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[Shinta]

Cifaldi makes a very astute observation: Tretton's / Sony's strategy directly contests analyst sentiment.

The two draw the line on the health of the retail market. Sony is betting the PS4 will revive the market. Analysts are betting that the market has permanently shifted.

We'll have to wait and see which one is correct.

I agree that this is the premise. That's why I agree with Tretton completely. He said pretty plainly, no one is going to confuse Uncharted with their cell phone. They're just not the same thing and one isn't taking away the sales of the other.

Sales will pick up when new consoles hit in my opinion. And Sony is doing a lot to cater to people who don't want to pay full price with lots of smaller indie games, free games, and PS+.

I think they have clear eyes on this and are making good calls. Hopefully it works out for them.

It's up to hardcore gamers to actually support them though. They've bet on us. Here's hoping everyone realizes that and doesn't let them down.

 

[shinra-bansho]

Yeah, essentially the divergence in view is whether the downturn is due to the end of a product adoption cycle or a mobile exodus. If it is a mobile exodus then really nobody wins; not the big three and not publishers or developers. But I don't really see mobile substitution happening, yet at least.

 

[bridegur]

Sony is the only company that seemed to really care about people really into games this generation, and it seemed to work out alright for them. I'm glad it looks like they're still headed in that direction.

 

[Commanche Raisin Toast]

Sony's insistence on 'instant' gaming is huge. They aren't focusing only on the core. The analysts are completely missing the point of their presentation. Just because they didn't show how the Netflix asp will work?

 

[McHuj]

Why should I go watch blockbuster movies when I can get all my entertainment from Youtube? Stupid movie studios.


Really? So what should Sony do? They already make phones and tablets that run shitty Android games. So are they arguing that Sony should be making the PS4 in the first place and just become a HTC/Nokia/Samsung OEM of Android devices?

 

[Man-is-Obsolete]

150 million. PS2 alone reached the same numbers in much shorter time. And it didnt cause such a huge money loss like the PS3 did.The opposite to be exact. And the most succesful game by far on 360 was Kinect Adventures.

You don't really believe that do you? Being packed in with every kinect camera and kinect bundle does not make the game the most successful game. It was a free giveaway game, that as far as I know couldn't even be bought standalone.

 

[hoos30]

Sony is the only company that seemed to really care about people really into games this generation, and it seemed to work out alright for them. I'm glad it looks like they're still headed in that direction.

Jesus, not this.

Sony, like the others, a corporation and they don't give a crap about "people". They only care about your money.

 

[Opiate]

Sony is the only company that seemed to really care about people really into games this generation, and it seemed to work out alright for them. I'm glad it looks like they're still headed in that direction.

Ugh.

1) I reject the notion that "Sony is the only one who cares about TRUE gamers!" To be quite frank, if you ever have thoughts like that (with any company, not just Sony), you should probably question your objectivity.

2) This last generation did not work out "alright" for Sony. The PS3 remains the worst financial disaster in video game history by most metrics I can think of. It lost more money than the original Xbox or the Dreamcast. It lost more marketshare than any system in history.

 

[Opiate]

Okay, I'm going to repeat my argument because I still feel some people aren't grasping it. It isn't that a focus on the "core" is necessarily bad; it has upsides and downsides.

1) Focusing on the "core" gamer demographic is safe and reliable, but also low margin. You aren't likely to make oodles of money focusing on this demographic, but you aren't likely to completely fail either.

2) Focusing on "casuals" is risky and may lead you to fall flat on your face, but it also has a much higher upside. The potential rewards are very high if you are smart enough to figure out how to capture this demographic, but the potential for failure is also higher.

3) You are very unlikely to capture both at the same time. There is too much competition, and if you treat "casual" gamers as your secondary market then you probably won't beat out competitors willing to treat "casual" gamers as their primary market.

So I think you have to choose who to focus on, and I don't think it's obvious which one to choose. For a variety of reasons as already detailed before, I think a company in Sony's position needs to take some risks in the hope of breaking out of their rut, so I probably would have taken the risk and gone with a "casual" focused system, but I don't think it's incredibly stupid and bad that they didn't, as long as one of their departments is out there making those risks.

 

[shinra-bansho]

Treating the "casual" games as secondary concerns like Eyetoy or Singstar will simply not be sufficient. These types of games will need to be given the AAA treatment a la Wii Fit and Kinect.

In this market, treating casuals as a secondary concern -- as a group that can jump on board if they want to but they aren't the main focus -- won't compete against your iPads and Browser games and other portables which put casuals in the drivers seat and treat them as the stars of the show.

Casual gamers have options now, and you won't win them by default simply because they have nowhere else to go.

Does a platform need to attract these casuals to be a successful and worthwhile venture. Why?

Why compete in a crowded space with products far more suited to the task?

