E3: The Hirai and Tretton roundtable

GamesIndustry.biz's Mark Androvich was given the opportunity to join a roundtable discussion at E3 with SCEA president and CEO Jack Tretton, who was joined by Sony Computer Entertainment President Kaz Hirai shortly thereafter.

The pair asked for feedback and answered questions from a small group on a variety of subjects. Here, we present their most interesting comments on the E3 conference, the regional autonomy of each division, future plans for video on demand and much more.

On the tone of this year's conference compared to last year's conference:

Tretton: I obviously wasn't as intimately involved in planning last year's press conference as I was in this one, but it's funny now that you look at the perspective and you see some of the other press conferences and how people are conducting themselves.

I think companies are very proud of their success, and you want to tell everybody how successful you are, but what you realise is that everybody already knows that, and nobody really cares. They want to know, how are you going to be successful going forward?

We've certainly taken our fair share of heat about the performance of the PlayStation 3 in the first six or eight months. I guess we wanted to focus our message on, 'let me tell you why PlayStation 3 is going to be successful going forward'. And it is all about content and it is about games. And I think, going through that experience, the light bulb goes off... 'oh, wait a minute, its really all about the content and what we are going to do going forward to keep our platforms relevant'. It's not about what we did 10 years ago, it's not about how many units we've sold here or there.

So clearly, I think, for points of reference and perspective, we wanted to point some things out, but we really wanted that press conference geared towards why people are going to want to buy games and buy our platforms, and that was kind of the theme in the central message. And I give Dave [Karraker] a lot of the credit for building off of that theme and coordinating a tremendous amount of presentations and context to the whole thing. Hopefully we stayed on message and we got the point across.

On why the recent price drop was announced prior to E3 instead of at the show:

Tretton: I think it was because we were so confident in what we had to talk about, and I call it the 'Wizard of Oz' effect. If all you have is a price drop, you say 'pay no attention to the man behind the curtain...did I mention that we have a new model for PS3 and that we're USD 499?'

If you really believe in what's behind the curtain and all the content, you say 'let's get the whole price announcement out of the way, and the whole new model introduction out of the way, and let's spend all the time at the press conference talking about the content.' And we really believed that, while the new model and the price move were relevant, we didn't want it to detract from the message of the press conference.

Why no word about rumble in the PS3 controllers?

Tretton: Well, I guess at this point, the Sixaxis controller is something that we're comfortable with. We've certainly settled our differences with Immersion. Is it something that could happen down the road? Absolutely, but the bottom line is we haven't made that decision and we didn't have anything to announce or introduce.

On the matter of PS3 exclusives:

Tretton: You can never control or anticipate what another company is going to do. That's their business, and they run it as they see fit. So, the best way to ensure that you have content that differentiates your platform from the next and showcases the technology is to create it yourself. That's why we've invested so heavily in our internal development over the years.

I think we tend to look at exclusive opportunities a little more organically. Most of the time, the publishers approached us and said 'this is what we have to offer, and this is what we are looking for,' whether it is some development help or some co-marketing. We would look at that the same way we would look at our strategy behind developing a first-party game. Is this something that is going to showcase the technology, and is this something that's going to differentiate our platform from the next?

Because an exclusive - just because it's not on any other platform - does nothing for you. If it's exclusive, and it's actually a game people want to buy and want to play, then that helps you.

On multiplatform titles arriving on the Xbox 360 before the PlayStation 3:

Tretton: People talk about the exclusives that you're losing. I think if you lose an exclusive, and they no longer make that game for your platform, that's a big disappointment. If you lose your exclusive and they make it for another platform and then ship it day and date... to me, that's not the end of the world, because as I pointed out earlier, we're really depending upon our first-party efforts to differentiate our platform.

If games are shipping later, and if they are not at least in parity, that is a real problem and I think that's a disadvantage for us and one that we'd want to correct. Part of their reasons for that I surmise, number one, that platform was out a year earlier and anybody that supported it has got a year more experience with it.

I'm not a development expert, but PC-based development systems may be, certainly in terms of initial efforts and investments, a little bit easier to get your arms around than PS3 development. But I hope, if we're successful and we really evangelise the technology, that that trend tends to shift and people start hosting their development on our platform, and that's the goal. Whether we accomplish that or not, time will tell.

On the differences in frame rates between EA and 2K Sports games on PS3 (30 frames-per-second) compared to Xbox 360 (60 frames-per-second):

Tretton: That question is probably better asked of the two publishers that you mentioned.

But it goes back to the first point I made about first-party development. On our NBA game and our MLB game, it will ship at 60 frames per second. If the game isn't up to the standard the consumer expects, they're not going to buy your game. That's a decision a developer has to make.

On the Wii outselling PS3 6 to 1 in Japan:

Tretton: All credit to the Wii for the success they've had. We're talking about eight months into a product's lifeycle.We don't want to be outsold for one day, but if we're outsold in the first eight months, it is much less of a concern than if we're outsold in the first eight years. I think the other thing that we have going for us is perspective... that we're looking at a ten year lifecycle. I'm not saying that our competitors aren't, but the thing our competitors don't have is two viable hardware platforms. So we get to add up the revenues and the sales that we've sold on PlayStation 2 with the revenues and the sales that we've sold on PlayStation 3.

