http://biz.gamedaily.com/industry/interview/?id=17209
GameDaily BIZ: Let's start by talking about the PS3 price cut. This is I think the earliest in a console's life that it's had its price reduced. Are you worried that this looks like a move out of desperation?
Phil Harrison: We launched PlayStation 1 in September of 1995 and at E3 in May of 1996, we dropped the price by 100 bucks... So it's exactly the same business plan that we have followed for PlayStation 1 and PlayStation 2. This is not a new path for us; it's a well trodden path. Because we control the manufacturing and we control the design of the machine, we can engineer out cost quickly and pass that on to the consumer through a price cut, or add value, which is what we've done with the 80GB SKU and Motorstorm. So I think it's a good strategy.
BIZ: Most people would say that $499 is still quite expensive for the average consumer, and some would argue that in order for Sony to really make an impact you'd need to match the Xbox 360 at $399. Would the financial hit at $399 be too much for Sony to take? What went into the decision to drop to $499?
Harrison: I think just looking at the cost of the components and the value of the machine, a $100 price cut is a great achievement adding that value, reducing the price to the consumer, so we're really happy with that approach. And the reaction from the very fastest sales channels that we can measure, like Amazon and some of the other online retailers... [he makes "whoosh" sound while pointing up].
BIZ: How much do you anticipate this boosting sales through the rest of this year?
PH: A lot. I'm probably the wrong person to ask from a North American perspective but I can see that the [initial reaction] is pretty strong, so it's off to a good start. [Note: Sony more recently said sales at their top 5 retailers increased 135 percent - Ed.]
BIZ: Can you talk about how much it costs Sony to make the PS3 now? Is the box still selling at a loss at $499?
PH: If you look at the price and cost curve of PlayStation 1 or 2, the most expensive machines are the ones you make at the beginning and the cost basically goes down like that [angles hand downward]. However, if you look at the line in detail it actually has some variation up and down as time goes on because of open market issues like currency, because of supply of commodity components like memory and things like that. So, although the downward trend is the right direction to be headed in, within the trend there's going to be some dynamic range. We don't actually disclose the details of this because it's our competitive advantage, but we know what the business model is, which is to get the installed base grown quickly and then we make money, lots of money, from software and services. [Note: Sony recently said its Q1 loss in the gaming division was mostly attributable to "the strategic pricing of PS3 at points lower than its production cost." - Ed.]
BIZ: An executive from a publisher this morning I think it was Capcom said that he'd expect another PS3 price cut some time later this year. Any thoughts on that?
PH: I have no idea. Also, my stock answer to those kinds of platform questions is I'm a software guy and I'm completely the wrong person to ask...
BIZ: True, but Sony has made you one of the key spokespeople, one of the faces of PlayStation...
PH: Well, from a software point of view, anything that drives greater installed base of PS3 is a good thing, and we're really happy with a $100 price cut. But I think from an industry point of view and a consumer point of view, the price cut is only one moment in time; what people should really focus on I believe is what we showed yesterday, which is a price cut supported by a slew of incredible games. Those two things combined is what makes a platform.
BIZ: It seems like the trend for third parties is to develop for 360 and then bring those games to PS3, which means the games are not taking full advantage of the PS3's power and it's up to the first-party games to show off the PS3's power. How will you convince third parties to design specifically for PS3 instead of porting or tweaking code? How can Sony reverse this trend?
PH: Well, I'll take the compliment if it was intended anyway that the first-party titles [look great]. We are clearly demonstrating the PS3 is capable of some amazing things and if you approach the architecture from the right direction, your games will shine on the platform. It's very natural, however, to see what some of the third parties are doing. They started to work on Xbox 360 before they did on PS3; they got some tools and technology and know-how established on the format before PS3. That situation will reverse fairly quickly organically, but what we're doing from a worldwide studios point of view is we're actually shifting some of our core technologies from exclusively being available to our studios to supporting third parties as well all third parties.
BIZ: Right, Edge...
PH: Edge, exactly. And that is delivering some of the core technologies that you saw here this week. Those same technologies are now available to our third parties.
BIZ: As an example of what I was talking about, the Call of Duty 4 trailer at the Microsoft conference looked amazing, but the game for some reason just didn't look as solid when it was shown at the Sony conference. But you believe this will even out as time goes on and developers take advantage of Edge?
PH: Exactly, and perhaps not surprisingly, I didn't get an invite to the Microsoft conference so I didn't get a chance to see that.
