In this edition of Popzara's Ping/Pong, our two resident windbags take on one of the most emotionally charged topics in the modern gaming climate - the future of Sony Electronics. Hoping to create a dialog that cuts through the numbers, editors Mr. Universal and John Lucas take a closer look at what went wrong, what went right, and what the future holds for the electronics giant.

Did they nail it, or have they lost their minds? If you can survive to the end, feel free to join in the conversation and us know what you think!

The Future Of Sony Electronics

For today's Ping-Pong we're discussing The Future of Sony in the videogaming business, or specifically Sony Corporation’s videogame division known as Sony Computer Entertainment, Inc. There’s no doubt that times have been hard for the company the past few years in this business realm and with world markets decelerating at stomach-churning rates, any observer must wonder what the future presents for them. Me, myself, I, John Lucas serves the ball with Mr. Universal returning on the volley.

Well, there’s not much question where my sentiments stand on the matter. I think the picture for SCEI is the encyclopedic entry of “bleak”. They are straddling the cliffs of a canyon right now as far as I’m concerned. Trying to compete so heavily with upstart Microsoft and their XBox 360 and then being blindsided by Nintendo in two contests—DS vs. PSP, Wii vs. PS3 - made them this generation’s equivalent of the Jack-Of-All-Trades, Master-Of-None. It’s like Microsoft challenged them to a game of Chicken on the roadway with Nintendo being the arresting officer flashing blues and reds. At this stage of the game, I don’t see how they can come out of it much less compete with future machines.

Well, it’s certainly true that the last few years haven’t been kind to Sony. But I think any honest explanation of the current state of things in Sony Land has to begin by acknowledging that change is inevitable, and while there’s a certain comfort in the idea of permanence, this has always given way to progress. But I disagree that it was aggressive competition alone that set things in motion. Looking back, it’s easy to see the missteps and miscalculations, but I also think there were other forces outside of anyone’s control; the economic breakdown, changing tastes, among other things.

Honestly John, I think we’re smack dab in the middle of the greatest cultural and ideological shift the videogame industry has ever seen, and I’m not sure the plates have stopped moving. When the dust has settled and we’re back on Terra firma again I’m not sure we’re going to easily recognize the landscape - and that everyone will survive. I think it’s fascinating that some have taken a fatalistic approach to the current climate, and there may be elements of truth to that. It’s certainly worth exploring.

Well as for your first point about forces outside of anyone’s control, I say it’s the responsibility of a company’s management to prepare for those forces. The contest is always decided pretty much in the planning stages before any product comes to market. Sony simply overshot with the PlayStation Portable and PlayStation 3. They did too much, too soon. That electronics company fell too much in love with the tech without considering the customers. Yes, it’s natural for a technology company to be enamored by its gadgets and circuits but that’s exactly why you need visionary leaders who can focus on what is needed for the market. It prevents the engineer-centric mentality of being in love with the complexity of the machinery.

If Sony had that kind of leadership about 6 years ago, they’d be in a much better position right now. Nintendo was excellent in this regard by focusing on the demographics of the Japanese population. Many people at once were getting older generationally. They saw this parallel in their other markets in Europe and America (the so-called Baby Boomer generation). They saw many of these changes coming and prepared for the shift by making their products appeal to a wider cross-section of people. Sony perhaps overconfident from their record success of the original PlayStation and PlayStation 2 just made assumptions it would always be that way.

The PSP vs. DS fight in 2005 should have been the wake-up call that caused them to reconsider their direction but instead they went even harder into that strategy. I remember those bewildering comments from the Sony executives in 2005 and 2006 shaking my head with a grin at gems like “PS3 can’t be offered at a price that’s targeted towards households” and (from their image of “consumers”) “I will work more hours to buy one” when talking about the price brought about by the overdone systems. It’s not that the PSP and PS3 are bad machines. Far from it. But they weren’t useful to what people really wanted at the time. Sony should have had the leadership to forecast upcoming climates.

But keep in mind where Sony was coming from, as they had consecutively dominated the industry for over a decade. The wheels for the PlayStation 3 were set in motion long before the realities of the current market were clear, and you’re right that internal marketing efforts either failed or refused to recognize emerging trends and act accordingly. Their success at growing the market from the inside-out had been so transformative, it’s difficult to imagine them following any other path. Much as Nintendo had done in the 90s, I think they miscalculated the resilience of their brand with consumers, assuming what had worked would always work.

