Although the majority of the big announcements had been made at E3 earlier in the year, Sony still put in a significant investment for Gamescom last week, hosting a more relaxed press conference, hands-on time with new product and a handful of new announcements, most notably from Insomniac with Heroes on the Move and Resistance 3.
After the event GamesIndustry.biz spent some time with European boss Andrew House to catch up with the Sony business, to discuss how PSN Plus is beginning to take off, the build up of momentum ahead of the Move launch in September, and how online content is changing first and third-party attitudes to the business of multiplayer gaming.
Q: Sony made an effort at Gamescom this year, with a press event and various interview and hands-on opportunities. Its still an important event for the company, its still considered the event to reach trade and consumers in Europe?
Andrew House: Its absolutely one of our major events of the year. Obviously last year we took the unprecedented step of making a global announcement and that was more or less a deliberate statement. We are now for PlayStation 3 the single largest market overall. Its a very vibrant market and we wanted to pay due difference to that by giving an announcement of that scale in Europe. So yes, its a very significant event for us.
Theres also this nice aspect of the consumer show as well. Unlike E3, which I managed for many years, you have that sense of a more fundamental connection to the consumer that I think is really very positive.
Q: PSN Plus has been the big change for your online service this year - can you give us an indication of uptake and feedback of the service from consumers?
Andrew House: Im not in a position to talk specifics because its still early days. But what I would say is that subscriptions are tracking at or above where our higher expectations were. Which is a way of saying in essence that were pleased. Its interesting that theres been a more significant uptake on the annual subscriptions than there has been on the three months subscription, with the exception of Japan, but thats no surprise because almost all subscriptions work better there on a short-term basis, its a cultural function of the market.
The points Id note on reaction are that its been overwhelmingly positive from those that subscribed. I think that we need to remain hard at work on ensuring the content offering and the content flow remain strong. I have a sense that there is a second tier of PSN users that are almost ready to sign up that are in something of a wait-and-see mode because they want to see a bit more of the roadmap and how it flows out and is it meaningful to them? Which is absolutely fair enough.
The other interesting point that I would make is that weve seen an interesting and positive trend where a couple of the games within the content offering have been provided for free to subscribers and then seen an immediate up-tick in terms of their sales on PSN. Its early days yet, but its very positive. Were obviously doing more research into how the dynamics of the PlayStation Plus subscribers are going to function in the wider PlayStation Network. But what it leads me to believe is that there seems to be a try-before-you-buy and then a word of mouth factor there. Which, if it proves to be robust, is a very intriguing aspect of the model and one that we certainly hope to generate. Its one that were trying to promote with the publishing community as well - that theres a benefit to making content available to subscribers because theres a promotional aspect among that customer that then leads to improved sales in the network, which is a win-win.
Q: And are publishing partners coming around to that idea? Its something thats worked very well on PC digital services in the past.
Andrew House: As with any of these propositions weve got to validate it first and then show them some good viable data on it. Theres overall amongst publishers, certainly with European publishing partners, a good open flexibility to talk about different models and actively explore them. Theres increasing recognition that within the network space for our audience its a mistake to try and adopt a one-size-fits-all attitude. The network naturally leads you to a variety of business models. Creating multiple consumer options is the way to do that and publishers are latching on to that idea. Whether its based around their own franchises or being part of a publisher lead initiative.
Q: How do you feel about a publisher like EA making online play an extra payable component on PSN with the Online Pass for second-hand consumers? And also Activisions less-defined ideas of charging players for online play for something like Call of Duty multiplayer - theres a lot of talk about subscriptions to play online.
Andrew House: On the principle of making online portions of the game available or unlocked from the disc-based release for a fee, were broadly supportive of that. And were exploring actively the same option for our own content.
In terms of just a charge for basic online play, thats something that we have to talk about a lot more and we struggle with a little bit because we feel very vindicated and base a lot of the success of PSN today - a 70 per cent connection rate across consoles - on the fact that weve removed that major initial barrier to entry.
And that was what I was driving at with that one-size-fits-all attitude, admittedly in a more complex way, but exploring a range of different monetisation options that fit consumer needs. Thats broadly the philosophy that wed like to keep.
Q: Lets talk about Move, because its out in two months time. How are pre-orders for that, are they inline with expectations and are you hoping for a sell-out around launch?
Andrew House: We are going to do very substantial numbers. Its not that kind of offering that we just want to have the big blow-out first day launch, its very much a launch in September and then drive gradually right through the peak of Christmas Weve got a couple of big advantages, one of which is the overall sales momentum on PlayStation 3 is so strong right now that I think it becomes a much easier proposition to up-sell a new experience when youre a console with very positive momentum in the marketplace, as opposed to where sales are struggling a little bit.
The indications that weve got so far coming from retail interest, what I can say is that the numbers have just gone up and up over the course of the last three to six months ever since people have started to become aware of it. All indications are there right now that retailer interest is predicting this to be very big and very significant.
Weve got to have the right communication strategy behind this and in my view weve talked about this a lot at Gamescom. In the same way that weve hit a really nice balance in the initial content support between the social games, the games for welcoming a new audience on one hand, and a lot of that showcased in the starter pack, and then at the same time validated via good solid core gaming applications as well. That then needs to be carried through into the communications strategy. Youll already see the advertising out there thats very broad in terms of media reach and style of communication, while at the same time via digital outlets, via PSN and also making sure that we reach the early adopters, the guys who are at the top of the adoption pyramid. They are the guys that validate it and generate word-of-mouth amongst the rest of the consumer base.
