Sony's steep learning process

Can the firm grasp how much the market has changed - in time to save the foundering Vita?

Every company in the console business - publisher, developer, platform holder - is on a steep learning curve right now, but none more so than Sony. Since the departure of PlayStation founding father Ken Kutaragi, whose shadow had loomed large over the organisation for many years, Sony's performance has been far from impeccable - indeed, financially, it's often verged on the disastrous - but nobody can deny that the company is learning and adapting.

"PS3 hasn't done badly; it hasn't crashed and burned, as some feared at the outset; but by god, it's had to endure a rough few years"

Of course, Kutaragi left the company in a position that required a hell of a lot of learning. PlayStation 3's launch was the culmination of a development cycle that was suffused with extraordinary hubris. The console was birthed from an almost wilful ignorance of the realities of the games market, with Kutaragi and those around him choosing to believe that Sony's market-dominating form with the PlayStation 2 ensured that no matter what they did with the PS3 - its extravagant price point, its alien architecture - the company would continue to rule supreme.

Well, it didn't. In the end, the new management who took over after Kutaragi's departure have managed to turn the generation around to a degree - which is no mean feat, especially given the awful business conditions for Japanese export companies - but even at that, Sony has had a miserable generation in the home console market. It's watched Nintendo run away with the kind of sales the PS2 enjoyed once upon a time, while it carves up the rest of the market with Microsoft - an also-ran last time around, yet now easily a match for Sony. PS3 hasn't done badly; it hasn't crashed and burned, as some feared at the outset; but by god, it's had to endure a rough few years in order to ensure a "joint-second" market position, and that's no fun for the former all-conquering champion.

In that time, though, the company really has been learning. It's learned that off-the-shelf components and technologies may limit your engineers' imaginations, but they keep your price tags low and your developers happy, since they don't have to reinvent the wheel every time you launch a console. It's learned that if it's going to outpace Microsoft, online services will be a big part of things - and it's notable that while Sony's core online gaming experience may not rival Microsoft just yet (not shipping with a headset still feels like a crucial mis-step to me in this regard), it's streets ahead of its competitor in terms of its digital content offerings. PlayStation Plus has matured into an excellent and high-value service, in content terms, while the company's investments into developers like thatgamecompany have also paid rich dividends.

The problem is, there's still more to learn. There's more to learn every day, because the industry is changing faster than ever - and even if Sony today is clearly a chastened and vastly wiser company than the Sony of six years ago, I'm not sure if the company is learning fast enough.

PlayStation Vita, of course, is the canary in the coalmine. It's the first Sony console to be created and launched in the post-Kutaragi era, by the team that had supposedly learned from his mistakes. It does a lot of things right. It's packed with technologies that are pretty developer-friendly, it's got a host of flexible, interesting control systems, and it's even relatively cheap for a new piece of hardware. It supports the idea of launching cheaper software that has been forced on the industry by the uptick in mobile games. It takes all the great hardware design that runs deep in Sony's DNA and combines it with a degree of understanding of the market that was painfully lacking from the PS3's launch.

"Third parties are agnostic, and in some ways, they recognise that Apple and Google are better platform holders for them"

It's also doing genuinely miserably in the market. I wish that wasn't true, because the console is a joy to hold and plays host to a handful of genuinely great games, but it's unavoidable - the sales figures are extremely weak, even in Japan, which was the bright point on the global map of PSP sales.

This week, Shuhei Yoshida told Gamasutra that he was disappointed and surprised at the poor support for the system from third parties. "In retrospect," he said, "there are so many options for publishers now that we cannot take it for granted that our new platform would be supported by third parties, like [it would have been] many years ago."

Learning. Learning fast, even, and let's not underestimate what a difficult recognition this is for a company like Sony - which formerly had every major third-party publisher and studio hanging from its every word. It must be even tougher for a man in Yoshida's position; as Worldwide Studios president, he would have regular contact with many of the third parties who now seem to have hung the Vita out to dry. All the same, he understands. He knows that the question for publishers is no longer "how much support are you giving the 3DS, and how much the Vita?". These companies are asking themselves whether the dedicated handheld market (okay, the non-Nintendo dedicated handheld market) has any future at all in a world that's filled with iPhones, Galaxy S3 phones, iPads, Nexus 7 and Kindle Fire tablets.

