willing to pay more for a digital version, indeed as a general rule they're willing to pay less, far less, after-all its obvious why, your getting less, sure the cost of the box and media may be a practically negligible price (though short sited policies exploiting cheap labour costs have an effect on this), but to a consumer it represents a visceral object of value, remove that object and then charge more for the privilege produces a similar effect to wizzing in their face, certainly as far as there wallets are concerned.

Posted:24 days ago

#4

Max Brode
Videogame Consultant

11 9 0.8
I think the key to understanding Sonyís thinking on PlayStation Now, is not to look at it as a games distribution service, but as a further gaming platform next to PS4, Vita and the ageing PS3.

Sony has recently driven a strategy that is all about convergence of platforms. (So far, so original Ė who hasn't!) But with CrossBuy and CrossSaves they are the only platform holder that has somewhat delivered on the idea of giving you choice of where to play a piece of content you have bought. Looking at PlayStation Now in isolation it looks like OnLive Remastered, which canít help but raise more eyebrows than a Botox party. Looking at it as an addition to the existing eco system it suddenly makes more sense. Games you started on your PS4 at home can be continued on your parentís netbook when you visit over the weekend; instead of making your mate buy a PS4, you can bring a pair of DualShocks and play FIFA at his home simply by logging into your account; continue your game on the television in the bedroom whilst the main screen in the living room is occupied.

None of these examples require a new business model to draw in new customers. As a matter of fact, most of us who read this site regularly are probably already signed up to it by virtue of having PSN accounts. That customers in the Beta are not benefiting from deep integration just yet isn't necessarily surprising. Rentals are just an additional option, and it doesn't truly matter whether they are priced to undercut buying the games outright. Anyone who intends to complete a 100+ hour game at point of purchase will not pick the rental option, but it may make sense for 10 hour shooter rented over a free weekend.

The big question is what Sony plans for the people who are not likely to pick up a PS4 any time soon. At what price can you sell gaming to mid core television owners and how do you get DualShocks into their hands? Can you create a Breaking Bad moment to get people to sign up? Can you find a good content / pricing model compromise that will keep PlayStation Now relevant to anyone who has signed up?

Posted:22 days ago

#5

Login or register to post

Take part in the GamesIndustry community

Register now