In part one of this interview, SCEE president and CEO Andrew House talked about the launch of PlayStation's new Video Delivery Service and the ongoing impact of Blu-ray in the PS3's value proposition.
Here, in part two of this industry-exclusive interview, he looks at the momentum of the PS3 going into the Holiday season, the shift in marketing that's helped bring that about, and the strategy behind the PSPgo on a continuing basis.
Q: With the PS3 Slim in the market, and having increased sales of the platform by 300 per cent, you'll feel you have good momentum going into what's the busiest point of the year - how have publishers been responding to the increase in installed base?
Andrew House: Just anecdotally, it's been enormously positive. People have been telling us we've reached the price point they were hoping for, and as a result we've got the wind in our sales - that the market really is there for the PS3 to command.
I think at a time when we're seeing one of the major competitors somewhat losing a sense of momentum - at least in many of the markets I've looked at - it's gratifying to see a platform that's always had a very significant share of sales go to third party publishers capture that momentum again.
The knock-on effect can only be a positive one if publishers are making up 75 per cent of the sales on a particular platform, as opposed to a much smaller share elsewhere, then that's the platform I think it's in their interests to see succeed - and I think that's the dynamic we're seeing return right now.
Q: And the major competitor you're talking about is...?
Andrew House: From data that we're starting to see, in some of the publicly-released figures, we're seeing a significant year-on-year downturn for the Wii. I think that's just a factor of this Holiday season.
Q: What do you think you'll be looking back on next year as the highlights from the next couple of months?
Andrew House: I think what I'll look back on is tied in with the launch of the new PS3. What it says to me, and what third party publishers have said to me, is that we've finally capitalised on inherent brand strength that you had in the market place - that people were ready to embrace your console and did have a long-standing affinity for the brand and offering, but it needed to be at a value proposition that people were comfortable with.
Seeing us be able to establish momentum not purely based on price, but I think with a sense of capitalising on internal brand strength, is really gratifying for me.
I'm also very proud of the marketing efforts, and the marketing position we've adopted this year - because we've been able to stake our ground out with 'The Game is Just the Start' and 'The Whole World in Your Hands'. It strikes the right balance between saying, yes, we are first and foremost a gaming company and that's at the heart of what we do - but on the other hand we are now about being a much broader entertainment company as well.
I think there's been considerable scepticism about whether you end up being neither fish nor fowl, but I think we're showing you can still remain true to the core of your gaming offering, while at the same time seamlessly introducing other services and ranges of content.
I think the final highlight for me is just really starting to see that network effect in the growth of PlayStation Network - there are really substantial numbers coming on board there. As you've heard me say before, a network adds more value the more it grows.
I think that's great for the long term validity of a platform, so I think that's really encouraging as well.
Q: You talk about marketing - I think it's fair to say that some of Sony's advertising in the past, across the corporation, has been pretty oblique at times. More recently it's more focused, with a message that's much closer to the surface.
Andrew House: I think that's a great observation - it was a move that wasn't taken on without some considerable thought. The balance is, how do you stay true to the brand heritage? I for one - as someone who's been around PlayStation for 15 years and looked with admiration at some of the earlier brand campaigns we ran in Europe - how do you remain true to that spirit?
But it was deliberately one of the most direct product- and features-based communications I think we've done - but done in a way that still felt true to PlayStation, to the consumer and the brand. That's something I think we're particularly proud of.
So yes, it's quite deliberate, and we recognised that as you move into a somewhat more mass market, maybe family-oriented, then previously and you have a device that can do so much - that has so many features and benefits - there's probably a need to be a bit more direct about that communication.
It's interesting - if you look at what our colleagues have done in the States, they came to almost exactly the same conclusion, but as is appropriate within SCE, tonally a very different route. It's much more humorous and light-hearted, which works well there - speaking as somebody who marketed there.
We've adopted an approach which is easily identifiable as coming from PlayStation, but talks pretty directly as well to the consumer. The anecdotal feedback I get is that people are responding to that.
Q: The PSPgo has been in the market now for a few months - it's come in for some criticism about things like price points, although I guess on one hand you don't want to cannibalise existing PSP SKUs, and on the other I'd be hard-pressed to find anybody who didn't think digital distribution wasn't the future of the industry... So is it a statement of intent, perhaps not designed for mass-selling at this point?
Andrew House: I think we were always fairly clear, as far back as the original announcements, that this wasn't a replacement for the current PSP-3000 offering, and that it sits alongside that and packaged media. It's additive to the business.
The early sales numbers that we've seen bear that out - I don't think there's been a huge amount of cannibalisation, and I think those sales have come in and lifted overall PSP sales.
It's clearly demonstrated that there is a consumer out there, and it's validated that proposition in moving more towards a digital download as a preferred means of getting content.
I think that it's part and parcel of the way that the industry is going to have to shift and respond as more of our content becomes available for download or digitally, and I'll get on to putting that in context in a second - but I think it just puts new demands on us in terms of how we think about the concept of merchandising, how we get people to browse, how we get people to sample.
Those are things still at a nascent stage in our industry, and there's an absolute necessity to work in tandem with our traditional retail partners in making that happen as well. Make no mistake, when you're looking at PS3 games and you're seeing the shift in the sheer size of the data that's becoming available, the packaged media business is not going away any time soon.
I think there's been an overstatement there potentially, and then a backlash to that - but I don't think we were really responsible for that overstatement, so we're not really part and parcel of the backlash, if that makes sense.
It has its place for those consumers - it comes back to offering people options, and it was the right option for us to offer.
Q: A few retailers decided not to stock it - how much real impact did that have?
Andrew House: There's been sufficient distribution for the product at retail for consumers to be able to find it where they need to - I don't think that's particularly been part of the challenge. In some senses, if the question comes down to consumer pricing, it's the same argument we've often had around PS3: If we are able to deliver something at a cheaper price, would we see a much swifter uptake in the marketplace? Quite probably.
But we're in a responsible business mould and we have to put products out there at the price that we think they're worth.
Q: And will 2010 see a greater focus on the PSPgo over the PSP-3000, or will they continue in parallel?
Andrew House: No, I think they'll continue in parallel - as long as consumers continue to embrace the existing PSP and packaged medium, then it's a pillar for our business.
Q: And when do you project the PSPgo sales will begin to overtake the PSP-3000 sales?
Andrew House: I don't think I'd hazard a guess at this point, but it may be a while.
Andrew House is president and CEO of Sony Computer Entertainment Europe. Interview by Phil Elliott.