So now Sony knows new things. It knows that it's not just facing the prospect of iOS and Android stealing a slice of market - it's facing a genuinely existential threat to the whole handheld console business. It may even recognise that the same threat, a little further off, applies to the console business too, and it knows that third-party companies may no longer be natural allies. Third parties are agnostic, and in some ways, they recognise that Apple and Google are better platform holders for them than the much more hands-on Sony, Nintendo and Microsoft ever were.

There's an equation in all of this which we often ignore, but which bears repeating. We talk about the idea of a sector of the market - handhelds, in this instance - losing support, and sometimes we forget the calculation that underlies that. As a developer or publisher, you look at the size of your addressable market, and the kind of product you're making, and you figure out what your sales might be. If your addressable market - the installed base of a platform - falls to a certain point, the equation no longer makes sense, and you stop supporting that platform.

"Sony believed that the old model of doing business in handheld consoles was still in good enough shape to sustain Vita. It was wrong"

That number isn't zero. It's actually very high, because games are expensive to develop, and you need to sell a lot of them to break even - and you'll only ever sell to a small percentage of the installed base. So for some developers and publishers, a console with a 20 million installed base might be worth a punt, but a console with a 15 million installed base is of no commercial interest whatsoever (think of how many publishers bailed on the GameCube, a console with around 20 million installed base). In other words, you could have a system that sells tens of millions of units and still doesn't develop much third party support, because the equation never spits out an answer that makes commercial sense.

How does Sony extricate itself from this situation? There are various approaches - none of them foolproof, and none of them without extraordinary costs and risks, but any of them better than staying still and hoping the good old days magically come back. Sony could follow Nintendo's strategy, focusing its efforts on first-party and second-party development, building a platform for people who want to play amazing Sony exclusives and letting third parties come along for the ride as they see fit. Alternatively, it could go the opposite direction and follow Apple's lead, opening up a platform that anyone can develop for cheaply and release on with the minimum of fuss (with Sony's gatekeeping duties reduced to keeping an eye on technical quality and safety). That could work, although giving developers a distinct reason to work on Vita rather than on iOS could be a tough prospect (the controls might help). Perhaps there's also a third way, which creates a whole new business model, or a middle way, combining aspects of both of the above.

Of course, in the short term, a price cut would help a lot - but if Sony is really learning anything from what's happening here, it must be learning that Vita's flaw isn't just a high price point (because it's really not that high by historic standards). It's a basic problem with the whole business model; a flaw in the reasoning that created the Vita and the assumptions which placed it on the market. Sony believed that the old model of doing business in handheld consoles was still in good enough shape to sustain Vita. It was wrong. Now it has to take its newfound wisdom and some of those chastening lessons it's learned, and show us all that it has the bravery and the boldness required to turn this boat around - before it sinks.

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Latest comments (23)

To be entirely honest, when Vita's details were announced I was pretty surprised, I could understand the PSP's sequel being a console mobile phone, but a old fashioned handheld console surprised me, gone are the days where those into portable gaming where restricted to Gameboy's and later PSP's, every year iphone's get more powerful, more capable and have better graphics, and so do Samsung's Androids competitor's even Nokia's Windows Phones are getting more powerful year on year.

The only way the Vita could have been a real success as a long-term handheld console would have been to make it with really powerful hardware, hardware that would allow it to carry on competitiveness for at least a 5+ year life cycle which would have made it prohibitively expensive to produce or sell, instead they made it only a little more powerful then the last iphone and didn't include any smartphone abilities, they even halved the ram just to make it cheaper to produce and so even less appealing from a developers and consumers point of view, you need to attract developers to a new platform not merely expect them to show up regardless.

Vita really should have been the first of a series of Sony PlayStation phones, indeed where they to have made a good handheld console with decent capacity and good spread of smartphone features (camera's etc) then I may well have swapped out my iphone for Vita due to its superior game focus, these phones should receive regular updates similar to the iphones and androids of this world, and may have gained a major following for sony, but vita is instead well it seems like sony's wishful thinking, making a new PSP, oblivious to all the changes in handheld gaming options and instead of a proper play station phone they made some weak sub-par version for mobiles which at least didnt have the PlayStation name attached but is nothing but a half hearted effort in the direction the future lies, if Sony innovated and instead came up with a proper Playstation Vita Phone instead of vita the handheld console, they may well have carved them selves out a large customer base, now whenever they do finally get around to it they'll have to struggle to gain any traction, and Vita is going to be a hard sell indeed to the smartphone wielding generation Sony seem to be slower to adapt then Microsoft, you cant really compare Nintendo directly as they frankly do they're own thing with little regard for either MS, Sony or market patterns, but it seems to work for them nevertheless.

