The way we did that wasn't just by just the product, but we changed the business model as well. So you go back to what enabled us to have that kind of success, and it's technology, it's innovation and it's vision. When we started, it was a cartridge-based business. Talk to any publisher about how much they hate cartridge-based business models with expensive cost of goods and months-long manufacturing lead times. Sony came to the table with CD-ROM, with just-in-time inventory, low cost of goods, a more profitable business model. Consumers loved it -- it was high-tech and sexy.
I think we really changed the face of the business, and we grew it exponentially. We made gaming an acceptable part of the entertainment landscape that's no different than going to the movies, watching TV, surfing the internet. People today don't look at you funny if you say you're a gamer. Having a PlayStation 3 is a pretty cool thing.
Every generation of PlayStation has launched with a new format: CD for PS1, DVD for PS2 and Blu-ray for PS3. However, outside of Sony's internal studios, we haven't heard much from developers expressing the necessity for Blu-ray. Is the format really as important for the PS3 as CD was for PS1, DVD for PS2?
"I think Blu-ray's the secret weapon, and will continue to be the secret weapon." - Peter Dille
Absolutely. I think it's the secret weapon, and will continue to be the secret weapon. In 2006, there was considerable concern from press and analysts and consumers as well about Blu-ray because we were in the midst of a format war. Any time you have a format war, you've got a lot of haze, and it causes a lot of consumer confusion to want to wait on the sidelines. They don't want to make the wrong bet. Well, the early success of the PS3 carried the Blu-ray format to victory and what turned out to be questions back then: "Do I really need this?," "Couldn't they have done something less expensive?" But you fast-forward to today, PS3 is $299, manufacturing costs have come down. The fact that it's a Blu-ray player is the secret weapon because now you have a device in your house that will drive all your entertainment: Blu-ray movies, free online network that gives you access to movies and TV shows. But, the Blu-ray benefits on gaming haven't been lost either because you compare 50GB of gaming with the competition, which caps out at nine, you realize that you're getting a better gaming experience on PS3 as well. You just couldn't do games like God of War 3
or Metal Gear Solid 4
on a competitive platform and have the same experience. I guess you could pop in multiple discs, but the benefit of Blu-ray goes beyond movies.
Is Blu-ray the new standard? Do you foresee your competitors ever adopting it?
It's hard to answer questions about what our competitors will do. If a competitor wanted to match what the PlayStation 3 does, they'd need to include a Blu-ray player. Blu-ray is the standard for high definition video playback in the home. If Microsoft or Nintendo wanted to make a machine that could sit next to the PS3 and do everything that it does, it would need to have a Blu-ray player in it. Anything short of that is a different device. In Nintendo's device, it's a gaming-only device and in MIcrosoft's device, it's a gaming device that provides access to the internet, but it's not the total entertainment solution that the PS3 is.
But increasingly, the internet is becoming a preferred way for consuming content. There seems to be less need for a disc, and more demand for network content, whether it's DLC expansions or standalone downloadable games. Considering PlayStation's legacy, is being tethered to a disc always part of Sony's DNA?
It's a disc plus add-on model that we think is viable. Let me answer the question with a question: when's the last time you initiated a 50GB download? We've got several hundred games on the PlayStation Store and I think more than half are exclusive on our console. But, they are smaller experiences. When you talk about downloading an Uncharted 2
, God of War
-- to download 50GB, the consumer experience isn't very palatable yet based on the pipes going into the home. If that changes, we're obviously in a position to take advantage of it. When consumers are ready to download bigger games, that's fine with us. We don't believe that day is coming any time soon, and if you talk to the analysts, that's still many years off until we have that kind of connectivity.
Speaking of the network, PSN was barebones at launch. It's evolved greatly since then, but do you think Sony was potentially shortsighted at first about the possibilities of the Network? Is there a much stronger vision for it now?
The vision was always there, but the reality is you have to start somewhere, and it was being compared to something that had been up and running for many, many years with Xbox Live. We didn't have time to develop all the things that we wanted to develop on day one, and what we always said was "this is the starting point" and we're going to continue to iterate, and I think we've done a great job with that. The PlayStation Network you see today is light years from what the PlayStation Network was in the fall of 2006. If you go out six months, or six years, PlayStation Network will be different yet again. We're going to continue to build it out, and make changes, improvements, and listen to consumer feedback, and add new services, like MLB.tv or Hulu or Netflix. You name it. We have a music service that's coming onboard. And we'll maintain the free promise to consumers. We're not charging you to get online and play games or have access to this stuff. We've always said that once we aggregate a big audience, we can find a way to make money from that audience, but we're not going to charge a toll to get online. We think that's a great competitive advantage.