BIZ: Microsoft's video marketplace has been doing pretty well. You have an advantage of course because you can tap Sony Pictures, so why haven't we seen a movie and TV downloads service on PlayStation Network yet? When are we going to finally hear about that?
PH: I'm not going to give you any specific answer to that, but what we have demonstrated with the PlayStation Store is that we have a secure, reliable distribution method for getting bits 1s and 0s from a server onto somebody's PS3. Right now that's been for selling games and downloading free demos and trailers; it's not a big shift to extend the functionality of that.
BIZ: Right, but I guess part of it is working with the studios. Obviously you have Sony Pictures but how much of a challenge is it to get other studios on board? A number of studios have been supporting Microsoft's service and they've been trumpeting that. I would think Sony would want to counter with something as quickly as possible.
PH: [pauses] How do I answer that? ... E3 is very much about games. [smiles]
BIZ: There's no Metal Gear Solid 4 or FFXIII this year. So what is your big game to go up against Halo 3 later this year? What's going to drive PS3 sales this fall and holiday?
PH: If you go back to PS1 and PS2, we've never built the personality of the platform around a single game. It's always been around the breadth of the portfolio and the variety of games that you can experience, and now on PS3, the services as well. So I don't think you're going to get a single answer to that [question]. You're not going to get, "Oh it's going to be this game that we're going to go up against entertainment choices for consumers not just other consoles but movies or television shows or music." But I think the lineup that we have this year is pretty powerful and I'm very confident that we have everything we need at our disposal. Look at Ratchet & Clank: Future, a second generation title from Insomniac, Heavenly Sword, which I think is shaping up beautifully, Uncharted ... did you see that?
BIZ: Yes, it does look promising. So from what you've heard or seen, what's your general reaction to what your competitors have show at this E3?
PH: I have to really rely on the commentary from you and your colleagues to really digest it because I haven't had a chance to sit down and stream the conferences yet. Please, tell me. What do you think?
BIZ: Nintendo's new Wii Fit and balance board peripheral was intriguing from that whole health/fitness perspective and expanding the audience similar to how they did so with Wii Sports.
PH: Yeah it's nice of them to pay homage to a game called EyeToy Kinetic, which we did a couple years ago.
BIZ: I doubt they were thinking of that when they made Wii Fit.
PH: We have great photo of [Shigeru] Miyamoto at our booth at E3 one year playing with EyeToy [laughs].
BIZ: What do you make of the hardware problems and warranty adjustment for the 360? They are taking a billion dollar hit. It's a bit amazing isn't it?
PH: I don't think I need to add to their situation by making any comment on that. I think it's a very difficult situation for them and I'm sure they're working hard to overcome it. A hundred dollars per unit sold is a big reserve.
BIZ: The PSP redesign that was unveiled at the conference was interesting. It's lighter and a bit slimmer, but it's essentially the same with the exception of some video out and some onboard memory; it's just a very, very similar design and I guess a lot of people were expecting a more radical change, like when Nintendo redesigned the DS into the DS Lite. Why such a minimal change to the PSP?
PH: Do you play PSP?
BIZ: I do have one and I play it.
PH: [Harrison hands me the new PSP design] So when you're playing a PSP, and you've got it in your hands now, what would you change without ruining the form factor of the screen or the buttons?
BIZ: Well, one rumor suggested possibly adding in a second analog nub.
PH: That would change the format. The functionality of DS to DS Lite was exactly the same and the button layout was exactly the same.
BIZ: Was there ever any thinking of maybe adding some internal hard drive or new screen technology or something else?
PH: I think all of those things are possible, but that's a different format and that would mean designing some new game system. I think what the engineers in Japan have done is pretty impressive.
BIZ: Well, you do feel a difference when you first pick it up, but...
PH: When I was first handed the machine I was like, "So when are we going to get the final machines?" and they said, "That is the final machine." So I asked, "Does it have a PCB and a battery in it?" They said, "Yes" so I was like "Holy s**t." [laughs].
I don't mean to dismiss your comment but we think the ergonomics of the form factor works really well, and there wasn't a great deal to change other than for the sake of change. I don't think there's anything we should have done to the layout of the machine.
BIZ: Since Sony has settled with Immersion, when should we expect to hear about a new PS3 controller with rumble? One of the rumors we heard was that Sony is trying to balance battery life with rumble, wireless and motion sensing.
