**NOTE: For a TL;DR that's shorter and summarizes the write-up, go to the "BRIEF SUMMATION" section.
SONY/SIE: HOW DO THEY IMPROVE MARGINS & EXPAND, WHILE RESPECTING PLAYSTATION'S ROOTS?
[WHAT ARE PLAYSTATION'S ROOTS?]
The legacy of PlayStation can be traced to its roots, specifically the prime motivations that brought the platform into existence. These can be traced to several factors, covering a period of some years leading to the first console's release. These are listed in no particular order:
These five tenets helped PlayStation fulfil the traditional console business model goals. That model's goals are:
The original PlayStation realized certain goals differently, given the make-up of the console market in the mid 1990s; for example, "subscriptions" could be interpretable as official PlayStation magazines
providing content & demos for readers, some subscribing for 1-2 years via mail. However, the main points of the model were as true back then as they are today, and Sony were able to achieve these seven goals with their first console, thanks to adhering of the five core brand tenets.
Such extended to other consoles such as the PlayStation 2, where a combination of momentum plus adhering to the five core brand's tenets, can shape the success of the given platform generation. The PS2 saw significant increase in some of the five precepts, which helped in achieving the seven goals of the traditional console business model even more than the first PlayStation, leading to growth in the market compared to contemporaries, who each struggled with one or more of their own "core brand values", thus could not maximize the seven aims of the traditional console business model as effectively as Sony.
Other Sony consoles, such as the PlayStation 3, failed to respect one or more of the brand's five tenets, and were unable to achieve the seven goals of the business model (either wholly, in effectiveness, or both) as direct result. Quickly, here are the PS3's mistakes in respecting the five root brand values:
1: HOLISTIC HARDWARE ECOSYSTEMS: Sony's ambition for the PS3 included the joint-developed Cell processor. This processor promised to be the revolutionary future of computing, at one point setto be both the PS3's CPU & GPU. However, less-than-desired maturity on the GPU promise, led to a rushed redesign, and a final system that pursued (at the time) ultimate power, yet forced into undesirable compromises.
The result was a system with promising technology, but an extremely high learning curve to extract the potential. Combined with growing software budgets, increased complexity in game development, and less TTL (Time-To-Learn) for programmers vs. the commercial work expected of them, this made the PlayStation 3 a less attractive holistic hardware & product design compared to its direct rival.
2: INDUSTRY-DEFINING STANDARDS: Whereas the PlayStation's pursuit of 3D as standard was a goal aligned with the majority of the gaming market at the time (even if through proprietary
means), the PlayStation 3's push for heterogeneous programming via the Cell, was partly forward-thinking ambition obfuscated by corporate-driven financial desires and industry control on the parts of Sony, IBM, & Toshiba. Sony's specific implementation of heterogeneous computing clashed with desires from the majority of the games industry.
Similarly, the push for Blu-Ray disc standard was seen by many, as less games "needing" that level of additional storage (at least tied to a single disc), and more a push from companies like Sony to assert format control in the market. This created friction between Sony, 3P developers & publishers, plus increased costs for the PS3 beyond at-the-time tolerable levels for the majority, hampering adoption rates.
3: MARKET LIBERATION: With PS3, Sony failed to correctly gauge the demand for online-based multiplayer gaming. This led to many a massive multiplayer games that generation, such as COD & Halo 3, to either be exclusive on or prefer their direct console rival, Microsoft's Xbox 360. Also, during this time the console market in the US would reach its peak in terms of growth rate, PS3 being the least poised of the Big 3 to capitalize.
While Sony were able to leverage other markets globally to offset many of the install base loss in the US & UK, it was never enough to meaningfully overtake the 360 in install base.
4: PARTNER FOCUS: With a complex architecture, high level of TTL (Time-To-Learn), & lack of market share in key markets relative competitors, the PS3 was mostly unable to leverage strong
3P partnerships, particularly Western 3P developers & publishers in the AAA space. For example, with 360, Microsoft provided strong brand synergies with IP such as COD, Saint's Row, & the Mass Effect trilogy. Sony were incapable of this aside with some Japanese 3P such as Konami; with Western 3P, it'd be later that gen with games such as GTA V.
5: LIBRARY UNIQUENESS: With the PS3, Sony lost many "defacto exclusives", with many once-exclusive Japanese 3P franchises either going multi-console with Xbox 360, turning towards breakouts like the Nintendo Wii, or both. Many Japanese 3P who primarily focused on PlayStation hardware in the past, turned to doing exclusives for rival consoles. For example, Capcom launched the IP Lost Planet & Dead Rising on the 360, while that system also got early JRPG exclusives such as Blue Dragon & Lost Odyssey.