Presumably, this is premised on the notion that the EyeToy and SingStar demographics drove the success of the PS2. I'm not sure where this notion derives. Yes, I don't doubt the PS2's success wasn't driven by the ultra-enthusiast gamer but rather by a more casual or mainstream gamer - but the "casual gamer" that comes to mind is the COD/FIFA/Madden/few key titles a year consumers that persist today.

 

[antonz]

Focusing solely on the core helps get an early install base but that's about it. Those same core gamers buy 5-10 million copies of Sonys biggest games while 60 million others don't care.

Focusing solely on the core does not bring long term success. Sony has been very lucky to have an industry that has a hardon for them so that even when they monumentally fuck up the industry still treats them as a golden goose and keeps the software flowing so the fuck up doesn't appear as bad.

 

[Big-E]

Casual market is gone. The Wii's dropoff and the WiiUs abysmal start shows two things. One, that casuals are not loyal and two, that real tablets have taken the casual market. Sony making a casual focused machine would be a disaster as they have no ip at all that can capture casuals like Nintendo can and Nintendo lost the casual market for a while now. PS3 cost them boatloads of money due to R&D and component costs, two things which will not be as severe for them this time around. 360 and PS3 pretty much proved where the money is on the home console scene and I don't think that is going to change at least in the near future.

 

[Opiate]

Does a platform need to attract these casuals to be a successful and worthwhile venture. Why?

Not necessarily. I am not saying a "core" focused system is automatically a terrible idea; it has upsides. I think for Sony in particular it's not ideal, but it's not terribly stupid either.

Why compete in a crowded space with products far more suited to the task?

Because the potential upside is higher. The "hardcore" market is now a very mature market with low profit margins even if you succeed.

Presumably, this is premised on the notion that the EyeToy and SingStar demographics drove the success of the PS2. I'm not sure where this notion derives.

No, the opposite actually. It's supposed to represent a contrast between games like Singstar/Eyetoy and something like, say, Wii Sports.

Singstar and Eyetoy were late-generation additions to the PS2 and were never really the focus for the system. By contrast, Wii Sports was the headlining event of the Wii, launched with the system and was the driving force behind the whole system's philosophy.

I'm suggesting that a few a Singstar/Eyetoy approach is no longer adequate; you can no longer expect to capture the casual market by throwing them a few bones late in the generation. That worked with the PS2 because there really wasn't much competition; again, iPhone didn't exist, iPad didn't exist, Browser and F2P PC gaming did not exist. Now, if you want to capture the casual market, you have to be much more aggressive and put casual gamers first. Or, said differently: I am saying that the philosophy of "capture the core first, get casuals later" is an antiquated philosophy that will not work in today's market. The days where that worked are long gone. There is simply too much competition, and if you want to capture the casuals you have to focus on them first and foremost and not treat them like a secondary objective.

 

[Opiate]

Casual market is gone.

It is gone, but that doesn't mean it can't come back. I agree that I don't see an easy way to bring them back off the top of my head -- but then again, I didn't see the Wii coming, either.

The fact that you and I cannot personally think of a way to capture the casual interest again does not mean that no way exists, it only means we haven't thought of it. In fact, I feel very strongly that it would be possible to capture the casual market again, but it would require someone to really think outside of the box and come up with something totally unexpected like the Wii Mote was. It probably would not be motion control, because at this point that's completely expected.

The downside to doing something totally new and unexpected is that you have little idea how the market will react. It's certainly a risk, but the upside would be very big.

 

[Meatvillain]

Not necessarily. I am not saying a "core" focused system is automatically a terrible idea; it has upsides. I think for Sony in particular it's not ideal, but it's not terribly stupid either.



Because the potential upside is higher. The "hardcore" market is now a very mature market with low profit margins even if you succeed.



No, the opposite actually. It's supposed to represent a contrast between games like Singstar/Eyetoy and something like, say, Wii Sports.

Singstar and Eyetoy were late-generation additions to the PS2 and were never really the focus for the system. By contrast, Wii Sports was the headlining event of the Wii, launched with the system and was the driving force behind the whole system's philosophy.

I'm suggesting that a few a Singstar/Eyetoy approach is no longer adequate; you can no longer expect to capture the casual market by throwing them a few bones late in the generation.

You could sayit t worked for Kinect as well, though there was a stronger effort behind it with a console relaunch and it's arguable that Microsoft shifted focus in the process.

I do really agree with the notion that if you're going to focus on casual gaming or the more traditional sort it's really a case of one or the other at this point. The casual audience is far more lucrative, but I also think there is far greater potential for disaster when competing with products that are now far more established and in some cases are humongous household names even greater than names like "Nintendo" or "Playstation".

I'm inclined to say Sony are smarter to target the traditional videogame market. While as a company they may be in a position where a huge influx of profits driven by a casual focus would probably help set them back on track I also think they'd be well-served by a steady and healthy core gaming business as some sort of baseline.

Sony can chase the casual market, but I'm inclined to think that they're better off doing that with other products, not with a videogame console.

I'm no sort of analyst, though, just a dude who likes to play videogames.