PH: I can't comment. We settled with Immersion; we kissed and made up from the point of view, and now we're enjoying exploring some things with them.
BIZ: But you will have rumble again in the near future? Is it exciting to you to be able to bring that feature back?
PH: Again, no comment. [smiles]
BIZ: OK, well let's talk about the Blu-ray format, which Sony has pinned its hopes on. How much are you looking to the Blu-ray movie format to help PS3 adoption? For example, I would think that Spider-Man 3 on Blu-ray later this year could be tied into a push for the console maybe even a pack-in for a limited time?
PH: Irrespective of PS3 as a game format, just looking at Blu-ray disc as a movie format, there's a lot of positive momentum behind it the Blockbuster announcement, some of the pricing announcements of the standalone players. These are positive factors... the lineup, the release of some great movies and even the BBC Planet Earth series. Those things have a kind of snowball effect and they start to buildup. And as a result, I think what will happen in the mind of a consumer you can never completely predict what happens in the mind of a consumer but I think what happens is the value they ascribe to the Blu-ray function of the PS3 increases. So their perception of the value of the entire PS3 package is enhanced because they go, "Oh, that is something that would be valuable in my entertainment consumption choices," whereas last holiday season I think it was harder for the mass market to really understand that Blu-ray disc brought to the player.
BIZ: Right, it's still a very small segment of the market though, since DVDs are going to be prevalent for many years I would imagine.
PH: Of course, and we'll take it one consumer at a time, but it's going to grow pretty strongly and obviously [more with] people like you and I you know, more leading edge media consumers but there's always that pyramid, somebody who has a cooler phone than you do, or a better laptop or better home theater setup. [It'll] trickle down.
BIZ: EA's John Riccitiello recently said that the game industry is "boring people to death" with "rinse-and-repeat" games and making games harder and harder to play or less accessible. As a software guy, do you agree with this? Do you think the industry needs to make some radical changes?
PH: I know John very well and his heart is absolutely in the right place on this. I think maybe the way he messaged it was a little harsh, but the concern that he's raising is absolutely valid. If we become an exclusive industry, then we will shrink, because you'll always have some churn. You'll have some people who can't get to level 5 or level 10 of a game because it's too hard, and they'll just peel off and we'll end up with an ever shrinking smaller and smaller market. And that won't be good for any of the stakeholders.
We think we've been quite successful in helping to grow the market. Clearly some of our competitors are helping to grow the market. Nintendo's been doing this very well. But look at Singstar, a 200 and something million dollar brand for us, which is definitely causing new users to come in and buy consoles. Buzz is a $100 million franchise for us millions of units sold in Europe and coming to the U.S. this year and I think will be very significant in the U.S. And I think that's another thing that will draw in new users.
Maybe [John's] comments were addressed more internally at EA than they were at the industry as a whole. I don't know what his intention was about his message, but he is absolutely right. If we don't keep an eye on the growth of our industry, then the heart and the internal organs will not survive.
BIZ: It was somewhat encouraging to see a few third-party exclusives for PS3 announced, such as Haze and Unreal Tournament III. Microsoft over the last year has chomped away at Sony's third-party exclusivity, where games that may have once been only on PlayStation are now on 360 too. Is more third-party exclusivity something that Sony is actively pursuing?
PH: I can't really comment because that's out of my domain, but I get asked this question a lot and it's kind of a curious question because I actually think that the gamers don't care. I think they don't care who makes them. They want to make sure that the best games are available for the system that they've chosen to validate that purchase and to give them a good experience. When they walk into the store they don't go and buy "that third-party game" Metal Gear Solid 4; they just buy the PS3 game Metal Gear Solid 4 or the PS3 game Heavenly Sword or the PS3 game Motorstorm... they don't really think [about], I believe, whether it's a first- or third-party game so long as the best games are available on their system. And I think what we showed over the totality of the lineup from yesterday is that we have that.
BIZ: How do you see the PlayStation Network (PSN) evolving over the next year or so? You have a number of interesting original games on there already, but how would you size up PSN compared to Xbox Live and maybe even what Nintendo is promising with WiiWare?