Western-wise, rivals like the 360 saw preferred support from devs like Bethesda, Volition, Obsidian, EA, & Silicon Knights, either with exclusive IP exclusive, or with games that ran much better on 360 vs Sony's console. The PlayStation 3 would not see parity in most Western 3P releases until the second half of that console generation, and never saw priority from Western studios for new or exclusive IP the way 360 did. Things went better on the Eastern side, with Sony's Japan Studio partnering with From Software to birth the "Soulsborne" genre via 2009's Demon's Souls, and securing exclusives (in some cases defacto) with games like Metal Gear Solid 4.
Problems with Sony Corporation during the latter '00s compounded on the PS3, the company facing significant financial turmoil, needing to make changes. Kaz Hirai became the President of SCE (now SIE) during this time (later CEO of Sony Corp in 2012), helping both it & the PlayStation 3 remarkably recover. We will look at some of the things done to help in this recovery.
SONY/SIE: HOW DO THEY IMPROVE MARGINS & EXPAND, WHILE RESPECTING PLAYSTATION'S ROOTS?
[WHAT ARE PLAYSTATION'S ROOTS?]
The legacy of PlayStation can be traced to its roots, specifically the prime motivations that brought the platform into existence. These can be traced to several factors, covering a period of some years leading to the first console's release. These are listed in no particular order:
1: HOLISTIC HARDWARE ECOSYSTEMS
Even as far back as Sony's MSX computers, the company always seemed to value hardware ecosystems with various parts serving a greater whole. In terms of their MSX machines, this encompassed manufacture of all necessary peripherals made compatible with machines, in an era where such tight integration was only seen with microcomputer platforms like the Amiga. In terms of the PlayStation, it was through a unified chipset design, each component consciously built to uplift overall performance. In both cases, making things streamlined for software creators.
2: INDUSTRY-DEFINING STANDARDS
Also traceable to Sony's MSX line of computers (if not even earlier), is a strong presence of leveraging hardware technologies to lead what seemed could or should be new industry standards. With MSX, it was in supporting a relatively open PC platform for Eastern markets (which in time replaced closed standards like those from NEC, as PC-compatibles running Windows gained popularity in the mid-'90s). With the Super Famicom, it was CD-quality sound & sampling for video games (at a time when other consoles mostly used standards like FM synthesis). With the Walkman, it was portable music. With CD, it was the promise (and realization) of the then-futuristic data format. And with PlayStation, it was 3D visuals in the home to complete what was a pinnacle of immersive gaming for the time.
3: MARKET LIBERATION
This is in the act of establishing business standards which allowed Sony & various 3P to manufacture, distribute, & promote with more flexibility, while increasing revenue and profit margins. PlayStation's licensing policy stood in stark contrast to comparatively more draconian Nintendo & SEGA ones. Sony's deep experience with licensable open standards like the MSX computer, combined with their experience as a software publisher prior to PlayStation via Sony Imagesoft, informed their business model for the console.
4: PARTNER FOCUS
With the PlayStation, Sony was the first platform holder to truly place stock & value in enabling 3P developers, publishers, and their content on their platform. Whereas those like Nintendo & SEGA prioritized their own 1P offerings in lieu of 3P focus (unless they were a heavily favored 3P, such as Squaresoft with Nintendo or EA with SEGA), Sony sought to work closely with 3P to elevate their development & market pipelines. A good example of this is the collaboration with Namco on System 11 & System 12 arcade boards, which would go on to spawn cherished IP such as Tekken.
5: LIBRARY UNIQUENESS
Thanks to understandings of content differentiation in the film & music industries, combined with feature differentiation in the electronics market, and synergized development for the PlayStation, Sony were able to amass both a significant amount of exclusive & primary support from 3P software creators towards the platform. The market presence PlayStation amassed, combined with the industry growth this helped stimulate, made PlayStation the favored platform for "defacto exclusives" from many 3P in obtaining more-than-desired revenue & profits. For those whom exclusivity (defacto or not) did not present, the PlayStation's qualities made it attractive as a lead platform for multi-platform development & marketing efforts for games originating on platforms such as arcade or PC, console ports.
These five tenets helped PlayStation fulfil the traditional console business model goals. That model's goals are:
1: Intensive R&D on prototyping, architecting, design, QA testing & refinement of embedded system specs targeting a specific TDP profile
2: Manufacture finalized hardware designs at mass scale (multi-millions per fiscal quarter), includes securing large wafer volume for chip production
3: Sell hardware at a set MSRP and take direct loss on hardware being sold (aka hardware subsidization) to aggressively push install base size
4: Recoup losses on hardware with combination of B2P software, add-on content, subscription and peripheral sales (peripherals often sold at for-profit prices)
5: Design marketing campaigns to draw in customers at scale to justify rate of hardware production (can cost hundreds of millions of dollars, in phases)
6: Develop lots of exclusive gaming content (combination of 1P and 3P) to draw customers to the platform vs direct rivals
7: Create virtuous cycle where preceding six elements generate enough revenue & profit to create feedback loop of positive reinforcement (lower production costs, lower MSRPs, bigger budgets for exclusive content, more ROI per advertising dollar, etc.)