Sony's aversion to risk is doing them more harm then good, they're never properly positioning their company or products in time to wave the crest of public interest or technological innovation, they tend to be the last to innovate and the most conservative, not talking about hardware processor's here, I don't think the whole Cell situation helped them this generation, it made developing for PS3 more difficult then the other options, an example would be it took them being hacked quite thoroughly before they finally paid decent attention to their own online offerings, and only due to the fluke interest this generated after its removal did Sony finally give it the attention it deserved, making it a genuine rival of sorts for Microsoft's offering, in truth such offerings should have existed from release, Hopefully they'll learn in the future, but I'll hold of judgement until I see it, for the reasons of fairplay its worth noting as a consumer I own both an Xbox, a PS2, a Xbox360 and a PS3 all by this point for quite some time, so I have no particular bias console wise, and plan on owning both a PS4 and a Xbox(whatever) when they come out so it's in my best interests for both companies to succeed. I have a Gameboy Advance SP NES Edition Styled somewhere (styled like an old NES controller) full of old NES games, which in truth I bought to save me from having to dig out my old NES whenever I got nostalgic, and otherwise rarely played it, I always meant to buy a PSP but never got around to it, I am planning to buy a Vita, mostly because of Dust 514, at some point, I also own an iPhone 4S and an iphone 3g somewhere, and prior to that had a HTC XDA Executive Running Windows Phone 5/6 for a few years, I kept the xda for so long as no one had produced anything more powerful even my first iphone was a step down in many ways, its a pity the software was so buggy and non intuitive, I don't do much handheld gaming truth be told, but I like the option.

Edited 4 times. Last edit by Alexander McConnell on 5th October 2012 9:46am

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Bruce Everiss Marketing Consultant 9 years ago
The proprietary memory cards are a real killer. Sony are ripping off their public and their public know it. You just cannot treat customers like this.

Other than that why carry round yet another device when a device most people already carry, the smartphone, already does the job and in many ways does it better? There are 122,566 active games on the Apple App Store, something the Vita has no answer to.
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Jamie Read 3D Artist, Neon Play Ltd9 years ago
The slightly too high price is one factor I haven't yet purchased a Vita, but the real kick in the teeth for me is the memory cards. Do I want to spend around £220+ for a Wi-Fi Vita, game and small memory card, knowing that within about six months I would have to shell out again for a another/bigger one? If Sony was to release a Vita v1.1 with a slightly lower retail price and Micro-SD compatibility, I would get one right away.
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Show all comments (23)
I have a vita and 3DS along with many games and play it every day, but admittedly I'm the only one in my circle of friends - even though many are gamers. There are some really cool games that I would never be able to play on a touchscreen, but the real killer-app is still missing. Sony just doesn't quite have the same kind of games nintendo does. And I'm not talking about IP and marketability only, just about core gameplay quality. Nintendos IPs are successful because their games are insanely fun, while many of Sony's heavy hitters are heavily relying on presentation and narrative, something that doesn't shine as much on a handheld as it does on the big screen.

Edited 1 times. Last edit by Felix Leyendecker on 5th October 2012 10:26am

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Mihai Cozma Indie Games Developer 9 years ago
@Bruce Everiss I agree with you on most points, but how many of those games on App Store compare in quality/size/depth with the ones on a specialized console like Vita?

Edited 1 times. Last edit by Mihai Cozma on 5th October 2012 4:27pm

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Bill Garrison Studying Student, DigiPen Institute of Technology9 years ago
Incidentally, has anyone heard even a peep from Ken Kutaragi since he retired from Sony? As flawed and affected by hubris as he was in the end, its hard to deny how his vision of Playstation transformed the industry. What exactly does he think when people say Sony is disorganized, overprices its products, and so forth? He must have some interesting views at least.
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Andrew Poes UX Developer / Designer, Technicolor9 years ago
As someone who got really have into cell phone gaming – even before the iPhone (j2ME) I found the Vita to be exactly what I was looking for. Before the Vita, I was skeptical to get a PSP because it was so late into the lifecycle. The Vita's development has been slow but it has some solid content that makes it an adversary in the mobile gaming space. Specifically sound shapes has been one of the most amazing mobile game experiences I've had.

As someone who loves mobile gaming, the Vita gives me everything the iPhone can't, dedicated buttons and solid titles. iPhone game still lack the panache of console titles.