PH: I think PSN is kind of an umbrella that incorporates a lot of different aspects. In one sense, it's a set of technologies that enable game developers to empower their titles with a lot of connectivity and commerce. In another sense it's the PlayStation Store, which is for digital downloads... From a store point of view, what we showed yesterday things like Wipeout HD, Echo Chrome, Warhawk, SOCOM and Pain those five titles are what I think most people would consider equivalent (and in some cases actually are) disc based releases. They are high-spec, high value that's a bit harder to say about Echo Chrome because it doesn't have graphics but to have those available through digital distribution is a strong statement for us about where we're headed with that. Obviously we've got PS1 backwards compatibility, the ability to bring the historical archive to the format, so it's a good trend.
BIZ: You mention that some of these PSN games are like disc-based titles, and some in this industry think the future is going to be entirely digital distribution, where PS4 might not even have any discs... it would just be like a set-top box. Is that where all this is headed?
PH: I don't think we can talk about future PlayStation platforms today, but speaking generally or philosophically, I think it's not just the game industry but digital media consumption [as a whole] so I think we're part of a big wave of consumers moving from physical selection of content in a store to digital selection of content in a service.
BIZ: I realize we're basically out of time now but...
PH: Well, what from Sony stood out for you?
BIZ: I think Heavenly Sword and Uncharted continued to impress. The new IP Infamous looked quite good. And I was intrigued by Echo Chrome...
PH: There are a couple of twists in [Echo Chrome] that we haven't talked about, but there's a user created component to it as well.
BIZ: Interesting... continuing along the lines of LittleBigPlanet it seems.
PH: [User created content] is something I'm pushing really, really hard because I believe it makes a huge difference.
BIZ: One last question since we're already talking about user generated content. What do you make of Microsoft's XNA approach?
PH: Well, that's slightly different since that is programming rather than user created content and tools. I think it's a valid strategy; it's something we did a few years ago with Net Yaroze on PS1 and Linux on PS2. So we know that market pretty well and we know the importance of that, and I would really think about that as a talent generating program, meaning that those kinds of high-tech solutions are incredibly important in getting more programmers and artists to join our industry. Building in the "poppit" tools into LittleBigPlanet is a slightly different thing. That's more about users rather than potential employees.
BIZ: I've asked Microsoft about this before and they say that XNA has some very simple tools also essentially drag and drop and that you basically don't need any knowledge of programming or coding to use it.
PH: But you still need a PC... I'm talking about stuff embedded into the application. It's very different.
BIZ: Great speaking with you Phil.
GameDaily BIZ: Let's start by talking about the PS3 price cut. This is I think the earliest in a console's life that it's had its price reduced. Are you worried that this looks like a move out of desperation?
Phil Harrison: We launched PlayStation 1 in September of 1995 and at E3 in May of 1996, we dropped the price by 100 bucks... So it's exactly the same business plan that we have followed for PlayStation 1 and PlayStation 2. This is not a new path for us; it's a well trodden path. Because we control the manufacturing and we control the design of the machine, we can engineer out cost quickly and pass that on to the consumer through a price cut, or add value, which is what we've done with the 80GB SKU and Motorstorm. So I think it's a good strategy.
BIZ: Most people would say that $499 is still quite expensive for the average consumer, and some would argue that in order for Sony to really make an impact you'd need to match the Xbox 360 at $399. Would the financial hit at $399 be too much for Sony to take? What went into the decision to drop to $499?
Harrison: I think just looking at the cost of the components and the value of the machine, a $100 price cut is a great achievement adding that value, reducing the price to the consumer, so we're really happy with that approach. And the reaction from the very fastest sales channels that we can measure, like Amazon and some of the other online retailers... [he makes "whoosh" sound while pointing up].
BIZ: How much do you anticipate this boosting sales through the rest of this year?
PH: A lot. I'm probably the wrong person to ask from a North American perspective but I can see that the [initial reaction] is pretty strong, so it's off to a good start. [Note: Sony more recently said sales at their top 5 retailers increased 135 percent - Ed.]
BIZ: Can you talk about how much it costs Sony to make the PS3 now? Is the box still selling at a loss at $499?
PH: If you look at the price and cost curve of PlayStation 1 or 2, the most expensive machines are the ones you make at the beginning and the cost basically goes down like that [angles hand downward]. However, if you look at the line in detail it actually has some variation up and down as time goes on because of open market issues like currency, because of supply of commodity components like memory and things like that. So, although the downward trend is the right direction to be headed in, within the trend there's going to be some dynamic range. We don't actually disclose the details of this because it's our competitive advantage, but we know what the business model is, which is to get the installed base grown quickly and then we make money, lots of money, from software and services. [Note: Sony recently said its Q1 loss in the gaming division was mostly attributable to "the strategic pricing of PS3 at points lower than its production cost." - Ed.]
