How Sony's PlayStation 2 took the world by storm

It's rare for a company to have such a strong entry into the games market as Sony did with the original PlayStation. What started as a collaborative project with Nintendo in the late '80s soon turned into its own product, taking the market by storm in 1994 in Japan and much of the rest of the world the following year. In March 1999, Sony told investors that it had shipped 54.42 million consoles, a figure that went north of 70 million over the following 12 months.

But the people heading up Sony's brand new video game venture knew that it wasn't enough to just do well the once -- you needed to land another smash hit in the bag before you could consider yourself successful. Going into the PlayStation 2's launch, there was a degree of trepidation among Sony's leaders, all of whom had been in the industry for a while and knew what a fickle beast it could be.

"It was always in the back of my mind," says Chris Deering, who was Sony Computer Entertainment (SCE) Europe's boss at the time. "If PlayStation was ever successful, the real proof would be to have the follow up come out and do as well or maybe better."

"We were cautious because it was very rare that the leader of one generation could hold that position in the next"

Jack Tretton

Jack Tretton, who was heading up SCE US, adds: "Everybody was euphoric coming off the success of PlayStation. We had set the bar high but it really exceeded our expectations. Going into PlayStation 2, we were certainly confident, but we were also cautious because it was very rare that the leader of one generation could hold that position in the next. There was a great deal of trepidation not to get caught up in our success and to make sure that we redoubled our efforts going into the next generation."

The original PlayStation had been targeted towards a broad audience. There was promotion aimed at bringing kids on board, like the goofy and colourful Society Against PlayStation commercials, as well as marketing like the rather gruesome print ad featuring two women with bleeding noses for WipEout. For the PS2, however, SCE wanted to bring in a more mature audience. This was part of the reason why Twin Peaks creator David Lynch was hired to make the unsurprisingly bizarre The Third Place trailer.

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"It was just amazing to see the potential PlayStation 2 had over PlayStation in both functionality and design," then SCE UK & Ireland boss Ray Maguire says. "It was chalk and cheese in terms of what you got.

"Part of the job was go to a slightly older demographic. We didn't want to be in Nintendo's space. We wanted to drive it up on PlayStation and make it a little bit older still, with content that was noticeably better on PlayStation 2. A lot of people understood what PlayStation was then and we needed to start converting them into PlayStation 2 users, and then get more people into the platform to grow it as we started to move on."

Tretton says that for the US launch, Sony's target audience was 17 year-olds: "We had the exact audience in mind for PlayStation 2 that we did for PlayStation because it was so well targeted. If it isn't broke, don't fix it. We use the age of 17 as kind of the target of the bullseye, with the theory that everybody under 17 aspires to be 17 because of an older sibling or you're going to have your driver's licence. If you're older, you harken back on your teenage years."

Meanwhile, Deering says that the company still wanted to embrace a broad audience, including more mature demographics. One of his core focuses was -- as with the original PlayStation -- trying to nail down as many third-party exclusives as possible. This included Tomb Raider, again, as well as Disney titles and games from Take-Two, including Grand Theft Auto and State of Emergency.

"We were asking what we could do to make it difficult for Sega or Nintendo to come back," he explains. "We didn't start with a big portfolio of game development studios like Sega and Nintendo had. We were really friendly with third-parties right from day one, which was [president of SCE] Ken Kutaragi's idea. He had made a deal with EA from the start and in Japan some of Sony Music's A&R team reached out to SquareSoft and got Final Fantasy, as well as companies like Enix. We lucked out with Tomb Raider on PlayStation which [SCEA VP third party relations] Phil Harrison had managed to get an exclusive on sequels for. It became clear that exclusivity of software was what drove hardware, not the other way around."

"Part of the job was go to a slightly older demographic. We didn't want to be in Nintendo's space"

Ray Maguire

PlayStation 2 was the first console to come with a DVD drive. With a launch price of $299, the hardware was actually cheaper than a lot of other DVD players on the market, much to the apparent disdain of Sony's consumer electronics division. As a result of this functionality, the PS2 is seen as the point when consoles left the bedroom and moved under the living room TV. However, Maguire and Tretton say that the console was sold as a games device first and foremost.

"We didn't particularly centre on [the DVD player] because it wasn't a core function," Maguire says. "It was a feature and we mentioned it, but we didn't spend too much money on that because we were spending for the games. It's the games that were the real hook."

Meanwhile, Deering says that SCE Europe sold the PS2 specifically around the DVD functionality in parts of Southern Europe to great effect.

"We really pushed PS2 as a DVD player almost on an equal footing with it being a game machine in Southern Europe," Deering says. "Of course, once it got under the TV then people started buying games. But it got under the TV to play movies, certainly in Spain, which wasn't a big video game country until PlayStation and PS2 doubled the total penetration of homes with consoles."