I'm not saying iPhone gaming is bad – I think its all dependent on what you want out of gaming. If small mobile experiences are fine for you, stick with the iPhone, but fore deeper more involved titles, get a Vita. Playing MGS3 for the first time on a Vita was really fun! I've never owned a console so being able to access all this content is awesome.

Don't count it out!
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Mbuso Radebe Producer, Electronic Arts9 years ago
@Alexander McConnell - Reports of Sony halving the RAM were not true.

I agree with the comments that the expensive proprietary memory cards are a real deterrent to potential customers.

Great article as usual Rob!

Edited 1 times. Last edit by Mbuso Radebe on 5th October 2012 5:14pm

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Tom Keresztes Programmer 9 years ago
Incidentally, has anyone heard even a peep from Ken Kutaragi since he retired from Sony? As flawed and affected by hubris as he was in the end, its hard to deny how his vision of Playstation transformed the industry. What exactly does he think when people say Sony is disorganized, overprices its products, and so forth? He must have some interesting views at least.
Perhaps it was not his fault that Microsoft came up with a better product, brought it on the market for a lower price.
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Craig Page El Presidente, Awesome Enterprises9 years ago
You know how I know Vita is going to fail horribly? Because I buy all of the losing hardware from every generation. I had a few Macs back in the 1990s, an HD DVD add on for my xbox 360, a Windows Phone 7, and a couple months ago a wifi Vita.

It's not hard to see why it will fail either, the people running Sony are clueless and the games for Vita are mostly awful. They've got $20,000,000,000 in the bank, and a handheld console with no games. Isn't the obvious solution to spend some of that money buying or creating a new games studio to shovel out Vita exclusives? If they could buy all of Electronic Arts for just $4,105,689,792 then I'm sure they could also find something decent for under $500,000,000.
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Very few, mate. But I guess you are new here. No use in talking to Bruce. ;)

Edited 1 times. Last edit by Laurens Bruins on 5th October 2012 6:04pm

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Paul Jace Merchandiser 9 years ago
We won't see the full extent of Sony's learned lessons until the launch of the PS4.
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Caleb Hale Journalist 9 years ago
Sony is actually a really good gaming company lost within a giant electronics company. Over the PlayStation 2 and 3 years it's developed a stable of exclusive gaming franchises that at least match Nintendo in length and quality. Anyone who tries a PS Vita is going to want one, they just might not get over that hump of the start-up price, a big part of which is the proprietary memory sticks that have been mentioned in this thread. The Assassin's Creed III: Liberation bundle may yet get me over that hump.
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Bill Garrison Studying Student, DigiPen Institute of Technology9 years ago
Perhaps it was not his fault that Microsoft came up with a better product, brought it on the market for a lower price.
Maybe, yeah. Its so strange to me that he has this sort of omniscient status in gamer culture, but it seems like we've never heard him interviewed or anything. Even right after the PS3 launched, it seemed like Sony instantly switched over to Phil Harrison. I mean, talk about an interesting retrospective. A lot of the best gaming articles out there are about developers unpacking what they did right and wrong with game titles. It seems like you could do a really amazing piece picking the minds of the people who planned the PS3.
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I just wanted a PS3 on the go...
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Tony Johns9 years ago
A region free system is good, Perhaps the ONLY thing SONY got right on PS3 launch.

As for the PS Vita, I guess that a memory card with a game on it that only works for just one PS Vita was the killer that saw many people ditch the platform. SONY need to fix this before it sinks the Vita.

A console or handheld should be user friendly with the consumer interest in mind in order to generate sales.

The more that companies try to influence their decisions based on copyright protection and DRM then they are literately killing their own market.
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Andy Samson QA Supervisor, Digital Media Exchange9 years ago
The primary reason the Vita failed was it followed the same recipe for failure used on SEGA's handhelds, more powerful, less affordable. Those memory card prices alone are ludicrous, I could buy at least 4 32 GB SD HC cards for 1 of Vita's 32 GB cards.

SONY Should have learned from PS vs Saturn wherein you do not need to be "2 times more powerful", just look prettier by being significantly better.

