Sony's content platform and business strategy *spawn

[Shifty Geezer]

I am certain any attempt to switch to a fast upgrade cycle will simply result in a market crash. Development of big games simply takes too long. They depend on a stable user base. If everyone is on a 2 or 3 year upgrade cycle how will a developer know which of the 6 or 8 consoles their target customers will have in 4 years?

With forwards compatibility, supporting platforms is no different to developing for PC or Droid etc. Anyone aiming for iPad 2 now will also have their work run on iPad 3 and 4. Anyone can then look at the install base and growth to see if there'll be enough iPad 3/4s to drop support for older platforms.

I'm not saying that will happen, but this industry can change and flex to change how it does thing. the approach that worked okay for 20 years may not work in the future, and there may be another strategy that's needed. Quite a few folk seem to think the console business (which is just computer gaming) is fixed and unchangeable and wil carry on as is forever, as if market forces and people are completely static. There's more than one way to skin a cat, and there's more than one way to provide a hardware platform for people to buy for gaming on.

 

[Brad Grenz]

With forwards compatibility, supporting platforms is no different to developing for PC or Droid etc. Anyone aiming for iPad 2 now will also have their work run on iPad 3 and 4. Anyone can then look at the install base and growth to see if there'll be enough iPad 3/4s to drop support for older platforms.

And risk your 60 million dollar game looking "last gen" next to the games that targeted the newer hardware? Like I said, that model is antithetical to the advantages the console market is supposed to have and the stakes are too high to make bets on such a nebulous future. People resent being on an upgrade treadmill. People like that even if they hold out for a console to cost less than $200 they are still granted instant access to the cutting edge games. Publishers are risk adverse. You'll never get to that iBox 3 stage because the backlash will start when iBox 2 comes out.

 

[Prophecy2k]

I absolutely agree Brad Grenz.

 

[TheChefO]

Or you change tack and release a lower-spec console with a shorter lifecycle, or new epxeriences, etc.

Or you drop out of hardware (ps suite) and become a software publisher.

Or team up with another platform holder that might make up for the deficiencies of the hardware company while touting the advantages that Sony has in hardware manufacturing ...

____________

But yes I agree the multi-tier hardware approach has merit.

Difference between you and I is I believe tier 1 is here now.

Building on a 50m+ userbase is how you get such a concept off the ground, not risking it by coming out with a new, relatively weak console that in gamers minds should last another 10 year cycle.

Now, if they say we're building the playstation platform back into a true platform by including BC for ps1, ps2, psp (yes psp) and ps3 while having the new ps4 be a scaled Cell with a mid-grade Tesla GPU that could be sold for break even (not profit as that will come later) then they have a shot to push an aggressive upgrade cycle on this with the clear understanding that Playstation is a platform and all future and past games with the playstation logo on them will work, that is how you build on what you have without risking your userbase and at the same time, lure in potential new customers on the back of such a consumer-centric viewpoint.

It's all about hitting multiple market segments. Leaving the low end on the shelf with ps3 until demand drops sufficiently to replace it with ps4 after ps5 comes out.

The aggressive hardware ramp can work if it isn't redundant (>2x so every 2 years or so), isn't required (new games still work on old hardware v3 and up) and doesn't put Sony in the red for each console sold.

 

[dobwal]

It's all about hitting multiple market segments. Leaving the low end on the shelf with ps3 until demand drops sufficiently to replace it with ps4 after ps5 comes out.

The aggressive hardware ramp can work if it isn't redundant (>2x so every 2 years or so), isn't required (new games still work on old hardware v3 and up) and doesn't put Sony in the red for each console sold.

This is one of the many reasons why Apple brings in a disproportionate amount of the overall profits generated by smartphone sales.

While Apple releases a iphone once a year, Android manufacturers release tons of phones with varying specs throughout the year. And the same problem thats exists for Android manufacturers would exist for a Sony platform that followed that same model.