And while I'd like to think that they buy a PlayStation 2 today, and they buy a PlayStation 3 tomorrow, we know the people we're selling PlayStation 2's to are probably not going to buy a PlayStation 3 this year. They're somebody that we're going to migrate somewhere down the road. We really believe bringing interest in this category is good for everybody. And while I'd like them to buy a PS3 today, if they buy a Wii, they buy a PS2, they buy an Xbox 360, I think in time we'll be able to convert everybody and anybody that hasn't bought a PS3 to the PS3 if we deliver on the promise of the technology and gaming content.

And I don't think it's a matter of when you get them, it's a question of when you get them. If we're sitting in this competitive position ten years from now, I'll be very disappointed, but quite frankly, I think as far as the company is concerned, if we are well-accepted by consumers and we deliver profit contributions, how you sold relative to competition is somewhat irrelevant, because what they sell or don't sell doesn't pay any bills for Sony.

On whether or not PS3 sales have been affected by the continued success of the PS2:

Tretton: Maybe we're a bit overconfident, but the PlayStation 2 remains incredibly viable - great contributions to the bottom line, great software for the consumer - I think we felt like we could have a little bit more patience in terms of getting where we needed to get to [on the PS3].

We elected to do the quantum leap, the ten year lifecycle, because that's what did so well for us in PlayStation 1 and PlayStation 2, and I think if you have a strategy that's worked, you have tendency to stick with it.

Hirai: We do take a very long term perspective on the business as a whole. A great example right now is to do it with the PlayStation 2, where you look back seven or eight years into the lifecycle and say 'Okay, how much have we accomplished in terms of business volume for Sony, the publishers, and for the retailers on this platform for seven or eight years, depending upon which territory you are talking about, and after 118 million units worldwide?'

We look at the here and now, but also understand that there is a wider business implication we need to look at from a Sony perspective over the ten year cycle that Jack was talking about as well.

On the autonomy of each region:

Hirai: I bring a different perspective, in that I was in Jack's position for about 11 or 12 years on the regional headquarters side, where we got a lot of different strategic input from Japan on a lot of issues that were pertaining to the North American market. So, I was on the receiving end, Japan was on the transmission end.

There were times where I said, you know what, that's a great idea perhaps for the Japanese market or the European market, but I don't know if that really works here in the US. And other times, I think the Europeans thought, 'great strategy for America, doesn't really work for Europe'.

So, one of the things that I've tried to start changing is giving more autonomy, more decision-making power, and therefore more responsibility if you will. And also more credit if everything works out to the regional headquarters.

We're starting out with small things. We got the black [PSP], of course, we got the silver and we got the white, as opposed to Tokyo saying you will do this colour or that colour, or saying 'these are the five colors you can choose from, none of them really work for the US, but which one would you like?'

When it comes to basic, fundamental strategies on where the hardware needs to go, or worldwide implications, such as where Home needs to go, those kind of things, that's obviously something that needs to be decided at the Tokyo level, but in concert with a lot of discussions we've had with the regional headquarters heads to make sure that their issues and their points of view are taken into consideration when we come to those decisions at the Tokyo level that have global implications.

Having said all that, it's not like it was a one-way street before, but perhaps it was six lanes coming this way and two lanes going to Tokyo. I want to make sure that the 'freeway' has three lanes on either side, if you will, in terms of information flow and also exchange of opinion in making sure that those kind of opinions get reflected in the decisions I need to make in Tokyo.

On how is Sony intends to counter the trend of games not looking any better on the PS3 than on the Xbox 360:

Tretton: If the games don't look good on the platform, consumers aren't going to buy them. As I said, we can't control what third parties are going to do. We can try to evangelise the technology and assist those guys in development and try to convince them that it is in their best interests to take advantage of the technology.

If we have to drive the message on our platform with the games that do that - whether they are first party or third - those are the games we are going to focus on and those are the games the consumers are going to make their purchase decisions on.

At some point, what's the point of porting it over to another platform if it is not going to look as good on a platform that is more expensive? Why waste any money in development doing that?

The message I want to send is, we can't control what the third parties do. We want to encourage them as much as possible, we want to support them as much as possible. We want to give them the tools.

We're a company that does about 20 plus per cent of our business on first party, so believe me, I don't want to send the message that we don't need the third parties. We want to encourage them to maximise their development potential on our platform. But if a game doesn't showcase our technology, I don't know that is going to help either of us.

On how much of the recent Unreal Engine announcement was about trying to speed up the development process and get more PS3 games in the pipeline:

Tretton: I think the way we characterised it was a two-pronged benefit. One was to help the hundred-plus games that were in development and optimise the Unreal Engine, and the second one was to have Unreal Tournament 3 exclusively on our platform.