 

[Big-E]

It is gone, but that doesn't mean it can't come back. I agree that I don't see an easy way to bring them back off the top of my head -- but then again, I didn't see the Wii coming, either.

The fact that you and I cannot personally think of a way to capture the casual interest again does not mean that no way exists, it only means we haven't thought of it. In fact, I feel very strongly that it would be possible to capture the casual market again, but it would require someone to really think outside of the box and come up with something totally unexpected like the Wii Mote was. It probably would not be motion control, because at this point that's completely expected.

The downside to doing something totally new and unexpected is that you have little idea how the market will react. It's certainly a risk, but the upside would be very big.

Ya but I don't think anyone has that answer either. To get the casuals again you need to usurp iOS and Android. Those are mobile devices and thing directly connected to a tv is going to have a hard time fighting that.

 

[Opiate]

You could sayit t worked for Kinect as well, though there was a stronger effort behind it with a console relaunch and it's arguable that Microsoft shifted focus in the process.

That is exactly what I'd argue. It would take a reinvention and 500 million+ in advertising. And even then, the returns for Kinect were significantly diminished relative to the Wii. It just isn't something you can half-ass anymore and expect big returns like you could in the PS2 days.

I do really agree with the notion that if you're going to focus on casual gaming or the more traditional sort it's really a case of one or the other at this point. The casual audience is far more lucrative, but I also think there is far greater potential for disaster when competing with products that are now far more established and in some cases are humongous household names even greater than names like "Nintendo" or "Playstation".

I agree entirely.

I'm inclined to say Sony are smarter to target the traditional videogame market. While as a company they may be in a position where a huge influx of profits driven by a casual focus would probably help set them back on track I also think they'd be well-served by a steady and healthy core gaming business as some sort of baseline.

Certainly that's possible. I'd also point out again that whatever risks Sony does take don't necessarily have to be in their gaming segment.

 

[shinra-bansho]

No, it's not. It's supposed to represent a contrast between games like Singstar and Eyetoy and something like, say, Wii Sports.

Singstar and Eyetoy were late-generation additions to the PS2 that did reasonably well. Wii Sports was the headlining event of the Wii, launched with the system and was the driving force behind the whole system's philosophy.

I'm suggesting that a few a Singstar/Eyetoy approach is no longer adequate; you can no longer expect to capture the casual market by throwing them a few bones late in the generation. That worked with the PS2 because there really wasn't much competition; again, iPhone didn't exist, iPad didn't exist, Browser and F2P PC gaming did not exist. Now, if you want to capture the casual market, you have to be much more aggressive and put casual gamers first.

To wit: I am saying that the philosophy of "capture the core first, get casuals later" is an antiquated philosophy that will not work in today's market. The days where that worked are long gone. There is simply too much competition.

I think the distinction to draw is what is meant by "casuals."

I don't really take "capture the core, get casuals later" as literally referring to the traditional market and the new expanded audience that these monikers have now become. I take it as no different than targeting different portions of a product adoption cycle. I take it as no different to the approach taken with the PS2 and predecessors that met reasonable success.

Capture the early adopter, then successively expand your market with price reduction and improvement of value proposition.

I don't think Sony expect to capture the expanded audience with late additions to their system. I don't think the inclusion of a camera and lightbar is intended to really capture that market in any meaningful way.

I don't think "putting casual gamers first" will work in the home console space without some sort of lightning in a bottle. The only example we have of it is really the Wii with its Sports phenomenon.

 

[Opiate]

Ya but I don't think anyone has that answer either. To get the casuals again you need to usurp iOS and Android. Those are mobile devices and thing directly connected to a tv is going to have a hard time fighting that.

Absolutely, that appears to be the case. Certainly the Wii U isn't the answer, as available evidence shows.

But a smart, perceptive company might be able to figure it out, and I think many analysts were hoping Sony would be that company. It doesn't mean the PS4 is a disaster or anything, it just isn't a reinvention of the formula, which is what analysts want.

 

[Satchel]

Right. The advantage is being able to play a lot more games that tablets simply cannot play, if you want to at least. And all the while offering the same crummy tablet games to keep these people in familiar territory. Best of both worlds, something tablets don't and won't offer.

Soooooo the PS3 doesn't offer the opportunity to make cheap casual games?

So what are minis?

 

[Darryl]

It is gone, but that doesn't mean it can't come back. I agree that I don't see an easy way to bring them back off the top of my head -- but then again, I didn't see the Wii coming, either.

The fact that you and I cannot personally think of a way to capture the casual interest again does not mean that no way exists, it only means we haven't thought of it. In fact, I feel very strongly that it would be possible to capture the casual market again, but it would require someone to really think outside of the box and come up with something totally unexpected like the Wii Mote was. It probably would not be motion control, because at this point that's completely expected.

The downside to doing something totally new and unexpected is that you have little idea how the market will react. It's certainly a risk, but the upside would be very big.