Sony would have to technically support two consoles at a time with a new sku arriving every two years. They would mostly likely do so with a unified OS model that would more complex to manage than a Xbox OS which would only have to support one console and a 4-5 year time span to upgrade to support a new sku. Apple supports 3 phone skus at a time. Android manufacturers have to support 4 to 5 times that amounts.

The ability of Sony to invest into the hardware of any one console sku would be severely hampered. Economies of scale would work better for the Xbox because it could hold its entire userbase to 1 sku for 4-5 years while Sony would have to deal with its core and hardcore gamers abandoning the current sku for a new sku every two years. A core user might buy 20-50 games for his/her Xbox while a PS core user would split 20-50 games across two skus.

 

[patsu]

I read recently that the cellphone makers are considering releasing fewer phones per year also.

The growth is in the mobile space. According to Kaz's statement, they want to tap on it for their recovery. I expect them to expand on Vita (Vitaphone ?).

 

[TheChefO]

While Apple releases a iphone once a year, Android manufacturers release tons of phones with varying specs throughout the year. And the same problem thats exists for Android manufacturers would exist for a Sony platform that followed that same model.

No, Sony would be following closely with the Apple model here (bot not as aggressive as a 1 year difference isn't enough time to introduce a new node so the performance wouldn't justify the upgrade).

Android has a ton of issues for software development because it's the wild wild west, there are no standards, and piracy is rampant.

This model would be more along the lines of IOS, not android.

Sony would have to technically support two consoles at a time with a new sku arriving every two years.

The amount of "support" needed wouldn't be much more than what was already in place for ps2 years after ps3 launched.

...Economies of scale would work better for the Xbox because it could hold its entire userbase to 1 sku for 4-5 years ...

This is assuming that this aggressive ramp wouldn't draw core gamers to the new experience 2 years later ...

Economies of scale are not an issue with these modern consoles. They sell enough to take advantage of the massive number of units they move.

The advantage would go to the one which is able to capture the core gamers that SPEND on games, DLC, accessories, etc.

Producing bleeding edge hardware at cost will pull them in. Especially if the upper end is targeted properly, not $300 entry point ps4 next to $200 ps3.

 

[patsu]

Thanks to Titanio who found these articles...

Sony Rises on Optimism Hirai Will Rebuild Company: Tokyo Mover
http://www.businessweek.com/news/20...m-hirai-will-rebuild-company-tokyo-mover.html

“The shares are rising on expectations that the company will be on track for rebuilding,” Makoto Sengoku, a market analyst at Tokai Tokyo Securities Co., said by phone. “All the bad factors have already been reflected.”

Sony can reward shareholders by narrowing its portfolio, Hirai said in his first meeting with reporters after being named to lead the company. He didn’t elaborate. Hirai said he will present his business plans later, though he reaffirmed his commitment to TVs.

‘Step Forward’

“Unless we steer drastically toward reform, we may confront a situation where decision-making comes with enormous pain,” Hirai said yesterday in his first interaction with reporters after he was named to lead the company. “If we hold back, we cannot take a step forward.”

The world’s third-largest maker of televisions may project an operating profit of about 200 billion yen in the fiscal year that starts in April as the company won’t repeat one-time costs that hurt profits this year, Chief Financial Officer Masaru Kato said yesterday.

This year, Sony had one-time losses of about 70 billion yen because of Japan’s March 11 earthquake, as much as 70 billion yen because of the Thai floods, and 63 billion yen from the sale of its stake in the Samsung venture, Kato said.

...

“We weren’t able to select areas where we want to concentrate, so we ended up keeping products that became commoditized,” Hirai said. “We want to make our focus clear soon.”

During a joint news conference yesterday, Hirai reaffirmed his commitment to TVs. The world’s No. 3 maker is maintaining a sales target of 20 million sets, though the business may lose between 220 billion yen and 230 billion yen, including the cost of exiting the venture with Samsung, Kato said.

