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Salvaging Sony

10 Years Ago This Month: The beginning of a long and costly PS3 course correction, and ESA founder Doug Lowenstein singes bridges on his way out the door

The games industry moves pretty fast, and there's a tendency for all involved to look constantly to what's next without so much worrying about what came before. That said, even an industry so entrenched in the now can learn from its past. So to refresh our collective memory and perhaps offer some perspective on our field's history, GamesIndustry.biz runs this monthly feature highlighting happenings in gaming from exactly a decade ago.

PS3 begins the turnaround

Sony sold more than 80 million PlayStation 3s over the course of the system's life. It might not have outsold its phenomenally successful predecessors, but the platform obviously wasn't a failure. However, that wasn't quite so obvious in its early days. When the PS3 launched in the US and Japan in November of 2006, much of the hype for the system was overshadowed by concerns about its exorbitant price and the comparatively huge anticipation for the Nintendo Wii, which arrived in the US the following week at half the price of the entry-level PS3, with Wii Sports packed in.

It didn't help that the Wii was constantly sold out while PS3s often seemed readily available. Sony suggested two reasons for that. First, it dismissed the Wii as an actual competitor, saying the cheaper, less powerful system was merely an "impulse buy," or that it was a simple games console whereas the PS3 was a "digital hub." Furthermore, the company suggested that any discrepancy of availability was due to Sony resupplying retailers effectively. Nintendo balked at the notion, noting that it was shipping 500,000 Wiis a month to the US, while Sony had said it was providing the country with 100,000 PS3s each month.

Even Sony's partners were throwing it under the bus, as Electronic Arts told investors it was disappointed by the PS3's software attach rate over the holiday season. That was less than a week after the publisher admitted it missed the boat on Wii and DS and promised investors it would ramp up support for those platforms. The negativity surrounding the system was such that a Phil Harrison on-stage interview at the DICE Summit in Las Vegas was less a summary of the company's strategy and vision for the future than a point-by-point defense of PS3 criticisms.

So how did Sony turn it around? Very slowly, and with tremendous pain. The PS3 hadn't yet launched in Europe, which had been a key region for the company's previous consoles, and anticipation for the system was still through the roof despite the negative headlines and outrageous prices.

Sony understood that the price was still a key problem, but it was already selling the PS3 at a loss. In order make a price cut for the finished product viable, it would need to cut the price of the components. First, it left the PS2 "Emotion Engine" chip out of the European PS3, eliminating the system's hardware-based backward compatibility. Sony would rely on software-based emulation instead, supporting a limited range of titles initially and expanding it over time. It also targeted the oft-touted Cell processor as a candidate for savings, acknowledging that while it had invested billions in the creation of the chip, advances in technology and the rise of specialist chip producers in the field would allow Sony to first consider outsourcing production of cheaper versions of the Cell, and later develop future consoles without pricey custom chips at all.

Sony execs were publicly acknowledging that a price cut for the system was already in the works, saying such a move was part of a plan to have the games division turning a profit again by the end of its next fiscal year. But as noted above, the turn-around was slow and painful. Sony's plan for a quick return to profitability failed, as the gaming division lost money the following year. And the year after that. And the one after that.

Lowenstein exits in style

Most people who worked terrible minimum wage jobs as kids are probably familiar with the idea of making a spectacular exit, quitting the job with bridge-burning aplomb and striding confidently out the front door as management scrambles to literally and/or figuratively clean up the aftermath. For most of us, the concept was something we idly considered while grinding through menial tasks on the clock, or perhaps whispered anecdotes that one employee knew another employee who effectively resigned by peeing in the fry vat. It was just talk. But Entertainment Software Association founder and original president Doug Lowenstein was not just talk, and on his way out the door a decade ago, it was his turn to (metaphorically, I cannot stress this enough) pee in the fry vat.

Lowenstein's departure had been announced the previous December, but he agreed to deliver a sort of outgoing address at the DICE Summit in early February, and he used it to give the industry a piece of his mind. In particular, he bemoaned a political apathy within the industry, as evidenced by the lack of participation in the ESA's Video Game Voters Network.

"I'm sick and tired of people in this industry sitting on their hands and waiting for others to do the hard work," Lowenstein chided the audience. "What is the problem? You cannot expect this industry to grow and prosper if you are not willing to put the time and effort into it."

He went on to lambaste an immature games press, and took a thinly veiled swipe at Rockstar Games and Take-Two, whose Grand Theft Auto series had created no shortage of headaches for Lowenstein and the ESA as they tried to polish the industry's image to the outside world.

Lowenstein referenced "publishers and developers who make controversial content, and then cut and run when it comes time to defend creative decisions," saying, "Nothing annoys me more. If you want to be controversial, fine - that's great. But damn it, don't duck and cover when the shit hits the fan."

As one might expect, Lowenstein didn't stick around the game industry after that, choosing instead to lead a private equity trade association and then a consulting service for non-profits. Still, there didn't appear to be much in the way of hard feelings; Lowenstein was back at DICE in 2010 to receive a Lifetime Achievement Award for his contributions to the industry.

Briefly...

-After Capcom shut down Okami developer Clover Games, Atsushi Inaba, Shinji Mikami, and Hideki Kamiya reunited to form their own studio. Originally known as Seeds, it would be better known after adopting the moniker Platinum Games.

-Happy 10th anniversary to Eidos Montreal! Its first decade saw the studio reboot both the Deus Ex and Thief franchises, and it's now at work on an Avengers-based game for Marvel.

-THQ was doing so well 10 years ago it had analysts predicting it would experience aggressive growth for years to come. Naturally, the following month would mark the end of the last profitable fiscal year THQ ever posted.

-The BBC's Watchdog program covered Xbox 360 failure rates and repair charges, prompting Microsoft to lie that there "is no systemic issue" with the hardware. After prolonged denials, Microsoft would admit to systemic issues with the hardware five months later as part of a $1 billion replacement program.

-Retailer HMV took anti-consumer policies to a whole new level, only offering PS3 preorders in a bundle that included a new PSP and two games for the handheld. A Sony spokesperson called it "a value-added incentive."

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Latest comments (4)

Ron Dippold Software/Firmware Engineer 9 months ago
It's a real testament to their hard cleanup work, their devs like Naughty Dog and Santa Monica, and the dedication of Japanese game devs in general that they were eventually able to salvage a worldwide tie with XBox 360.

The PS3 was a terribly designed package by a company at the height of its arrogance that would have completely tanked if not for the Playstation name, but they learned, and the PS4 is a real joy to work with. (And now the movie division is in the toilet.)
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Klaus Preisinger Freelance Writing 9 months ago
Sony never pumped out yearly iterations of video games the way EA, Ubisoft and Activision did. Sony was not alone in salvaging the PS3 and making it a success.

Sony movie studios do not pump out super/magic hero and talking animals movie in the way BuenaVista, Fox and Warner do. Even a good stand alone movie with a license is no substitute for the lack of a cinematic universe. The Sony movie lineup is the equivalent of a console without 3D acceleration. Imo, Sony today is facing the bigger challenge.
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Mohamad Alsharefee9 months ago
There was no point at all in talking about "Lowenstein exits in style", it didn't add anything to your article, you just highlighted the failures of another man for no reason.

Now I am thinking that there is a personal issue between you and him.
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Brendan Sinclair Senior Editor, GamesIndustry.biz9 months ago
Personal issue? Not in the least. I don't see a rare glimpse of candor from a prominent voice in the industry as a failure of any sort, either. As for why I included it, I think a lot of the things he criticized the industry for 10 years ago are still valid complaints today.
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