Andrew House - Part One

The SCEE president on the PS3 Video Delivery Service, and the increasing impact of Blu-ray in entertainment

Today Sony Computer Entertainment Europe launched the Video Delivery Service for PlayStation users, with over 2000 movies available across the territories, including 800 for the UK alone.

In an industry exclusive interview, spoke to the company's president and CEO, Andrew House about the timing of the launch, what was involved in bringing it to market, and how much of an impact Blu-ray is having over time on the value proposition of the corporation's flagship PlayStation 3 console. Part two will follow next week.

Q: You're launching the Video Delivery Service today - why is now a good time to do so? Is it because it's ready now, or because you wanted to do it after the launches of the PlayStation 3 Slim and PSPgo?

Andrew House: I think it's a combination of those factors. First and foremost, clearly - if you're going to launch a sufficiently robust Video Delivery Service in Europe then that requires full support from all the Hollywood studios, but another critical component is making sure we have the right mix of local content as well.

That takes somewhat longer in terms of the range of partners that are involved, making sure those business deals are put to bed - so I think in some part we didn't want to launch the service until we had all of those components in place, and that's come together now.

Also, we felt that we were launching at a time - as it turns out, fairly correctly predicting - that with the launch of the PS3 Slim and the new price point that there would be a significant shift in momentum in the market place. It's a good time to have a more... let's say "family-friendly" price point, to be able to start to introduce services which probably have a broader appeal to the mass market than just pure videogame focus.

So I think it was a culmination of those factors that made this feel it was the right time to move ahead.

Q: How pleased are you with the content line-up at launch, and how will you look to grow it over time?

Andrew House: Well I think there's a good template there to look at with our US service, where obviously we've had the benefits of seeing their progress, and learning from what's worked there and been successful.

If you look at their content, they've grown something like 700 per cent in terms of content from launch to where it sits right now, some year and three months later - so I think we'll look to follow a similar track.

Again - it'll be a little bit more complex, because we're trying to maintain that mix between Hollywood content as well as local studio content, and also I think we'll see short form and television become part of that play as well.

But I think we're in a good spot - I think we have something like 2000 movies available at launch, which is a pretty substantial library. Break that down to a per-country basis and there's around 800 films available for the UK, for example.

So we're starting out with a really strong offering - there's plenty there to choose from, a tremendous number of current hits - and then I think we'll grow it somewhere in the region I hope of about an additional 50 movies per week. So that'll encourage return traffic, people coming back, something new for them there to check out - we're feeling fairly comfortable about the content line-up we've got, and that's led us again to this being the right time to launch.

Q: And that's a mix of more recent films, as well as classics, on a weekly basis?

Andrew House: Yes, it'll be catalogue movies as well as refreshing with newer releases.

Q: In the context of Microsoft having recently launched new film and TV content on the Xbox platform in association with Sky, do you feel it's a more difficult process to handle all the negotiations internally, as opposed to having a partner take care of it?

Andrew House: I think there's an ease of ability. What's great about Sony is that with all the different parts of the organisation working in concert more closely together we have in-built expertise on the content provision side - because we have a major studio in our portfolio of companies.

This has been working absolutely hand-in-glove with a division called Sony Media Software & Services, whose expertise is in building the business relationships necessary to secure content - as well as building the systems and back-end necessary to deliver them.

And then of course what I think - and hope - that Sony Computer Entertainment brings to the mix is the strength of the PlayStation brand and an understanding of the European consumer, a sense of what local tastes demand, and being able to package that together as a really good offering for a PlayStation consumer - a consumer that's entertainment-savvy and knows a lot about hi-def and videogames.

Q: On a European level - and not just looking at the UK and Ireland - how do you feel that the PlayStation video content now stacks up against your rivals in the entertainment space?

Andrew House: We should forget that we've always had an in-built advantage with PS3 from the start, which is the availability of Blu-ray out of the box. I've always been a big proponent of that as part of our feature set.

I think it's part of the proposition that gains value over time and I it's really important in this generation that people see more and more value being built into the console that they purchase - whether it's via the Network, additional services, the growth of the Network and the number of people with whom they can interact, or the fact that Blu-ray is there and available, and more and more Blu-ray content is becoming available regardless of the Video Delivery Service.

The key point is really to give the consumer as many options as you can. They've shown us that there's a tremendous hunger for content in standard-def, short form, long form and hi-def - but our responsibility is to make that available in the most convenient way, and the most price-competitive way, that they want to consume it.

Q: How much of an advantage for Sony is it to be able to tie this content in with the PSP for users on the go?

Andrew House: I think it's a huge differentiator, because it puts us in a spot where we really are the only company I can see out there that's giving a really robust living room-based hi-def solution, but there is also an option - seamlessly - to bring that across to a portable device, and one that's really well set-up for video- and long form content-viewing in standard definition.

So yes - it's a big differentiator for us, it's a unique place that we're able to offer in the market place.

Q: How much impression do you feel Blu-ray has had on PS3 sales to-date, now it's been the standard next-gen video format for some time?

Andrew House: I think that clearly the mass market DVD penetration is going to take some time to reach, but the signs are already emerging. If you look at some of the releases of content which you'd particularly say is going to appeal to PS3 users - Transformers, for example - those kinds of releases are really over-indexing in terms of the percentage of packaged media sales that are going to Blu-ray as opposed to DVD. In some cases they're really surprising.

For those movies it's really starting to be a substantial piece [reports place first two weeks for Transformers at around 22 per cent on average market share for Blu-ray] and I think that's saying that PS3 is starting to drive Blu-ray amongst an early adopter entertainment audience - not just a gaming audience.

That reinforces, for us, the strength of the PlayStation 3 proposition, and I think we're starting to get to the point where there's a virtuous circle that's being built - I think that gives PS3 significant momentum for the next year onwards.

I think what's been essential though is that we've always wanted to get to a point where that value proposition is one that can be embraced by a much wider audience, and clearly with something like a 300 per cent growth of sales for PS3 since the new model was launched... clearly the consumers are voting with their feet and saying that at that price point it's a great value proposition and I'm going to buy into it.

I can't quantify for you exactly how much Blu-ray plays into that discussion, but I would bet that it's a significant part.

Andrew House is president and CEO of Sony Computer Entertainment Europe. Interview by Phil Elliott.

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