“Hirai shared a sense of urgency by commenting that the company will act quickly once a decision has been made by a unified management, it will make painful decisions, and that Sony has no time to spare,” Yuji Fujimori, a Tokyo-based analyst at Barclays Plc, wrote in a note to clients today. “Next is the company’s execution ability.”

http://www.mydigitalfc.com/stock-market/nikkei-slips-us-jobs-data-sony-surges-787

Japan's Nikkei share average fell on Friday ahead of US jobs data, though Sony Corp soared as traders said investors were hoping its new CEO would turn things around after it forecast a $2.9 billion annual loss.

Sony surged 7.5 per cent, while the Topix electric machinery subindex was the top sectoral performer, up 1.7 per cent.

"There is some confidence in the CEO (Kazuo Hirai). It certainly can't get much worse," a sales trader at a foreign brokerage said.

Hirai, a 51-year-old Sony veteran known for reviving the PlayStation gaming operations through aggressive cost-cutting, replaces Howard Stringer as CEO in April.

"Sony looks incredibly cheap ... Even though the numbers were bad, they were not the shocking erosion of a fundamental sort of value of the company's asset that happened two days ago with Sharp," the trader said.

Deutsche Bank said most of the losses were impairment from exiting a flat panel joint venture with Samsung Electronics, while many divisions in its core operations outperformed guidance and inventory fell to 47 days from 66 days in the second quarter.

EDIT:
I would like to thank Hirai for not overloading his speech with buzzwords. His past interviews usually give me terrible headaches. This is the first time I understand what he's saying. ^_^

And also great job pointing out Sony's problems in the public. I have never worked in Sony or attended any Sony meetings, but it's always great to see someone identify their mistakes and fix it, hopefully in an effective manner. God speed !

 

[mrcorbo]

I absolutely agree Brad Grenz.

As do I.

PC gamers have a tendency to blame the shift to console development for holding back the graphical innovations made possible by the constant march of PC hardware development. But, long before that shift happened, PC games targeting mass market sales were developed for the lowest common denominator of PC hardware and very few games were released that would take advantage of the latest and greatest PC hardware in anything more than superficial ways. IMO, having this environment recreated for consoles would reduce the quality of console game development.

 

[TheChefO]

IMO, having this environment recreated for consoles would reduce the quality of console game development.

This is assuming the baseline target hardware for development is low.

It should all be at the dx11 level and advancing in power, but still providing a baseline performance significantly above and beyond existing hardware.

 

[dobwal]

No, Sony would be following closely with the Apple model here (bot not as aggressive as a 1 year difference isn't enough time to introduce a new node so the performance wouldn't justify the upgrade).

Apple's model includes a product with a big fat profit margin. Currently Sony employs a model where the product isn't meant to be a profit generator at the point of sale but rather through residuals that are produced through licensing fees. Sony would have to produce a product that was cost neutral or cost positive at sale to have success using a model similar to Apple.

Otherwise, Sony's hardcore and core userbase would be a negative for Sony and not a plus. Hardcore and core users will likely have the shortest time of ownership as they jump to console to console every two years. Currently, their average time of ownership is probably the longest of all console owners. As they are most likely to be early adopters and least likely to abandon a console until the next gen launches.

Also, Sony already employs two tier product cycle where each console is given a 10 year life. A two tier system where the product cycle is cut to four years means instead of having two skus over a 10 year period you end up with 5 skus. A two tier system doesn't make sense with such a short time gap between product launches. You can't expect your whole userbase to migrate to the latest two sku every two years. Developers are going to naturally want to target a large swath of the userbase meaning they may have to accomplish that by targeting at least 3 PS skus for every single release.

So over a ten year period you end up with 5 product launches and 5 consoles that have 60% of their lifespan removed. The only way this happens is if Sony launches consoles that cost $150 to make but retail $300 dollars or they market all their product launches with door hangers and youtube videos and ship their consoles in paper bags.