The original PlayStation realized certain goals differently, given the make-up of the console market in the mid 1990s; for example, "subscriptions" could be interpretable as official PlayStation magazines
providing content & demos for readers, some subscribing for 1-2 years via mail. However, the main points of the model were as true back then as they are today, and Sony were able to achieve these seven goals with their first console, thanks to adhering of the five core brand tenets.
Such extended to other consoles such as the PlayStation 2, where a combination of momentum plus adhering to the five core brand's tenets, can shape the success of the given platform generation. The PS2 saw significant increase in some of the five precepts, which helped in achieving the seven goals of the traditional console business model even more than the first PlayStation, leading to growth in the market compared to contemporaries, who each struggled with one or more of their own "core brand values", thus could not maximize the seven aims of the traditional console business model as effectively as Sony.
Other Sony consoles, such as the PlayStation 3, failed to respect one or more of the brand's five tenets, and were unable to achieve the seven goals of the business model (either wholly, in effectiveness, or both) as direct result. Quickly, here are the PS3's mistakes in respecting the five root brand values:
1: HOLISTIC HARDWARE ECOSYSTEMS: Sony's ambition for the PS3 included the joint-developed Cell processor. This processor promised to be the revolutionary future of computing, at one point setto be both the PS3's CPU & GPU. However, less-than-desired maturity on the GPU promise, led to a rushed redesign, and a final system that pursued (at the time) ultimate power, yet forced into undesirable compromises.
The result was a system with promising technology, but an extremely high learning curve to extract the potential. Combined with growing software budgets, increased complexity in game development, and less TTL (Time-To-Learn) for programmers vs. the commercial work expected of them, this made the PlayStation 3 a less attractive holistic hardware & product design compared to its direct rival.
2: INDUSTRY-DEFINING STANDARDS: Whereas the PlayStation's pursuit of 3D as standard was a goal aligned with the majority of the gaming market at the time (even if through proprietary
means), the PlayStation 3's push for heterogeneous programming via the Cell, was partly forward-thinking ambition obfuscated by corporate-driven financial desires and industry control on the parts of Sony, IBM, & Toshiba. Sony's specific implementation of heterogeneous computing clashed with desires from the majority of the games industry.
Similarly, the push for Blu-Ray disc standard was seen by many, as less games "needing" that level of additional storage (at least tied to a single disc), and more a push from companies like Sony to assert format control in the market. This created friction between Sony, 3P developers & publishers, plus increased costs for the PS3 beyond at-the-time tolerable levels for the majority, hampering adoption rates.
3: MARKET LIBERATION: With PS3, Sony failed to correctly gauge the demand for online-based multiplayer gaming. This led to many a massive multiplayer games that generation, such as COD & Halo 3, to either be exclusive on or prefer their direct console rival, Microsoft's Xbox 360. Also, during this time the console market in the US would reach its peak in terms of growth rate, PS3 being the least poised of the Big 3 to capitalize.
While Sony were able to leverage other markets globally to offset many of the install base loss in the US & UK, it was never enough to meaningfully overtake the 360 in install base.
4: PARTNER FOCUS: With a complex architecture, high level of TTL (Time-To-Learn), & lack of market share in key markets relative competitors, the PS3 was mostly unable to leverage strong
3P partnerships, particularly Western 3P developers & publishers in the AAA space. For example, with 360, Microsoft provided strong brand synergies with IP such as COD, Saint's Row, & the Mass Effect trilogy. Sony were incapable of this aside with some Japanese 3P such as Konami; with Western 3P, it'd be later that gen with games such as GTA V.
5: LIBRARY UNIQUENESS: With the PS3, Sony lost many "defacto exclusives", with many once-exclusive Japanese 3P franchises either going multi-console with Xbox 360, turning towards breakouts like the Nintendo Wii, or both. Many Japanese 3P who primarily focused on PlayStation hardware in the past, turned to doing exclusives for rival consoles. For example, Capcom launched the IP Lost Planet & Dead Rising on the 360, while that system also got early JRPG exclusives such as Blue Dragon & Lost Odyssey.
Western-wise, rivals like the 360 saw preferred support from devs like Bethesda, Volition, Obsidian, EA, & Silicon Knights, either with exclusive IP exclusive, or with games that ran much better on 360 vs Sony's console. The PlayStation 3 would not see parity in most Western 3P releases until the second half of that console generation, and never saw priority from Western studios for new or exclusive IP the way 360 did. Things went better on the Eastern side, with Sony's Japan Studio partnering with From Software to birth the "Soulsborne" genre via 2009's Demon's Souls, and securing exclusives (in some cases defacto) with games like Metal Gear Solid 4.