I think there's still a good chance to capture the casual market with the Wii U. They bet big on local multiplayer and I think that one day, that's going to be really big again. I can already see a fear (although it has existed since the start of the Internet) brewing with this always-connected-ness. Was there two games that had this fear on display during the Playstation Conference? We just got through a huge period of expansion for social networking, overall usage could slow and people might look for ways to get that need satisfied. No one wants to talk on Facebook? Well, let's get together and play video games.

I don't know, but I really think there's a perfect storm brewing for local multiplayer and I would've placed my bets on the same horse that Nintendo has.

 

[beast786]

I think there's still a good chance to capture the casual market with the Wii U. They bet big on local multiplayer and I think that one day, that's going to be really big again. I can already see a fear (although it has existed since the start of the Internet) brewing with this always-connected-ness. Was there two games that had this fear on display during the Playstation Conference? We just got through a huge period of expansion for social networking, overall usage could slow and people might look for ways to get that need satisfied. No one wants to talk on Facebook? Well, let's get together and play video games.

I don't know, but I really think there's a perfect storm brewing for local multiplayer and I would've placed my bets on the same horse that Nintendo has.

Yep , nintendo totally get the local multiplayer part. By shipping a single gamepad and cant even buy another. Forces you to play asymmetrical play on buying extra controls that are gimped and cant be used as main. Worst decision for local multiplayer ever.

 

[Alchemy]

Selling your products to the people who do want it is the smarter choice long term. Blue Ocean is not sustainable, ask Nintendo. It is very volatile as new markets can easily eat up your consumer base.

 

[Darryl]

Yep , nintendo totally get the local multiplayer part. By shipping a single gamepad and cant even buy another. Forces you to play asymmetrical play on buying extra controls that are gimped and can cant be used as main. Worst decision for local multiplayer ever.

It's bad local multiplayer for core gamers, but for the casual crowd that extra social interaction is a bonus and we're talking about that specific crowd. There's also the Nintendo Land, NSMB:U, Smash Bros, Mario Kart, Wii Sports U all inevitably coming within a short time after launch. I think it's safe to say Nintendo bet hard on the casual local multiplayer crowd.

 

[deviljho]

Selling your products to the people who do want it is the smarter choice long term. Blue Ocean is not sustainable, ask Nintendo. It is very volatile as new markets can easily eat up your consumer base.

The point is that Sony has many departments and they can't play it safe in all of them. Sooner or later, they will have to accept a big risk in some division in an attempt to right the ship.

 

[Thoraxes]

Looking at their TV strategy, I think doing initially the same with the PS4 is just them not learning from their mistakes at all.

The enthusiast will be happy though.

 

[beast786]

It's bad local multiplayer for core gamers, but for the casual crowd that extra social interaction is a bonus and we're talking about that specific crowd. There's also the Nintendo Land, NSMB:U, Smash Bros, Mario Kart, Wii Sports U all inevitably coming within a short time after launch. I think it's safe to say Nintendo bet hard on the casual local multiplayer crowd.

You can make a list of games for every single console that has some type of co-op. Giving names of software means nothing.

Kinect is much better causual co-op than any nintendo land or even Smash Bros. Because now you have to buy gimped controller extra just so they can sit aside after than one use, while one person gets the right controller.

If casual is your goal with local multilayer. Microsoft has that packed. No controllers needed for local multiplayer and everyone around can enjoy it, its better than move because even with move you need extra expensive controller. I have Wonderbook and eye pet. And my son and his friends love watching them self on tv and play but for others to enjoy I still need to buy some move controllers that will just sit on the side. Also, I still have to teach them how to use buttons on move etc. Kinect takes away all that hurdles and people can just walk in the room and within sec will learn to enjoy it. That is what casual gamers like, small burst of entertainment. That is partly why temple run and all the quick stuff on the phone is a hit. Casual gamers like fast food version. They dont want to sit and wait and learn and go over the menu ingredients ect.

 

[encephalon]

10-15 years ago, didn't these "casual" gamers play, for back of a better term, "core" games? I have a specific memory of two female cousins who played games casually playing Castlevania SotN on the Playstation. In a modern context, they way people talk about "casual" gamers this kind of scenario seems unthinkable. Is this true and if so, what happened? Did individual game franchises stop being exciting enough for the general public to be interested in these games?

 

[beast786]

10-15 years ago, didn't these "casual" gamers play, for back of a better term, "core" games? I have a specific memory of two female cousins who played games casually playing Castlevania SotN on the Playstation. In a modern context, they way people talk about "casual" gamers this kind of scenario seems unthinkable. Is this true and if so, what happened? Did individual game franchises stop being exciting enough for the general public to be interested in these games?

Yes, the definition has changed. Smart phones , tablets with App store have introduced new type of gamer. They would only want to play for short time without spending to much time to learn. Its almost a time passer than actually wanting to play a game.

I take time out to play video games. And most of casual of this gen only pay to kill time between things they actually enjoy.