 

[joker454]

And risk your 60 million dollar game looking "last gen" next to the games that targeted the newer hardware? Like I said, that model is antithetical to the advantages the console market is supposed to have and the stakes are too high to make bets on such a nebulous future. People resent being on an upgrade treadmill. People like that even if they hold out for a console to cost less than $200 they are still granted instant access to the cutting edge games. Publishers are risk adverse. You'll never get to that iBox 3 stage because the backlash will start when iBox 2 comes out.

I'd present some points to counter this:

1) Games already look last gen, the games people are playing today look very graphically dated, yet even though people know they can look far better on pc they really don't seem to care a whole lot. I think as long as a game supports their platform of choice, suppots the features they want, and lets them play with their friends then they will be fine with it.

2) Publishers are indeed risk averse, but that's where having a more often updated "platform" is less risk averse compared to traditional console cycles. With the traditional 5/6 year console cycle, a new machine comes out and is an entirely new platform. Everything has to be re-written over the course of a few years, optimized, etc. In all the time, which often takes 3 or so years, you are spending money on development and seeing nothing in return. If when you finally release your new game it doesn't sell well then that studio risks going under. Now what if you discard that old methodology and instead go the iOS style where you have a true long term platform, then everytime a new piece of hardware comes out you aren't starting from scratch. Publishers can adopt the advances features of that hardware at their pace, as time and budgets allow. This method is far far less risky than the traditional consoles are because you aren't starting over from scratch. All your existing games play, all your existing codebase works. You don't have to staff up to 100 people for 3 years to build entirely new engines, hand optmize for new finicky hardware, etc, none of the above. You just make games like usual on your usual schedules, with a stable headcount.

3) The traditional console style may offer better hardware than going with a backward compatible "platform", but it may not matter. It takes a few years to get a hand on a new console again because it requires starting from scratch and learning a completely new machine. Because of that even if a new console has a hardware advantage over another machine that goes with the "backward compatible platform" methodology, you may not see that advantage until year 2 or 3 until people get a grip on that new machine. On the other hand at that 2 or 3 year mark, the "backward compatible platform" style machine can simply release yet another new machine and eliminate any graphical gap for those that care and/or if the market demands it.

4) Going with a software platform means that the same software can be made to work on multiple types of devices. So if the "software platform" starts off as a new console but then ends up in a car at some point, then much of the existing software can be compiled to work in that car device. Likewise for phones, tablets, etc. This is something that publishers love because it let's then leverage existing code much better. Even if the benefit isn't 100% obvious today being able to compile one's game to work on multiple devices is clearly a huge benefit that all publishers would love, rather than always having to deal with new hardware.

Combine the above I'd argue that abandoning the old console style for a new more often upgraded buy fully backward compatible "software platform" is the better way to go.

 

[Dominik D]

Now what if you discard that old methodology and instead go the iOS style where you have a true long term platform, then everytime a new piece of hardware comes out you aren't starting from scratch. Publishers can adopt the advances features of that hardware at their pace, as time and budgets allow. This method is far far less risky than the traditional consoles are because you aren't starting over from scratch. All your existing games play, all your existing codebase works. You don't have to staff up to 100 people for 3 years to build entirely new engines, hand optmize for new finicky hardware, etc, none of the above. You just make games like usual on your usual schedules, with a stable headcount.

This was the very idea behind the original Xbox: have a base platform and update it every year or two. This idea got scrapped, obviously, due to various reasons. But yeah, continuous platform improvements are pretty much the next big shift we're going to see, just like the game-as-a-service model seems to be the next big thing for yearly sports/driving titles.

 

[TheChefO]

Sony would have to produce a product that was cost neutral or cost positive at sale to have success using a model similar to Apple.

Agreed, that's why I said as much:

Producing bleeding edge hardware at cost...