We're proud of the changes we've made. We think the PlayStation Network is a fantastic experience. Whether you're a gamer and enjoy things like trophies and Home. Or if you're an entertainment enthusiast, and you're downloading movies and TV shows and accessing social networking sites.
Gaming is much more fragmented now. It's no longer hardware and software. The PlayStation brand hasn't expanded itself to emerging gaming, like social gaming and mobile games. Looking ahead, does PlayStation want to be every kind of game, or will it always be tethered to the classic business model that demands hardware?
"The connectivity between the PSP and PS3...is a vision that we'll continue to build on and improve and enhance...going forward in this cycle as well as future cycles." - Peter Dille
I think you're starting to see some signs of evolution today. The PSP certainly is that portable play. Our vision on portable games is that they don't have to be dumbed down, short, or lacking depth or complexity. We believe that a gamer that wants to carry a portable game with them can still get a rich experience via the PSP. We're also looking to a vision of connecting that portable experience to the console experience so you can take your games with you wherever you go, or access them if you forgot them at home. I think the connectivity between the PSP and PS3, I think is a vision that we'll continue to build on and improve and enhance, and get consumers comfortable with that going forward in this cycle as well as future cycles. I think we've also taken note of some of the things going on other gaming and social networking sites. I think if you look at Home, you'll can find some interesting examples of different business models we've been experimenting with, where you might get the game for free and you have a freemium model. You'll can find plenty of examples of this outside of the PlayStation ecosystem, but we're now introducing them and I think that'll continue as well.
A key part of the Home experience still involves owning hardware. Will PlayStation always refer to hardware?
Well, at the end of the day, we are a company that likes selling hardware to people and provide an experience that's only possible on PlayStation. That's a core part of the strategy going forward.
Speaking of hardware, PlayStation Move is Sony's upcoming new platform. But it's been in development for so long. Any regrets on not fully exploiting EyeToy and the potential for motion gaming earlier?
We'd like to think we're not brand spanking new to this part of the business. We've been pioneers in camera technology and how it relates to games. We kicked the tires on other forms of technology -- camera-only technology, sensor-only technology -- and we felt that the combination of camera and the controller provided some unique competitive advantages. Combined with the power of the PlayStation 3 to display things in real-time, in high-definition, provided an experience that was appropriate to bring to market. We're really excited about it. I've said it many times before. We give Nintendo all the credit in the world for popularizing a genre of games that maybe we introduced to the world, but we feel like we're bringing something to the table that they're not doing and provides a level of precision, in high-definition, on a device that does a whole lot of other things that we think consumers want in their house. We think that the combination of the PlayStation Move and the PS3 is a pretty compelling proposition.
Do you think that Move could've been a trailblazer had it been introduced earlier?
I'm not the technology guy, so I can't really answer what PlayStation Move would've been like on a PS2. What I can say is I can see all the benefits in the world for why a PlayStation 3 coupled with a Move is going to work real well.
Over the past 15 years, do you think Sony has had its equivalent of a Virtual Boy? Is there a single thing you wish you could change in the company's history?
We haven't had a failed sales platform. Ever. PS1, PS2, PSP have all been huge global successes, and with the PS3 we're poised to do it again. There's no Virtual Boy in that line-up.
People, I think, have a mistaken perception that the Go is its own platform. The Go is a form factor for the PSP platform, and it was always intended for a specific consumer: the high-end of the food chain that's very comfortable with digital. That's not everybody, and therefore, our expectations weren't that this was going to replace PSP. This is an industry that's inundated with rumor -- the rumors before the PSP Go was announced were "oh, the PSP2 is coming out." Those were rumors, and they were incorrect. The PSP Go is not the PSP2. It was just a different form-factor. It's met our expectations, it's part of a bigger ecosystem, and it also helps us evangelize a digital lifestyle that we think will continue to plant its roots. In that regard, it's been a success.
The rumors are how Kevin Butler made his debut as PlayStation spokesperson. It's obviously been a successful campaign. Do you see him representing PS3 for the rest of its life cycle?
Kevin Butler is a valuable employee around here, and you'll see plenty more of Kevin Butler. We couldn't be more excited about the success of the campaign, his popularity and how much people love Kevin and our marketing. I think he's really helped PlayStation get its mojo back. Thinking back to our 15 year anniversary, we have a long heritage of people talking about our commercials. I think Kevin's done that again, and we're incredibly proud of the reaction that our fans have to this campaign. As a marketer, the other thing I love about Kevin is that he works. What we were looking for was a campaign that would help explain a very powerful and complex product in a way that people could understand. We're having this ongoing conversation via Kevin, and it's working like nobody's business. We plan on continuing it, and we'll take it and be very protective of it, and nurture it.