 

[shinra-bansho]

10-15 years ago, didn't these "casual" gamers play, for back of a better term, "core" games? I have a specific memory of two female cousins who played games casually playing Castlevania SotN on the Playstation. In a modern context, they way people talk about "casual" gamers this kind of scenario seems unthinkable. Is this true and if so, what happened? Did individual game franchises stop being exciting enough for the general public to be interested in these games?

The "casual" moniker has essentially be co-opted to mean the new expanded audience - the consumers who drove the success of Wii Sports and the Wii, Just Dance; who continue to drive up AppStore revenues, and grew the Zynga bubble.

I think it's a misconception that the "casual" gamer you're referring to has disappeared. I don't think 155M PS3s and 360s could have been sold to just the enthusiast gamer.

 

[Darryl]

10-15 years ago, didn't these "casual" gamers play, for back of a better term, "core" games? I have a specific memory of two female cousins who played games casually playing Castlevania SotN on the Playstation. In a modern context, they way people talk about "casual" gamers this kind of scenario seems unthinkable. Is this true and if so, what happened? Did individual game franchises stop being exciting enough for the general public to be interested in these games?

I think casual/hardcore just has way too many definitions. I have a very broad definition for it, which is anyone who plays video games but would not invest time into the exploration of the hobby.

Others think it's a word for people who got curious about this Angry Birds thingy, or invited to join Poker World on Facebook, or who were driven by the exclusivity of the Wii and wanted one as a living room showroom piece. These guys do not game outside of this.

 

[Dark Octave]

If anything, Nintendo stance this gen compared to last has done nothing but confirm that seeking the attention of the hard core is the way to go.

 

[Tellaerin]

I'll just say this. As one of those so-called "true" or "core" gamers, I'm glad that someone's trying to cater to my particular demographic, rather than abandoning it to chase after the "casual" audience. Whether or not this is a sustainable strategy, and how profitable it'll prove to be for Sony, I can't say yet. Hopefully there are enough of us out there to demonstrate that we're still a viable market.

 

[speculawyer]

Many of these analysts don't get it.

The money in gaming is made by selling good games to gamers willing to pay for a good experience. You can eek out a living by creating free-to-play games but it is just not going to be a consistent market. Zynga was their darling . . . and it collapsed.

 

[deviljho]

Many of these analysts don't get it.

The money in gaming is made by selling good games to gamers willing to pay for a good experience. You can eek out a living by creating free-to-play games but it is just not going to be a consistent market. Zynga was their darling . . . and it collapsed.

No, they get it. They are saying that the money from the current PS4/Gaikai strategy won't be enough to fix Sony's larger problems.

 

[just tray]

There's a small yet dedicated group of people who will always buy dedicated gaming machines. But no one is going to be seeing iPhone or iPad numbers.

Also, what happens when the app store opens up on the AppleTV?

Just another day in the office for Nintendo,Microsoft,and Sony. Apple TV fve years from now will be outdated. And that's compared to a 360 and ps3

 

[Valkyria]

Okay, I'm going to repeat my argument because I still feel some people aren't grasping it. It isn't that a focus on the "core" is necessarily bad; it has upsides and downsides.

1) Focusing on the "core" gamer demographic is safe and reliable, but also low margin. You aren't likely to make oodles of money focusing on this demographic, but you aren't likely to completely fail either.

2) Focusing on "casuals" is risky and may lead you to fall flat on your face, but it also has a much higher upside. The potential rewards are very high if you are smart enough to figure out how to capture this demographic, but the potential for failure is also higher.

3) You are very unlikely to capture both at the same time. There is too much competition, and if you treat "casual" gamers as your secondary market then you probably won't beat out competitors willing to treat "casual" gamers as their primary market.

So I think you have to choose who to focus on, and I don't think it's obvious which one to choose. For a variety of reasons as already detailed before, I think a company in Sony's position needs to take some risks in the hope of breaking out of their rut, so I probably would have taken the risk and gone with a "casual" focused system, but I don't think it's incredibly stupid and bad that they didn't, as long as one of their departments is out there making those risks.

This bring me several questions to my mind. So how did psx became a success if you say that core has a low margin? What is low margin for you?

How do you claim that it's impossible to capture core and casuals in the same machine when you can see that's what happened in Ps2, NDS and X360? And how a casual can feel that it's not a primary objective of a console if their knowledge about gaming it's close to zero. Kinnect on the news selling as a new console it's what pushed their casual sales, those people have no idea that X360 was white before or what the hell happened with FFXIII.


Apart for that, in my opinion this kind of analysis are always shortsighted, it happens the same in every industry and you can see it clearly in the stocks market. The flavor of the week changes every week indeed, so you better make a business plan with a few years of foresight it you want to keep afloat. This strategy have proved itself to work, what happened with Wii as Wii U shows for now it's the exception that confirms the rule. (I don't know if you have this idiom in English).