...while having the new ps4 be a scaled Cell with a mid-grade Tesla GPU that could be sold for break even

Otherwise, Sony's hardcore and core userbase would be a negative for Sony and not a plus. Hardcore and core users will likely have the shortest time of ownership as they jump to console to console every two years. Currently, their average time of ownership is probably the longest of all console owners. As they are most likely to be early adopters and least likely to abandon a console until the next gen launches.

As I said, as long as they are break even on hardware, the plan would work fine. Gen1 hardware will eventually get cheaper to produce and allow a smaller box and a smaller pricetag while still not being a drag on Sony after the new gen2 hardware launches at cost.

Also, Sony already employs two tier product cycle where each console is given a 10 year life. A two tier system where the product cycle is cut to four years means instead of having two skus over a 10 year period you end up with 5 skus. A two tier system doesn't make sense with such a short time gap between product launches. You can't expect your whole userbase to migrate to the latest two sku every two years. Developers are going to naturally want to target a large swath of the userbase meaning they may have to accomplish that by targeting at least 3 PS skus for every single release.

The 10 year lifecycle becomes redundant with Sony reestablishing the Playstation platform.

If a developer wanted to, they could get a ps1 devkit and get to work targeting that platform knowing that all future and existing Playstations would be compatible with it.

The concept is very similar to PC development with the advantage of not supporting literally millions of configurations and not being forced to target a baseline comprised of motherboard embedded dx7 Gpus and 10 year old cpus.

The baseline config is up to the developer, but it would have to be made readily apparent upon purchase what hardware is required.

ps1
ps2
ps3
ps4.1
ps4.2
ps4.3
ps4.4
etc.
Until and unless a drastic new hardware is required which is powerful enough it can also run all the old ps4 games. Which if they deem it necessary to replace the ps4 arch, it should have no problem emulating the existing ps4 arch. Otherwise it seems it would be a bit pointless and scaling should continue.

...or onlive-type replacement becomes a possibility.

So over a ten year period you end up with 5 product launches and 5 consoles that have 60% of their lifespan removed. The only way this happens is if Sony launches consoles that cost $150 to make but retail $300 dollars or they market all their product launches with door hangers and youtube videos and ship their consoles in paper bags.

No lifespan would be removed.

Same games, just with added or removed features.

Rendered Res variable
Texture Res/mipmap level variable
Filter quality variable
AA quality variable
Poly count variable
Tesselation variable
Audio sample quality variable
Animation sample rate variable
Frame rate variable
3D variable

All games made for ps4.x would play. Just that some would obviously look/sound better than others.

At some point there would come a time when the base processing ability of the ps4.1 console could not handle what the top end ps4.x console could do function wise, and at that point, a new console family would need to be produced (ps5.1) ... or perhaps a live streaming gaming service would be viable by then.

 

[Shifty Geezer]

Sony's changing PSN accounts to SEN accounts. About time too! At least this establishes one network across all their devices.

 

[jonabbey]

I thought PlayStation was a better brand for them in the US than Sony was these days. Hopefully they'll work on that.

 

[Arwin]

Could be, but this makes a lot more sense. It's a good name, and covers the content well. As the Swedes would say: "better SEN then never" ....

 

[Carl B]

I look at Sony's present trajectory, and I am not encouraged. I like Hirai, but at least thus far his focus seems to be on streamlining vs innovation and an aggressive R&D track. The later is riskier for sure, but Sony is not going to remain Sony in the traditional sense for much longer unless it can reclaim clear pole position in at least one or two industries. Stringer's own focus for his entire tenure was on streamlining, synergies, and cost-cuts... and has anything rally been born of that, even the profitability that was at its core? I also question whether Hirai's tenure as head of Playstation can be deemed a success per se since what was executed was the obvious from the outset. The advertising did get a lot better, I will grant them that.