Backwards compatibility was also a core part of PlayStation 2's functionality, which allowed Sony to further dominate games real estate in the homes of users.

"My thinking was for people who had a PlayStation, there might be a sibling who was slightly younger who might get that once those people upgraded to PlayStation 2," Maguire explains. "Then you have a house with more than one device, which is great and stops squabbling over who can play. It's just a way of moving everyone along."

Tretton adds: "Backward compatibility meant people didn't feel like that the investment they'd made in the previous five years was completely abandoned and they had to dig into their pockets again to stay on top of where the games industry was headed."

The turn of the millennium was a period of change in the games business. Sega dropped out of the hardware market, ceasing production of its Dreamcast console in 2001, while Microsoft decided to enter the space with Xbox the same year. A player with so much clout and cash entering the console market was something for PlayStation to be wary of -- especially with Microsoft's US dominance -- but Tretton says that Sony's offering was different enough to withstand whatever the Windows giant could throw at it.

"We use the age of 17 as kind of the target of the bullseye, with the theory that everybody under 17 aspires to be 17"

Jack Tretton

"Microsoft was a company that you had to respect," Tretton says. "It certainly had tremendous resources and expertise. We were well aware that the market was incredibly competitive, but we weren't Sony veterans; we were industry veterans. Particularly in the West -- and with them being a US-based company -- we had a healthy respect for them. But they tended to have a heritage more in PC gaming or seemed to have a connection with first-person shooters with Halo. While that was a segment of our business, we felt like we had an advantage on a worldwide basis and being able to appeal to global markets."

He continues: "You certainly have to give Microsoft credit for generating excitement with the Xbox. It was a great time in gaming. I'm a firm believer in rising tide lifts all boats. Games grew exponentially after the launch of the original PlayStation."

Deering, however, tells a more aggressive version of PlayStation going up against Microsoft.

"We targeted Microsoft from day one -- we were ruthless," he says. "I'm not of this mentality anymore, but at the time it was life or death as far as I was concerned. We had this expression in our business meetings: 'Kill them right at the start and take no prisoners' when it came to Microsoft. It worked at least for PS2, and it continued to work on PS3 and PS4, and it'll probably continue to work on PS5 because we drove piles under the strength of the PlayStation equals games concept at that stage when we were getting ready to take Microsoft on."

PlayStation 2 launched in Japan in March 2000, ahead of its North American release in October and then Europe and Australia in November of that year. The European launch was tough, with Deering saying that the financial losses in this region were larger than those of the US and Japan combined.

"We had a tough year in the first year of PS2 because it arrived late, the cost was very high, the yen was not that weak," he remembers. "I had a rough bit with Tokyo because we had a loss year in the PS2's first year. Everyone lost, but our loss was as big as the US and Japan combined. That was possibly because we sold more PS2s and they were all sold at a loss."

"We targeted Microsoft from day one -- we were ruthless"

Chris Deering

He continues: "We couldn't sell at the price we wanted to. We were losing money because that was the cost of the machine. There was the economy of scale issue. Until we got over that road bump, that bubble of vapour lock, it was a few anxious moments. It wasn't we were going to die, but we were wondering if this was sustainable.

"In the PS2 era, software development was slower than expected. New games didn't come about fast enough, so we were shifting hardware but not enough games, which is how you make the money to pay off the investment in the hardware. So there was an expensive lag.

"We were always a hardware and software company and the install base was the most key metric of all. We had to get to it or all the other elements would have been academic -- and we got to it. Once we got past the threshold of the economy of scale and some software features kicked in, then the Disney games and Grand Theft Auto, F1, GT and all the Konami and Namco titles."

Overall, PlayStation 2 ended up shifting around 155 million units by March 31, 2012, at which point Sony stopped providing sales updates for the console. To date, it's the bestselling home console ever, but what was its lasting impact on the market?

"Both PlayStation and PlayStation 2 were the foundations of a really strong and solid business across the world," Maguire says. "It didn't happen everywhere at the same time. But the global expansion was the result of those two machines showing that it worked and you have to get some more people on board that haven't tried it yet. It was the bedrock of something which might have been the first one -- that was a runaway success -- and then it died. But it didn't; it went the right way."

He continues: "It was the right product at the right time and the right price. It was something everyone could get into easily, there was a huge breadth of content, it went through age groups and had a great price -- that's difficult to say no to."

Tretton concludes: "PlayStation 2 was the culmination of ushering in video games as mainstream entertainment. People stopped questioning whether it was a fad that was going to go away and started to look at it as a legitimate entertainment medium on a par with box office or the music industry."