 

[tim.mbp]

I'll just say this. As one of those so-called "true" or "core" gamers, I'm glad that someone's trying to cater to my particular demographic, rather than abandoning it to chase after the "casual" audience. Whether or not this is a sustainable strategy, and how profitable it'll prove to be for Sony, I can't say yet. Hopefully there are enough of us out there to demonstrate that we're still a viable market.

Who abandoned it?

 

[Paul Alexander]

I think you should read a bit more:

Shuhei Yoshida interview.

It's not just a AAA 60$ machine. Hell, the ps3 had more small interesting games that the 360 ever had. They Still have the pub fund. This ain't going away.

I completely agree that Sony's done an excellent job fostering relationships with great indies. This has nothing to do with profitability, or with my argument.

 

[James Sawyer Ford]

Okay, I'm going to repeat my argument because I still feel some people aren't grasping it. It isn't that a focus on the "core" is necessarily bad; it has upsides and downsides.

1) Focusing on the "core" gamer demographic is safe and reliable, but also low margin. You aren't likely to make oodles of money focusing on this demographic, but you aren't likely to completely fail either.


2) Focusing on "casuals" is risky and may lead you to fall flat on your face, but it also has a much higher upside. The potential rewards are very high if you are smart enough to figure out how to capture this demographic, but the potential for failure is also higher.

3) You are very unlikely to capture both at the same time. There is too much competition, and if you treat "casual" gamers as your secondary market then you probably won't beat out competitors willing to treat "casual" gamers as their primary market.

So I think you have to choose who to focus on, and I don't think it's obvious which one to choose. For a variety of reasons as already detailed before, I think a company in Sony's position needs to take some risks in the hope of breaking out of their rut, so I probably would have taken the risk and gone with a "casual" focused system, but I don't think it's incredibly stupid and bad that they didn't, as long as one of their departments is out there making those risks.

I don't think it's low margin. The problem is, companies like Microsoft and Sony made mistakes this generation that turned what could have been a medium to high margin business into a low margin business.

Microsoft made mistakes with their hardware design that resulted in eating huge losses due to the RROD. However, their business has been quite profitable for a while now, and while it's hard to analyze their financial situation over the span of a generation (due to Microsoft lumping the gaming business in with other entertainment devices), I think it's fairly safe to say they're profitable overall, and without RROD would have been significantly profitable.

Sony chased non-gaming enthusiasts with Blu-Ray and it resulted in them losing billions of dollars. Even so, Sony came out of that financial train wreck with a business that today is profitable and will sell over 100 million units in its lifecycle, and may even exceed the Wii's sales when it gets close to the end of its life.

By avoiding these mistakes, that business goes from low-margin to fairly decent margins for both companies.

Sony went after the core with the PS1/PS2, and I'd argue that those were both very profitable businesses, perhaps not to the magnitude of the Wii, but certainly gave them a valuable and reliable income stream without the risks associated with boom, bust, and the inevitable instability that Nintendo has incurred with the Wii.

I don't think Sony needs to take very many risks to get out of the "rut". For the most part, they're already out of the rut with the PS3, and by designing a much better system from the start for PS4, with plans in place for easier cost reduction, a focus on higher margin digital distribution, then they will avoid the pitfalls of the previous generation while hoping to come close to the business they did with the PS1 and PS2, from a profitability standpoint.

 

[Oersted]

Remember PS1 or PS2? They have been runaway successes. No core/hardcore/casual/true/untrue gamer bullshit. Just success. So, when we say " Is Sony making a mistake by betting the farm on 'true' gamers?", aren´t we just expecting it will be less succesful?

Where did I say PC users don't use Origin or Steam? >_> I said there are ones we cannot count that do not use either in addition to the ones who already use Steam(40m+) and Origin(21m+). It is foolish to think that absoluty everyone on PC uses either.

Also, that's over 61m+ that can be added to the PS3/360 numbers. Go ahead and add the Xbox and Gamecube numbers even. They will still be less than PS3/360/PC numbers in a shorter time frame.

Also, I don't know why you switched to 100m in 5 years now. The PS2's price was as low as 150? 5 years after it was released. The 360 was 250 to 300 in 2009. Even when you account for inflation, it is still way less money to pay. This only reinforces my point further as both were at a higher price point and still managed to sell as much as they did.

Edit: As for Hirai's prediction, I believe he changed it later to be similar to PS1 numbers and not PS2's.
Edit: MS and Sony losing money and having a terrible execution/higher price point != core market shrinking and not growing. I am trying to grasp why you included that.

Sigh, its getting silly. Now you have to add PC numbers to make it equal? Well, than we had PC gaming during PS2, believe it or not. A market which is growing because of "casual" offerrings btw.

You don't really believe that do you? Being packed in with every kinect camera and kinect bundle does not make the game the most successful game. It was a free giveaway game, that as far as I know couldn't even be bought standalone.

All those core gamers rushing to buy that Kinect gimmick...

 

[Canon]

They're appealing to Sony fans, not "true gamers" whatever that means. We'll see how big that base is when the console releases.