BIZ: An executive from a publisher this morning I think it was Capcom said that he'd expect another PS3 price cut some time later this year. Any thoughts on that?
PH: I have no idea. Also, my stock answer to those kinds of platform questions is I'm a software guy and I'm completely the wrong person to ask...
BIZ: True, but Sony has made you one of the key spokespeople, one of the faces of PlayStation...
PH: Well, from a software point of view, anything that drives greater installed base of PS3 is a good thing, and we're really happy with a $100 price cut. But I think from an industry point of view and a consumer point of view, the price cut is only one moment in time; what people should really focus on I believe is what we showed yesterday, which is a price cut supported by a slew of incredible games. Those two things combined is what makes a platform.
BIZ: It seems like the trend for third parties is to develop for 360 and then bring those games to PS3, which means the games are not taking full advantage of the PS3's power and it's up to the first-party games to show off the PS3's power. How will you convince third parties to design specifically for PS3 instead of porting or tweaking code? How can Sony reverse this trend?
PH: Well, I'll take the compliment if it was intended anyway that the first-party titles [look great]. We are clearly demonstrating the PS3 is capable of some amazing things and if you approach the architecture from the right direction, your games will shine on the platform. It's very natural, however, to see what some of the third parties are doing. They started to work on Xbox 360 before they did on PS3; they got some tools and technology and know-how established on the format before PS3. That situation will reverse fairly quickly organically, but what we're doing from a worldwide studios point of view is we're actually shifting some of our core technologies from exclusively being available to our studios to supporting third parties as well all third parties.
BIZ: Right, Edge...
PH: Edge, exactly. And that is delivering some of the core technologies that you saw here this week. Those same technologies are now available to our third parties.
BIZ: As an example of what I was talking about, the Call of Duty 4 trailer at the Microsoft conference looked amazing, but the game for some reason just didn't look as solid when it was shown at the Sony conference. But you believe this will even out as time goes on and developers take advantage of Edge?
PH: Exactly, and perhaps not surprisingly, I didn't get an invite to the Microsoft conference so I didn't get a chance to see that.
BIZ: Microsoft's video marketplace has been doing pretty well. You have an advantage of course because you can tap Sony Pictures, so why haven't we seen a movie and TV downloads service on PlayStation Network yet? When are we going to finally hear about that?
PH: I'm not going to give you any specific answer to that, but what we have demonstrated with the PlayStation Store is that we have a secure, reliable distribution method for getting bits 1s and 0s from a server onto somebody's PS3. Right now that's been for selling games and downloading free demos and trailers; it's not a big shift to extend the functionality of that.
BIZ: Right, but I guess part of it is working with the studios. Obviously you have Sony Pictures but how much of a challenge is it to get other studios on board? A number of studios have been supporting Microsoft's service and they've been trumpeting that. I would think Sony would want to counter with something as quickly as possible.
PH: [pauses] How do I answer that? ... E3 is very much about games. [smiles]
BIZ: There's no Metal Gear Solid 4 or FFXIII this year. So what is your big game to go up against Halo 3 later this year? What's going to drive PS3 sales this fall and holiday?
PH: If you go back to PS1 and PS2, we've never built the personality of the platform around a single game. It's always been around the breadth of the portfolio and the variety of games that you can experience, and now on PS3, the services as well. So I don't think you're going to get a single answer to that [question]. You're not going to get, "Oh it's going to be this game that we're going to go up against entertainment choices for consumers not just other consoles but movies or television shows or music." But I think the lineup that we have this year is pretty powerful and I'm very confident that we have everything we need at our disposal. Look at Ratchet & Clank: Future, a second generation title from Insomniac, Heavenly Sword, which I think is shaping up beautifully, Uncharted ... did you see that?
BIZ: Yes, it does look promising. So from what you've heard or seen, what's your general reaction to what your competitors have show at this E3?
PH: I have to really rely on the commentary from you and your colleagues to really digest it because I haven't had a chance to sit down and stream the conferences yet. Please, tell me. What do you think?
BIZ: Nintendo's new Wii Fit and balance board peripheral was intriguing from that whole health/fitness perspective and expanding the audience similar to how they did so with Wii Sports.
PH: Yeah it's nice of them to pay homage to a game called EyeToy Kinetic, which we did a couple years ago.