There *are* tough choices that need to be made at Sony, and I have taken the stance numerous times that truly a lot of the difficulty is not even of their own making - for example, exchange rates. But on TV's for instance, I do hope they push Crystal and a halo product/tech, and keep the R&D up even if they stick to OEMs for the mainstream sets in the near term. They have to get out *ahead* of a product cycle somewhere, and playing catch-up in any one of numerous areas is not going to cut it.

My usual laments/refrains:

EyeToy vs Kinect, Sony E-reader vs Kindle/Nook. With the right support and and aggressiveness, Sony could be leading categories, rather than languishing. I could right on here forever as to how market strength - or even just the perception of such - in either of those spheres could have been leveraged towards much greater things. But for now I will only state that had Hirai been in charge 100% of pushing those products when the times were relevant, I honestly wouldn't see him as having done so.

 

[TheChefO]

I look at Sony's present trajectory, and I am not encouraged. I like Hirai, but at least thus far his focus seems to be on streamlining vs innovation and an aggressive R&D track. The later is riskier for sure, but Sony is not going to remain Sony in the traditional sense for much longer unless it can reclaim clear pole position in at least one or two industries. Stringer's own focus for his entire tenure was on streamlining, synergies, and cost-cuts... and has anything rally been born of that, even the profitability that was at its core? I also question whether Hirai's tenure as head of Playstation can be deemed a success per se since what was executed was the obvious from the outset. The advertising did get a lot better, I will grant them that.

There *are* tough choices that need to be made at Sony, and I have taken the stance numerous times that truly a lot of the difficulty is not even of their own making - for example, exchange rates. But on TV's for instance, I do hope they push Crystal and a halo product/tech, and keep the R&D up even if they stick to OEMs for the mainstream sets in the near term. They have to get out *ahead* of a product cycle somewhere, and playing catch-up in any one of numerous areas is not going to cut it.

My usual laments/refrains:

EyeToy vs Kinect, Sony E-reader vs Kindle/Nook. With the right support and and aggressiveness, Sony could be leading categories, rather than languishing. I could right on here forever as to how market strength - or even just the perception of such - in either of those spheres could have been leveraged towards much greater things. But for now I will only state that had Hirai been in charge 100% of pushing those products when the times were relevant, I honestly wouldn't see him as having done so.

I wonder what it would take for Sony and MS to team up?

Seriously given the strengths (and weaknesses) of either company, they make a good match.

And given the coming onslaught of Apple (Google next?) I'd think they'd want to pool their resources.

It is sad to see how far they've fallen, and I don't want to get into the details of how and why they are in this position, but the way out is clearly to align themselves with a big player in future technologies (Google, Apple, MS).

They seemed to be getting cozy with Google, and that may be a wise decision, but they need to have a much closer relationship going forward for it to make sense. And the problem with that is, Google is a whore. I don't see them dating anyone individually, much less marrying them.

Google's whole premise (up to this point) has been completely open to anyone for anything. Thus no competitive advantage can be gleaned without significant R&D investment (and it seems Samsung is killing them in that regard).

MS has some interesting tech and would make a good partner for MS in a lot of regions even outside of gaming. (Kinect for TV's, win8 pads, win8 tvs, win phones (that would sting for Nokia though consoles, laptops, etc)

It might just make more sense for MS to buy them outright.

Sony may not be bleeding edge in every area of tech, but they have a strong brand and they are close enough to leading edge that MS can leverage the brand for mass producing their wares.

Everyone's always applauding Apple, what better way to compete than to replicate their business model completely? Fully closed systems, but able to leverage the tech into many devices, not just phones and tabs.

I'd say win-win.

 

[Arwin]

What Sony needs is a much stronger platform focus, much stronger software focus, and have the hardware guys serve those needs whether they make and improve existing products or create something completely new. I think Hirai understands that, but the importance of the software component cannot be understated. The Vita so far seems promising. Everything before that wasn't fully his baby, so is harder to judge him by.