 

[Opiate]

I don't think it's low margin. The problem is, companies like Microsoft and Sony made mistakes this generation that turned what could have been a medium to high margin business into a low margin business.

Yes, it's almost certainly low margin. Keep in mind that this isn't just evidenced by Sony and Microsoft; it's evidenced by EA, by Activision, by Ubisoft, by Take 2. Did you know that EA made more than 500 million in profit annually from 2001-2004? That's more made by EA alone every year than EA/Take 2/Ubisoft/Activision have made combined for the generation. There are a variety of things which suggest this tendency for low margins will only increase over time:

1) Production costs have increased by an order of magnitude over the last 10 years, while the consumer base hasn't nearly kept that pace. The natural consequence will be lower margins.

2) We're not seeing any new companies show real interest in the "core" gaming market. It's been literally 15 years since there was any serious attempt to create a new competitor entered. Generally, a high growth/high margin market segment will see continued new investments.

Of course, anything is possible. It could end up being high margin because the market isn't perfectly predictable. But I wouldn't count on it, as both evidence and logic point to low margins.

I don't think Sony needs to take very many risks to get out of the "rut". For the most part, they're already out of the rut with the PS3, and by designing a much better system from the start for PS4, with plans in place for easier cost reduction, a focus on higher margin digital distribution, then they will avoid the pitfalls of the previous generation while hoping to come close to the business they did with the PS1 and PS2, from a profitability standpoint.

This isn't just the gaming segment that's been in a rut for Sony; the entire company is bleeding slowly, and just announced further layoffs. They've lost ~20-30k employees over the last 5 years; that's like shedding 5-10 Nintendos worth of employees.

 

[Opiate]

This bring me several questions to my mind. So how did psx became a success if you say that core has a low margin? What is low margin for you?

It wasn't low margin then; it is now. Generally as markets mature the chances for profits decrease over time.

The early days of a market segment or industry are very risky but also very profitable for those who win. Consider the early days of "core" gaming; companies and consoles like Atari, Sega, TurboGrafx, Commodore 64, Nintendo, and Colecovision.

In the early days of gaming, there was enormous turnover and lots of failure. Most of those companies and consoles no longer exist or are shells of their former selves; in fact, only Nintendo is still around in the same capacity they once were. But it was also a time of enormous year-over-year growth and profit, allowing small companies to get much, much bigger if they played their hands right.

Compare that to today; we've had the same 3 companies (Nintendo, Sony, Microsoft) as the only real players for 15 years straight now. The market is much more stable, and safe, stable markets don't tend to be highly profitable.

How do you claim that it's impossible to capture core and casuals in the same machine when you can see that's what happened in Ps2, NDS and X360?

I do not at all agree that 360 captured a significant portion of casuals, but in general, the answer again is that the market has changed. Things change. The competition has gotten better.

Apart for that, in my opinion this kind of analysis are always shortsighted, it happens the same in every industry and you can see it clearly in the stocks market. The flavor of the week changes every week indeed, so you better make a business plan with a few years of foresight it you want to keep afloat. This strategy have proved itself to work, what happened with Wii as Wii U shows for now it's the exception that confirms the rule. (I don't know if you have this idiom in English).

Right, it's always a trade off. Safe, secure, reliable markets like "core" gaming are also typically the ones with low profit margins; risky, burgeoning markets like "casual" gaming are the high profit ones.

You cannot realistically expect to have both a safe, reliable market and a market with high profit margins for long. If "hardcore" gaming were both safe/reliable and profitable, then lost of other companies would be jumping to make new consoles and compete with Microsoft and Sony because every company loves the sound of markets like that.

The fact that nobody has shown any interest in entering this market for nearly 15 years tells us quite a bit.

 

[Opiate]

That last point seems like a very important one, to me. If the "core" or traditional market was safe and reliable while also simultaneously being high margin and highly profitable, then surely other companies would be tripping over themselves to enter this market. Every company loves the sound of a safe, reliable, highly profitable venture.

The fact that no one has shown any interest in entering the "core" market for 15 years -- and in fact if anything, Nintendo has shown a desire to move away from it -- is an important signal. It's a strong indicator that most people don't perceive this market to be very profitable; if they did, then new entrants would be popping up competing for our dollars. Instead, the market has slowly been consolidating.

 

[shinra-bansho]

Yes, it's almost certainly low margin. Keep in mind that this isn't just evidenced by Sony and Microsoft; it's evidenced by EA, by Activision, by Ubisoft, by Take 2. Did you know that EA made more than 500 million in profit annually from 2001-2004? That's more made by EA alone every year than EA/Take 2/Ubisoft/Activision have made combined for the generation. There are a variety of things which suggest this tendency for low margins will only increase over time:

1) Production costs have increased by an order of magnitude over the last 10 years, while the consumer base hasn't nearly kept that pace. The natural consequence will be lower margins.