I think it would be a mistake to assume that Sony’s recent downturn was caused by a resurgent Nintendo alone, as this would suggest a migration of users from one platform to another. While this certainly occurred during the industry shift that led the first PlayStation to market dominance as Nintendo/Sega users graduated to Sony’s platform, there’s little evidence this is happening again. Wii users are not siphoning off PlayStation 3 users and if anything, the PSP seems to have encroached on the DS.

But this hasn’t been enough, especially in the one area that counts most - software. While a third-place distant console finish isn’t the end of the world, statistical data proves that the PlayStation 3 and PSP just aren’t moving enough software to their users, particularly with their own high-profile exclusives. Apart from Metal Gear Solid 4, I can't think of one software exclusive in the current generation that's performed as many predicted. Which is really sad, given how fantastic the quality of their better titles has been lately.

Oh, don’t mistake me. I would never say Sony’s downturn was caused by Nintendo alone. Microsoft was the proper distraction that took Sony’s eyes off the prize. For the longest time before the 7th generation of videogame consoles began most people wrote off Nintendo as a player in the industry. There was so much talk about the Big Two competitors: Microsoft’s XBoxes vs. Sony’s PlayStations. You wouldn’t even think Nintendo was alive the way people went on about the then-upcoming generation. I think Sony bought into that hype which prevented them from significantly adjusting their direction after DS gained ground on the PSP.

Ken Kutaragi, the Father of the PlayStation himself, often talked about Microsoft as a rival so it shows the tunnel vision they had when approaching the business in the recent past. But we have to look at the worldwide picture. True to the stereotype, we United States Americans tend to see the world in U.S.A. terms only. Take it to Japan where there were essentially only 2 competitors: Sony and Nintendo. Sony owned nearly everything in the home console world with Nintendo holding strong as the handheld console monopoly. Microsoft meant nothing there at the time of the original XBox (and this has only marginally improved there since that time).

In Europe and the various other world markets outside of North America, Sony ruled the show with only slight prominence from Microsoft’s machine and Nintendo again holding strong with its universal handheld presence. Seeing this picture in 2003 after finishing off a weakened foe like Sega, Sony became “a mark for the business” (to use pro wrestling jargon) and approached the upcoming generation as a foregone conclusion. They focused on Microsoft the way they did because this company was owned by the Richest Man in the World, Bill Gates, and a console from an American company (the first relevant one since the days of Atari) could stir up complications in the world’s best-consuming market, North America starring the U.S.A.

This explains their attitude in producing the PSP (and their comments about gaming ghettos and such) which they believed would deliver an easy Sega-style ruination to their little Japanese obstacle, Nintendo, who held strong with those handhelds all those years. And it explains their focus on building the PS3 the way they did, once again, to “Sega” Microsoft’s new machine like the PlayStation 2 did the Dreamcast by sucking the hype away from a competitor prematurely. Because of how they focused the machine, software DID become an afterthought. They wanted multimedia junctions that also played games too. By the time reality sunk in, they were too deep into to change course as Microsoft leveraged its money power to 3rd party developers and Nintendo trumped them both with their renewed business plan.

I think the consumer has picked up on this lack of focus, and they’re not sure what to make of the PlayStation 3 right now. The marketing for the machine has been so disparate and unnatural, almost giving the impression that playing games is a secondary use. They seem desperate to repeat the infiltrating success that DVD enjoyed by way of the PlayStation 2 with Blu-ray, but this hasn’t happened. Even marketing the PS3’s media capabilities, which include HD film downloads, seem in direct opposition to the merits of optical storage. Given the global recession, asking consumers to pay for technology that isn’t vital to the experience is asking a lot. Did you see that low-cost Vizio just surpassed them in flat-panel television sales in the US? Consumers are responding to entertainment on the cheap, and are satisfied with low-cost technology.

Experts have been predicting this digital convergence for years that a singular box would occupy the living room and drive the bulk of entertainment diversions for the entire family. Microsoft and Sony have been following the roadmap for years, which makes sense given that both serve communities other than interactive entertainment. But where they differed - and this is key - is the approach they used to reach the promised land. Microsoft’s expertise in networked systems and unified media delivery served them well, while Sony’s insistence on propriety formats and excessive control may have out priced them out of the market. Nobody is questioning the quality of their machine, but it may be a matter of overdevelopment when the market isn’t asking for it.