Q: Sony has always had that loyal and vocal early adopter, and theyve been very valuable to the business
Andrew House: We have and I think the other very positive element that were feeling on Move is the correct decision on pricing. Its a really good value proposition, the key components in there are at or less than the price of a triple-A games release. Its a fairly easy entry, and that was very deliberate. We positioned this globally as somewhere between a platform launch and a regular peripheral release and the price was set fairly aggressively in order to drive that initial uptake and drive it quickly.
Q: Are you selling the hardware at a loss? Is it a loss-leader at that price?
Andrew House: Its tough to answer that question because its heavily dependent on currency rates and where those are. If you saw Sonys major financial announcements currencies have not been kind to the corporation overall. With the yen hitting a fifteen year high against the dollar its no secret that it makes a very challenging environment for us. Currencies excluded we are in a much, much better cost shape than we were in previous years.
Q: This week you also announced two new bundles for the PS3, and there seems to have been this impressive attitude to retail where youre regularly chopping and changing the bundles on offer, not just with software, but by increasing the size of hard-drives on the console and that creates a vibrancy on the shelves. But is there a danger of confusing consumers or alienating early adopters who see a new deal for a the same price and feel theyve been punished for being too keen?
Andrew House: To be fair what weve done very deliberately is to keep the same price points and just in essence add more value into the proposition. Theres a minor risk of consumers that bought in early saying that the new consumer is getting a better deal. But I think that is partially offset by another part of our offering which is that for those consumers that bought early I could make a case that in somewhat intangible but valuable ways that their console is of more value now than when it was launched. Blu-ray is an example, if you look at the growth in that library and the availability of Blu-ray movies thats become much more valuable now than it was in 2007 with a format war taking place. And also being part of a hugely vibrant network with a broader array of services.
What were trying to do is structure it that theres increased value for existing consumers - 3D is another example. I cannot remember any similar initiative in 20 years on consumer electronics where a company made a significant additional functionality available absolutely free of charge to everyone thats connect to their install base. The goal is to strike it so that everybody feels like theyre getting added value, and thats grown over time. For a new user people make a decision point to jump in and they are going to look at what the value proposition is for them. Theres less risk of confusion when its a communication essentially to new users.
Q: Are the new SKUs and new bundles the primary factor in the recent growth in sales of PS3?
Andrew House: Obviously the biggest single factor is being at a 299 price point on the stand alone and a 349 on the bundle. It will be interesting to start looking at our year-on-year figures when we move into the period where we're reflecting the same value, or fundamentally the same value message and seeing what impact that has. If anything, I would say that we are tacking, even on the full year-on-year, probably higher than our initial expectations. And this factor of momentum, when it starts to move in your favour, it does shift fairly significantly. The biggest factor that we've highlighted is that in a market that is down overall we are significantly up. And not just in hardware, software sales have really come through well ahead of our expectations, certainly ahead of our expectations for the first fiscal quarter that we had this year. That was really very encouraging.
Q: Moving on to 3D, there's still the perception that it's too expensive from consumers. Since we last spoke at E3 are you winning over users to the idea and interest of 3D?
Andrew House: There are several steps in the chain and what has been most encouraging for me is that we've seen significant interest in 3D games actually driven from the studios - driven from the creative arms of the studios, as opposed to some sort of headquarters driven, top-down strategy. Killzone is a good example of the guys at Guerrilla Games being actively excited and wanting to work with this technology, and the opportunities they see for it. What that says to me is that if the guys creating the experiences are excited and wanting to work with this new technology, it probably bodes well for a good sense of how the consumer is going to perceive it.
The critical thing that I would always say around 3D is that we want to manage expectations about the timeline that's involved. In my view this is a shift of the same significance as a move to high-definition. What I find encouraging and bodes well for the uptake is that, and significant for Sony overall because we've got so many touch points in the value chain, there seems to be a faster development in the 3D eco-system that perhaps was the case of the early days of high-definition. CES was bombarded with a raft of related announcements, not just TVs from us but joint ventures and broadcasters announcing 3D adoption, sports rights license holders like the PGA heading into 3D. That seems to be coalescing in my view faster than I recall it happening in previous iterations of technology.
Another thing, and it's not directly comparable to 3D games but is new with the adoption of technology, the consumer is able to pretty much now on any given Saturday go out and see 3D movies at the cinema and get a direct sense of what 3D is. That's not purely a created retail experience of why they should get excited, it's becoming part of the regular cinema going experience.
Q: Talking to third-party publishers, not just the creatives in studios but publisher bosses, they also seem keen on 3D because it's not considered a massive extra investment in the development budget for games.
Andrew House: That's really encouraging to hear that. That was part of our pitch. We were privileged of being on the forefront of 3D with the connections in Sony and we were very early in establishing a centre of excellence globally within the studios and pollinate out a technical march. But the contention right form the start, from our centre of expertise, is that this isn't a really significant investment and probably plays really good dividends in terms of return on investment. Somebody asked how much of a premium are we going to charge on 3D games, and I said "we haven't considered charging for one." Because it's not significant enough an investment to really demand that. I'm a great believer in the brand loyalty and brand differentiation you get out of it more than pays for the investment that goes up front.
Andrew House is president and CEO of Sony Computer Entertainment Europe. Interview by Matt Martin.