2) We're not seeing any new companies show real interest in the "core" gaming market. It's been literally 15 years since there was any serious attempt to create a new competitor entered. Generally, a high growth/high margin market segment will see continued new investments.

Of course, anything is possible. It could end up being high margin because the market isn't perfectly predictable. But I wouldn't count on it, as both evidence and logic point to low margins.

This isn't just the gaming segment that's been in a rut for Sony; the entire company is bleeding slowly, and just announced further layoffs. They've lost ~20-30k employees over the last 5 years; that's like shedding 5-10 Nintendos worth of employees.

I'm not sure how publishers struggling with the HD transition is equivocal with a platform holder's margins based on hardware profits (if any) and software royalties.

Isn't the entire basis of the model that a loss-lead (to an extent, not ridiculous PS3 levels) is acceptable with early adopters because they are more likely to buy the games and generate the royalties sufficient to exceed that initial loss in the long run?

Economies of scale drive down the price of production and a more mass market product can consequently be sold at a profit on hardware to consumers that may generate less royalty revenue overall? Unless I have a misunderstanding of the general console business model.

----

If anything they need to "fix" TVs or get out of the business altogether.

Remember PS1 or PS2? They have been runaway successes.

Marketed on power as a generational upgrade, tremendous third party support, reasonable pricing. Yes, remembered fondly. The 360 emulated this strategy better this gen than the PS3. The only thing they'd need to do is get to reasonable pricing quickly to rinse and repeat the formula.

 

[Tutomos]

If by true gamers you mean people who'd pay $20 a month for a next gen PSN subscription then no, they're not making any mistakes.

 

[Opiate]

I'm not sure how publishers struggling with the HD transition is equivocal with a platform holder's margins based on hardware profits (if any) and software royalties.

It is evidence of a stagnating market, not proof of it. Sony is not only a hardware manufacturer; they spend significantly on software development, and that has significant costs, as evidenced by the numerous closures of Sony studios within the last couple years.

Isn't the entire basis of the model that a loss-lead (to an extent, not ridiculous PS3 levels) is acceptable with early adopters because they are more likely to buy the games and generate the royalties sufficient to exceed that initial loss in the long run?

Yes. It is a functional, reliable, but low margin business model.

Economies of scale drive down the price of production and a more mass market product can consequently be sold at a profit on hardware to consumers that may generate less royalty revenue overall? Unless I have a misunderstanding of the general console business model.

Yes, that is common. Keep in mind that three systems in history have made money with this model. Off the top of my head, all of these systems have employed the razor/blade model:

Sega Genesis
Sega Saturn
Sega Dreamcast
Turbo Grafx
Atari Jaguar
Playstation 1
Playstation 2
Playstation 3
Xbox
Xbox 360

And to my knowledge, only 3 of those had made any money at all; PS1/PS2/360. Otherwise, it's a long list of losers. Again, you can expect revenue, but profit expectations should be kept low. It has not historically been very profitable, and margins have only gotten thinner over time.

If anything they need to "fix" TVs or get out of the business altogether.

Yes, that's a possible approach, but again, Sony is bleeding everywhere. It isn't as simple as a single segment causing all their problems. The only reliable source of income over the last 5 years has been their insurance segment.

Sony has been rapidly jettisoning jobs, as you suggest. They've let go of 20-30k people over the last 5 years, which, again, is the equivalent of 5-10 Nintendos.

 

[erawsd]

Yes, it's almost certainly low margin. Keep in mind that this isn't just evidenced by Sony and Microsoft; it's evidenced by EA, by Activision, by Ubisoft, by Take 2. Did you know that EA made more than 500 million in profit annually from 2001-2004? That's more made by EA alone every year than EA/Take 2/Ubisoft/Activision have made combined for the generation. There are a variety of things which suggest this tendency for low margins will only increase over time:

Are you sure? Doing a quick google search says that Activision made $1billion dollars profit in 2011 and 1.1 billion in 2012.

http://www.gamespot.com/news/activision-blizzard-profits-hit-11-billion-in-2012-6403613

 

[DanteGhost]

That last point seems like a very important one, to me. If the "core" or traditional market was safe and reliable while also simultaneously being high margin and highly profitable, then surely other companies would be tripping over themselves to enter this market. Every company loves the sound of a safe, reliable, highly profitable venture.

The fact that no one has shown any interest in entering the "core" market for 15 years -- and in fact if anything, Nintendo has shown a desire to move away from it -- is an important signal. It's a strong indicator that most people don't perceive this market to be very profitable; if they did, then new entrants would be popping up competing for our dollars. Instead, the market has slowly been consolidating.

Some post above you said that the ps3 was one of the worst disasters in the history of videogames....Really? Is like im in 2007 all over again. If 75,000+ millions consoles sold is a failure then SONY should not even bother launching the Ps4. Also, the Playstation brand targets gamers, they always had and always will. what is people expecting?
If anything Sony seems to be playing their cards right, by targeting the consumers who made them succesful in the first place.