BIZ: I doubt they were thinking of that when they made Wii Fit.
PH: We have great photo of [Shigeru] Miyamoto at our booth at E3 one year playing with EyeToy [laughs].
BIZ: What do you make of the hardware problems and warranty adjustment for the 360? They are taking a billion dollar hit. It's a bit amazing isn't it?
PH: I don't think I need to add to their situation by making any comment on that. I think it's a very difficult situation for them and I'm sure they're working hard to overcome it. A hundred dollars per unit sold is a big reserve.
BIZ: The PSP redesign that was unveiled at the conference was interesting. It's lighter and a bit slimmer, but it's essentially the same with the exception of some video out and some onboard memory; it's just a very, very similar design and I guess a lot of people were expecting a more radical change, like when Nintendo redesigned the DS into the DS Lite. Why such a minimal change to the PSP?
PH: Do you play PSP?
BIZ: I do have one and I play it.
PH: [Harrison hands me the new PSP design] So when you're playing a PSP, and you've got it in your hands now, what would you change without ruining the form factor of the screen or the buttons?
BIZ: Well, one rumor suggested possibly adding in a second analog nub.
PH: That would change the format. The functionality of DS to DS Lite was exactly the same and the button layout was exactly the same.
BIZ: Was there ever any thinking of maybe adding some internal hard drive or new screen technology or something else?
PH: I think all of those things are possible, but that's a different format and that would mean designing some new game system. I think what the engineers in Japan have done is pretty impressive.
BIZ: Well, you do feel a difference when you first pick it up, but...
PH: When I was first handed the machine I was like, "So when are we going to get the final machines?" and they said, "That is the final machine." So I asked, "Does it have a PCB and a battery in it?" They said, "Yes" so I was like "Holy s**t." [laughs].
I don't mean to dismiss your comment but we think the ergonomics of the form factor works really well, and there wasn't a great deal to change other than for the sake of change. I don't think there's anything we should have done to the layout of the machine.
BIZ: Since Sony has settled with Immersion, when should we expect to hear about a new PS3 controller with rumble? One of the rumors we heard was that Sony is trying to balance battery life with rumble, wireless and motion sensing.
PH: I can't comment. We settled with Immersion; we kissed and made up from the point of view, and now we're enjoying exploring some things with them.
BIZ: But you will have rumble again in the near future? Is it exciting to you to be able to bring that feature back?
PH: Again, no comment. [smiles]
BIZ: OK, well let's talk about the Blu-ray format, which Sony has pinned its hopes on. How much are you looking to the Blu-ray movie format to help PS3 adoption? For example, I would think that Spider-Man 3 on Blu-ray later this year could be tied into a push for the console maybe even a pack-in for a limited time?
PH: Irrespective of PS3 as a game format, just looking at Blu-ray disc as a movie format, there's a lot of positive momentum behind it the Blockbuster announcement, some of the pricing announcements of the standalone players. These are positive factors... the lineup, the release of some great movies and even the BBC Planet Earth series. Those things have a kind of snowball effect and they start to buildup. And as a result, I think what will happen in the mind of a consumer you can never completely predict what happens in the mind of a consumer but I think what happens is the value they ascribe to the Blu-ray function of the PS3 increases. So their perception of the value of the entire PS3 package is enhanced because they go, "Oh, that is something that would be valuable in my entertainment consumption choices," whereas last holiday season I think it was harder for the mass market to really understand that Blu-ray disc brought to the player.
BIZ: Right, it's still a very small segment of the market though, since DVDs are going to be prevalent for many years I would imagine.
PH: Of course, and we'll take it one consumer at a time, but it's going to grow pretty strongly and obviously [more with] people like you and I you know, more leading edge media consumers but there's always that pyramid, somebody who has a cooler phone than you do, or a better laptop or better home theater setup. [It'll] trickle down.
BIZ: EA's John Riccitiello recently said that the game industry is "boring people to death" with "rinse-and-repeat" games and making games harder and harder to play or less accessible. As a software guy, do you agree with this? Do you think the industry needs to make some radical changes?
PH: I know John very well and his heart is absolutely in the right place on this. I think maybe the way he messaged it was a little harsh, but the concern that he's raising is absolutely valid. If we become an exclusive industry, then we will shrink, because you'll always have some churn. You'll have some people who can't get to level 5 or level 10 of a game because it's too hard, and they'll just peel off and we'll end up with an ever shrinking smaller and smaller market. And that won't be good for any of the stakeholders.