Since the Vita lacked true Backwards Compatibility with PSP games (UMD), they could have just made a "PSP 1.5" (not the Go!) and called it the Vita which uses game carts, has dual analog that's as powerful as the 3DS and very price competitive but they didn't. It doesn't have a 3D screen but all that power will be used to display visuals on a single OLED touch screen and the graphics would still look so much better than the previous generation and significantly better than a 3DS game with 3D off. This system could have launched with a more affordable 199 USD price tag and still use the previous memory cards.
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Andrew Goodchild Studying development, Train2Game9 years ago
The thing I find really crazy about the memory cards is that with the PS3, they let you upgrade the hdd with a standard 2.5" drive. They acknowledged the importance of the need of affordable storage. This has always been a sticking point on Xbox 360. Even recent comments suggest they see being able to swap the hdd with a standard bigger drive as important.
So why acknowledge this on one system, and then ignore it on Vita?
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Greg Wilcox Creator, Destroy All Fanboys! 9 years ago
Hmmm... not sure if a lot of you know this, but the latest Vita update (1.81) allows for playing of PSP games on the handheld. Granted, those games have to be on PSN already and I didn't check to see if PSP demos were part of that update, but yeah, the Vita just got a few more games (old games, but there's backwards backwards compatibility for you)...

As I noted elsewhere, it seems that there are a bunch of Vita games on the way that are looking quite good and at least one current release (EDF 3 Portable) that justifies its price point by the sheer amount of content in the game for the price point.

That said, Sony has made many mistakes in the past in the gaming division that all seem to be catching up with them this cycle. They should have at the very LEAST worked out that people HATE paying too much for storage devices (PERIOD) even if they're proprietary in nature. I have an 8GB card for my Vita and as I don't download anything but demos (some of which I delete if I don't like them), I still have room on it. Still, it WOULD have been spectacular to use a Memory Stick in the darn thing, as I have a few here I only use when I whip out one of my PSP's to play something NOT on PSN...
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I think it was mentioned somewhere that one of the reasons for proprietary memory cards was piracy protection. Not sure if it actually works like that.
I don't think the price of memory cards is a big issue because you basically get them for free in bundles, on amazon for example. It's only an issue if you want a big one to download lots of digital titles.
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Andy Samson QA Supervisor, Digital Media Exchange9 years ago
Vita backwards compatibility only works if the games you purchased for the PSP were digital versions. You're basically out of luck if your games are UMDs (which most people have), that's why I specified "true BC" . With Nintendo's handhelds, you don't need to repurchase your DS games, the same game card from the old system works on the 3DS.

It's been a standard on Nintendo's handhelds to be at least BC with the previous generation. SONY wasn't planing ahead when they thought of using optical media for a handheld gaming system. They thought they would have the same victory like when it was with the N64(cart) vs PS (CD). Optical media for portable devices died with the walkman.

As for the new memory cards being anti-piracy measure, that's a lame excuse. Nintendo's using SD HC and 3DS games still have not yet been compromised. Right now SONY's pushing digital download of their digital games, the 4 GB that came with most bundles is useless and is only good for game saves and demos.
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Jim Webb Executive Editor/Community Director, E-mpire Ltd. Co.9 years ago
The real reason the Vita is failing is because it does not do enough to make PSP owners want to upgrade.

Every console transition has to validate itself to the fanbase of the previous generation. Vita has simply failed to warrant its existence over the PSP thus far.

This is due to price, stronger market competition, slow 3rd party support (I can't believe I just typed that about a Sony console) and very poor backwards compatibility. The problem is that each of those factors are incredibly difficult for Sony to fix.

Price - The Games division posted a loss last quarter and the Yen is expected to strengthen even further against western currencies.
Market competition - Nothing Sony can do about this.
3rd party support - Will not change unless Sony either cuts the price of the console or reduces their fees to 3rd parties. And money is not something they have to give away right now.
Backwards compatibility - Sony can't fix this. They can make it a little better but not to the degree necessary to appease the majority of PSP owners.
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Greg Wilcox Creator, Destroy All Fanboys! 9 years ago
Which is why I have three PSPs and a ton of UMDs here. I think one other problem here is that Sony seemed to think that one device that was more powerful than the last would replace their old handheld, but like the PSP Go, they didn't figure people who still liked their older systems would want to hang onto them because of what the Vita couldn't do. I guess they weren't looking at Nintendo and their multiple handheld owners who often pass down systems instead of trading them in. Or the small amount of folks who keep them because they have older games that they can't play by any other means (not everyone has one a Game Boy Player for the SNES of GameCube).

That said, it seems a raft of decent Vita games are coming between now and next year, but at this rate, they all need to make a profit and/or help push a few more Vitas out the door. Those memory cards need to drop in price as well, but this was the same problem some had with the PSP when it launched...
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