Problems with Sony Corporation during the latter '00s compounded on the PS3, the company facing significant financial turmoil, needing to make changes. Kaz Hirai became the President of SCE (now SIE) during this time (later CEO of Sony Corp in 2012), helping both it & the PlayStation 3 remarkably recover. We will look at some of the things done to help in this recovery.
1: HOLISTIC HARDWARE ECOSYSTEMS: Aside PS3 itself, Sony made changes in reorganizing its TV & appliances sectors, plus selling off the VAIO line of computers, which proved financially unsound. Specific to the PS3, hardware redesigns removed some non-critical functions (though removal of native PS2 hardware for BC would become controversial in hindsight), simplified the motherboard, found cheaper alternatives for component costs, increased storage capacities, and effectively rebranded the console platform with a new marketing campaign in 2009.
Meanwhile, new peripherals such as the Move controllers provided options to PS3 owners for gaming experiences, paired with successive iterations of the Eye Toy, & various other peripherals 1P & 3P. The proliferation of 3D-enabled televisions in the market later that era saw the PS3 provide support. Considered a gimmick by some, it nonetheless was present for owners, helping condition acceptance for future products such as the PlayStation VR (PSVR), released for PS3's successor, the PS4.
2: INDUSTRY-DEFINING STANDARDS: While not intended, Sony's inability to iterate their online gaming infrastructure as well as rival Microsoft, meant their online gaming service stayed a free option for console owners. This wound up attracting gamers during the generation to pick up a PlayStation 3 as the price came down, becoming a convenient marketing point against Microsoft's paid-online walled garden of Xbox Live.
Although the Cell was a complicated chip to learn, its design was nonetheless forward-thinking, and contributed long-term to game developers adopting what became the standard for heterogeneous computing in the consumer electronics space, more so than Microsoft's ambitious-but-simpler Xenon CPU. Blu-Ray, similarly, in time proved its worth to the gaming market, being the preferred option vs. using multiple DVD discs (increasing physical production costs along the way), as was to be the norm with the 360, particularly since the add-on HD-DVD player (in the Blu-Ray vs HD-DVD format war of the late 2000s) gained zero traction.
3: MARKET LIBERATION: While forgotten today, Sony were the first platform holder to advocate for cross-play. However, a stern rejection from Microsoft, whose 360 was dominating the North American & United Kingdom markets, kept that from happening. Additionally, many today consider the incidental aspect of free online on PS3, the preferred model for online gaming in the console market, something even Sony reversed course on with the PS4.
The PS3's use of Blu-Ray was also liberation for the market, helping to reduce manufacturing costs for physical games. Instead of needing up to 4x DVD-ROMs, a single Blu-Ray could hold the same amount of data. This helped with keeping case sizes small & counts lower, aiding with logistics of materials shipping for physical games on the platform, often as a benefit vs. the 360, which prioritized the aging DVD-ROM format.
Sony's PS3 also standardized mandatory game installs & user-replaceable non-proprietary HDDs. The latter became a godsend for many core enthusiasts who sought larger capacities of storage at a cheap price for their growing catalog of games. Conversely, the 360 began a more questionable trend of Xbox consoles using proprietary storage solutions often limited in capacity and more expensive per GB than open market standards.
4: PARTNER FOCUS: Late in the PS3's lifecycle, Sony made efforts to court support from favored 3P developers & publishers, both to eliminate challenges related to development for the system, & getting more support for it in general. This included: reaching out to Valve to get The Orange Box collection on PS3, & Rockstar to prioritize the PS3 as the lead platform for GTA V (alongside a marketing deal). Updating the PS3 SDK & documentation so that programming for Cell became less of a barrier, was also a major focus for them during this time.
5: LIBRARY UNIQUENESS: Since the PS3 lost a lot of defacto exclusives to a competitive Xbox 360 & even (or better to say in different ways) Nintendo's Wii, Sony were forced to double-down on a combination of 1P & select 3P co-developed exclusives to add brand identity & value to the PS3. This resulted in a swell of 1P exclusives, such as the big push for what would become a signature "cinematic" narrative-driven action/adventure focus, with games such as the Uncharted series, The Last of Us, Heavy Rain and Beyond: Two Souls.
This combined with new entries in established IP such as Gran Turismo (GT5 & GT6), God of War, Twisted Metal, Warhawk, & SOCOM. As well, new IP would be fostered, both among 1P teams & in conjunction with select 3P studios, such as Puppeteer, Echochrome, the Motorstorm series, the Little Big Planet series, the "Metaverse before Metaverse" PlayStation Home, PS All-Stars, & seminal favorite (plus precursor to the modern-day Soulsborne sub-genre) Demon's Souls (Japan Studio x From Software).
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