Developers look for all the resources they can get their hands on. You mentioned the example of the Unreal Engine, but we really took a lot of the technology we created in our first-party studios and tried to recently turn it over to third-party groups. Our ICE engine and a lot of the technology that we've created we've now shared with the third-party community, and hopefully we'll start to see some of those results in the third-party games.

On the integration of Sony Computer Entertainment with other Sony divisions

Hirai: This is one of those things where there is always room for improvement, and quite honestly it is something that Sony can do a lot better as a group - I do want to point to the PS3. If we were completely filed and only vertically integrated, we probably wouldn't have a PS3 because we wouldn't be able to design it, we wouldn't be able to source key parts for it, like the cell chip, because that is coming from Sony. We wouldn't be able to manufacture it, because portions of it are being manufactured at Sony EMS.

Howard [Stringer] talks about Sony united. Where necessary, and at the real operational level of the organisation, there is a lot of back and forth that happens.

On the future possibility of video on demand services:

Hirai: We are looking at a variety of ways of bringing a music and video download service to the PS3, as well as the PSP obviously. It is something that we are actively looking at doing and actively working on as well.

Whether we like it or not, on the music side for example, there are some other companies that are having that as their core competencies in that music download space. Had we done a straight music download service for the PSN Store, your question would have been 'what differentiates your store from an iTunes store?' I want to make sure that we are able to put a unique 'Playstation-esque' way of presenting the music content to the PlayStation 3 users, otherwise we're just one of them.

We have the assets, obviously, but it's not as if Sony Pictures or Sony BMG for music download doesn't license to anybody else. Obviously they license to everybody, which is the way it should be doing their business. So, [iTunes] has access to the content just as we would, so what differentiates our service?

Maybe there is still a lot of demand for just a straightforward download service, and we may end up doing that ultimately, but again, it is not something we've decided we don't want to do. It is something we want to do and we want to do it right, and if the right answer means we just to a straightforward download, that may be the solution. Are we planning something? Absolutely.

On why a download service hasn't appeared on the PSP sooner:

Hirai: Given the fact that we want to make sure that we are integrating the PSP experience, especially when it comes to digital content downloading like music and videos, we want to make it part of the PSP/PS3 experience. We can't just look at the PSP in a vacuum at this point in time.

Had we launched the service two years ago, before the launch of PS3, maybe we could have done that, but then we would find ourselves in the situation today where how do you integrate that service into the PS3? It is a bit of a hardware transition/platform issue that we are dealing with, and it is a byproduct, fortunately or unfortunately, of being in the business of a portable device and also a home-based console device as well.

On Sony's intentions in the casual gaming space:

Tretton: It's our belief that you can't be everything to everybody on day one. You have to choose one end of the spectrum or the other. Historically, you have one company that has catered to the younger consumer and the casual for quite some time, another one that has gone after the core but has had trouble branching out from that.

We've tended to start with the core and branch out from there, and if you look at the PlayStation 2 over the last seven or eight years, those offerings initially were tailored to the core gamer, and now that we're in year seven or eight, I think we've had a lot of causal gaming experiences.

I look at what we were able to do with Eye Toy. I think it's great that you are interacting with your TV with a controller - we were able to do it with Eye Toy without anything. And I think it's great that you can stand on an exercise mat and interact in an exercise fashion, but with Kinetic you were able again to do it with the Eye Toy without standing on anything.

Casual gaming is something that we've had interest in and have tried to make inroads in. Singstar and Buzz, two most recent examples, both big successes in Europe. So I think we are taking a similar approach with the PlayStation 3 that we are going after the core and then we are going to branch out from there. I think we might get there a little bit sooner given the fact that the casual gaming aspect does seem to be taking hold to a larger degree that it had in years past, and that's why you'll see things like Singstar on the PlayStation 3 sooner than you did on PlayStation 2.

I don't think the process is much different, for better or for worse, but I think we are probably accelerating the curve a little quicker to reach down to a more diverse audience sooner. But I think you are who you are, and the PlayStation 3 lends itself more to a hi-tech hardcore gamer, at least initially, especially at a USD 599 price tag, than it does to a casual gamer and a more social gaming experience.

People over 50 probably don't own hi-def TV's and probably aren't interested in a lot of things that the PlayStation 3 can do. If that's the audience the Wii is ushering in, that's really not an audience our machine is tailored to.

On the 80GB PS3 not having 100 per cent backwards compatibility:

Tretton: I guess it depends on how important you feel 100 per cent backwards compatibility is to a consumer who hasn't bought a PlayStation 3 and is about to buy one. If price has been a significant barrier to the consumer who hasn't bought a PlayStation 3 yet, the assumption is that they would gravitate towards the USD 499 SKU.

I guess the theory is, the 80GB SKU is more tailored towards the online consumer that's much more interested in what we have coming out for the network platform, that's more interested in the extra 20 gigs of hard drive compatibility, and maybe the percentage of backwards compatibility that the 80GB offers is enough for them. And I guess the consumer will tell us once both SKUs hit the market.

Kaz Hirai is president of Sony Computer Entertainment, Jack Tretton is CEO of Sony Computer Entertainment America. Reporting by Mark Androvich.