We think we've been quite successful in helping to grow the market. Clearly some of our competitors are helping to grow the market. Nintendo's been doing this very well. But look at Singstar, a 200 and something million dollar brand for us, which is definitely causing new users to come in and buy consoles. Buzz is a $100 million franchise for us millions of units sold in Europe and coming to the U.S. this year and I think will be very significant in the U.S. And I think that's another thing that will draw in new users.
Maybe [John's] comments were addressed more internally at EA than they were at the industry as a whole. I don't know what his intention was about his message, but he is absolutely right. If we don't keep an eye on the growth of our industry, then the heart and the internal organs will not survive.
BIZ: It was somewhat encouraging to see a few third-party exclusives for PS3 announced, such as Haze and Unreal Tournament III. Microsoft over the last year has chomped away at Sony's third-party exclusivity, where games that may have once been only on PlayStation are now on 360 too. Is more third-party exclusivity something that Sony is actively pursuing?
PH: I can't really comment because that's out of my domain, but I get asked this question a lot and it's kind of a curious question because I actually think that the gamers don't care. I think they don't care who makes them. They want to make sure that the best games are available for the system that they've chosen to validate that purchase and to give them a good experience. When they walk into the store they don't go and buy "that third-party game" Metal Gear Solid 4; they just buy the PS3 game Metal Gear Solid 4 or the PS3 game Heavenly Sword or the PS3 game Motorstorm... they don't really think [about], I believe, whether it's a first- or third-party game so long as the best games are available on their system. And I think what we showed over the totality of the lineup from yesterday is that we have that.
BIZ: How do you see the PlayStation Network (PSN) evolving over the next year or so? You have a number of interesting original games on there already, but how would you size up PSN compared to Xbox Live and maybe even what Nintendo is promising with WiiWare?
PH: I think PSN is kind of an umbrella that incorporates a lot of different aspects. In one sense, it's a set of technologies that enable game developers to empower their titles with a lot of connectivity and commerce. In another sense it's the PlayStation Store, which is for digital downloads... From a store point of view, what we showed yesterday things like Wipeout HD, Echo Chrome, Warhawk, SOCOM and Pain those five titles are what I think most people would consider equivalent (and in some cases actually are) disc based releases. They are high-spec, high value that's a bit harder to say about Echo Chrome because it doesn't have graphics but to have those available through digital distribution is a strong statement for us about where we're headed with that. Obviously we've got PS1 backwards compatibility, the ability to bring the historical archive to the format, so it's a good trend.
BIZ: You mention that some of these PSN games are like disc-based titles, and some in this industry think the future is going to be entirely digital distribution, where PS4 might not even have any discs... it would just be like a set-top box. Is that where all this is headed?
PH: I don't think we can talk about future PlayStation platforms today, but speaking generally or philosophically, I think it's not just the game industry but digital media consumption [as a whole] so I think we're part of a big wave of consumers moving from physical selection of content in a store to digital selection of content in a service.
BIZ: I realize we're basically out of time now but...
PH: Well, what from Sony stood out for you?
BIZ: I think Heavenly Sword and Uncharted continued to impress. The new IP Infamous looked quite good. And I was intrigued by Echo Chrome...
PH: There are a couple of twists in [Echo Chrome] that we haven't talked about, but there's a user created component to it as well.
BIZ: Interesting... continuing along the lines of LittleBigPlanet it seems.
PH: [User created content] is something I'm pushing really, really hard because I believe it makes a huge difference.
BIZ: One last question since we're already talking about user generated content. What do you make of Microsoft's XNA approach?
PH: Well, that's slightly different since that is programming rather than user created content and tools. I think it's a valid strategy; it's something we did a few years ago with Net Yaroze on PS1 and Linux on PS2. So we know that market pretty well and we know the importance of that, and I would really think about that as a talent generating program, meaning that those kinds of high-tech solutions are incredibly important in getting more programmers and artists to join our industry. Building in the "poppit" tools into LittleBigPlanet is a slightly different thing. That's more about users rather than potential employees.
BIZ: I've asked Microsoft about this before and they say that XNA has some very simple tools also essentially drag and drop and that you basically don't need any knowledge of programming or coding to use it.
PH: But you still need a PC... I'm talking about stuff embedded into the application. It's very different.
BIZ: Great speaking with you Phil.