Personally, I think we’re going to see a lot more turbulence in the software market as the industry shifts its definition of the core user to suit mainstream realities. The model that sustained Sony through two generations of consoles is no longer driving the market, and we’ve already seen developers react and shift as best they can. Looking at some of their recent offerings, Sony really should be applauded for embracing this new world with open arms, but its a difficult sell when you’ve positioned yourself as elite entertainment. Like buying a Lexus to deliver pizzas.

BBut for the traditional gamer, the numbers speak for themselves, particularly in multiplatform releases on the Xbox 360 and PlayStation 3. I’m convinced that if Sony continues to stare down Microsoft, they’ll blink first. Developers are seeing massive results in traditional gaming with the Xbox 360 and fewer (if any) rewards with the PlayStation 3. If Sony can’t find success by producing reliable, powerful hardware and releasing some of the best software of this generation, I’m at a loss to see how they can.

Any final thoughts, and is it asking too much to keep it brief?

You bring up a good point with Vizio flat-panel TVs. And that underlines what I’m about to say why Sony’s future in this videogame business is bleak. The “PlayStation Division” of Sony, Sony Computer Entertainment, Inc., has been the lone bright spot for the company for the past 15 years. American Idol seeks to boost Sony Music which suffers the ongoing decline of the entire music business brought about by the age of downloading (this perhaps explains some of Michael Jackson’s recent problems with his partial ownership of that Sony/ATV music publishing catalog). Apple cut them off at the pass with the iPod erasing Walkman from the popular consciousness. Companies like Samsung and Vizio are crowding them out of their homebase electronics/television markets.

Sony’s VAIO computers run into Apple again with their many versions of the Macintosh not to mention cheaper competitors like Dell. In each of their businesses, they are either one in a crowd of many, stagnant, or in decline. No outright prominence of dominance outside of the PlayStation and now even that’s in decline. Perhaps this is why they loaded so much onto the PS3 to begin with. Maybe they expected the videogame division, their most prominent one in recent memory, to jumpstart their other businesses which explains the drive for pushing the Cell processor and the Blu-ray format (techs to use in other sectors).

Because Sony bet so strongly on this horse with all eggs in this one basket, they crippled themselves. Forgetting about the economic climate, they see their traditional image of high-quality (and often pricier) technology usurped by cheaper and/or more innovative competitors in every sector. Research & Development is costly and with how things stand now, I have to wonder if Sony has the motivation anymore to continue on in the tough-to-profit world of videogames...especially if Microsoft doesn’t leave the picture and Apple continues to dabble. In their days of record success, they delivered a profit but not one that was proportional to their outstanding revenues. Putting a lot in to get a little back.

It will be very hard for them if they choose to compete in the next generation because it is clear (and really has always been clear) that the videogame market as it stands today can’t handle much more than 2 major competitors at a time. Sony WILL blink trying to out-money Microsoft who also has their problems with Apple (and even Google, if your forecasting of Android becoming standard in notebook computers ever pans out). It’s Nintendo’s generation to mess up in the 8th because they will have a beyond tremendous advantage from the 7th (last gen’s winner always gets a head start in the next gen outside of self-sabotage). So how can Sony continue on against these odds? They are at heart and soul an electronics/technology company and not necessarily a videogame company. Do they know how to proceed in this particular business for the future after the ‘bigger badder tech’ race has been dismantled?

But it’s the Era of Obama and there is hope. Perhaps if the company as a whole realigned itself under the original visions of the founders Masaru Ibuki and Akio Morita in the restructuring. How did they originally view the ‘Tokyo Telecommunications Engineering Corporation’? How can Sony today realign themselves with those previous successes?

CCurrently in Japan, land of Sony vs. Nintendo, Sony sees some improvement with their PlayStations. Maybe due to the natural need for alternatives when there’s only one choice, the people there have begun buying more PSPs and PSP games enough to look more competitive with the almost monopolizing DS from Nintendo. Over there handhelds have become the primary consoles and home systems have become secondary. Handhelds are always about 2 steps behind when it comes to tech power so maybe that’s something Sony could keep in mind if they decide to continue competing. The economy is crumbling there like everywhere stifling sales a bit across the board so it makes sense to deliver a novel but cheaper-priced piece of entertainment technology.

If Sony wants to continue in this area of business, they will have to start at home base first: Japan, still the capital of the videogame industry. If not, they are finished in the world of games without Ken Kutaragi’s passion to fuel them.