October 6, 2022

s13e02: What Is It Like To Be A PlayStation?

0.0 Context Setting

It's Thursday, October 6, 2022 in Portland, Oregon.

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1.0 Some Things That Caught My Attention

What is it like to be a PlayStation?

Last episode I was thinking-out-loud about the position that Sony PlayStation is in now that console hardware sales have likely peaked and Microsoft have more or less forced their hand. Bottom line up front: Sony were winning at the sell-the-most-videogame-consoles game, Microsoft were playing in that game with Xbox, but now have decided they're playing a different game of winning at console-games-everywhere.

So what's PlayStation to do?

• They could take their formerly completely exclusive games and turn them into limited exclusive platform games: have them on PlayStation hardware for an exclusive window. They're doing this already: first party Sony games are turning up on PC after a while. They even look better on PC, so at least if you're really, really into those games, you'll need to have a PlayStation to play on day one. ... or will you?

• Well, if you want to play PlayStation games, Sony are trying to be clear that you don't need a PlayStation anymore. You can subscribe to the PS Plus Premium [sic] tier, and get cloud streaming at $17.99/month. This compares to Xbox Games Pass Ultimate (Microsoft's streaming tier) at $14.99.

• Figure out some sort of new revenue stream, or radically grow one of their existing streams (i.e. digital sales, digital add-ons)

• Something else?

I would say that PlayStation need to beef up their streaming catalogue. Xbox offers day-one streaming or download of their best, triple-A first-party games, the ones at Xbox Games Studios, all those Microsoft acquisitions. PlayStation doesn't, and I assume it's because the don't yet have a strategy or plan because those first party exclusive games sales are a nice slice of revenue. I imagine PlayStation leadership are afraid that without a solid plan for replacing or growing that revenue, they're cannibalizing PlayStation 5 sales, sort of an instance of not being willing to throw your babies into the fire. Sure, I understand that. Microsoft, however, is willing to make that bet, presumably also because they're willing to bankroll it. Sony's bet also, presumably, is that their first-party exclusive games are so good that there's still a giant backlog of people who will buy PS5s to play them.

But those are different kinds of revenue, and I don't know how PlayStation are figuring out the lifetime value of a PS Plus Premium subscriber is, or what their churn rate. But again, Microsoft is kind of super gung-ho about this, with a customer acquisition strategy of fronting you one month for $1 to then get you hooked in at $14.99/mo.

PS5s come in at $400-500 USD right now, which means it'd take over two years to earn back in monthly subscription fees for premium just to equal the revenue of one PS5 box (not even, right, because that $400-500 is the retail price of a box).

There's a rough comparison here in that Microsoft will give yout an Xbox Series X ($547.98) plus two years of their premium streaming tier (otherwise ~$360) for $34.99/month for two years, totaling $839.78, compared to $907.98, saving you a whole seventy-odd bucks.

But at least Microsoft will take advantage of your short-termism and cheap consumer credit (for now, I guess), and let you have access to the console and streaming everything for just $34.99. Sony doesn't offer an option like that. You either pay upfront or Klarna your PS5, and add on your PS Premium membership or... well, you don't. I guess you stick it on a credit card.

Well, what about the something else?

Assume Sony matches, at some point, Microsoft's strategy, then it's still going to need to do something else because neither of these companies, I assume, are going to compete on cost. If they are, Microsoft will win, because it just has more money and because of the type of company it is and how that company is treated in the stock market, I assume it'll have easier access to cash than Sony which is... whatever giant collection of stuff Sony is.

Is it hardware? I'm not entirely sure? PS VR2 is coming out next year, and say it costs another $400. It's not standalone, and the attach rate of peripherals like that to consoles is historically a giant Tesla fire. If you want a peripheral like that which requires explicit, expensive develop support, to be a thing, then it's got to be pack-in, and Microsoft, after two bouts of trying, gave up with Kinect. So sure, you sell super optimistically an attach rate of 20%, which means right now 4.4 million units at another $400. That's... incremental.

So maybe you come up with a standalone PS VR headset, which means you're up against Apple and Meta, and you're playing a slightly different game with slightly different competitors. I'd argue that you'd have a fighting chance against Meta because, well, PlayStation actually has the chance of delivering games and content that people would like to play, rather than some sort of nebulous metaverse. Apple doesn't really have this problem because if it treats it like Apple TV and not, say, Apple Arcade, then it will throw a shit-ton of money and get some good platform exclusives for whatever it is that Apple end up calling their augmented reality, not-VR probably at least $800 product. (Apple don't sell hardware at a loss, AirPods Max cost $549, and any Apple headset is likely to be more like the SoC and display equivalent of the iPhone 14 Pro Max, which starts at $1099).

Okay, forget hardware. That's it own thing. What about what it means to be PlayStation everywhere else?

You could make the argument that as the most successful challenger brand (i.e. PlayStation beat Nintendo and Sega, until Nintendo decided to play a different game at the Wii era), PlayStation would like to think it understands gamers [sic] the most, or rather, at the launch of the PSOne, it understood how to reach people who could be gamers, but didn't consider themselves to be (see: the marketing campaigns that focussed on clubs).

Well, you'd start talking about, I don't know the social and if you could make money from advertising? You'd try to figure out what it would be like if PlayStation really were everywhere because honestly, PlayStation games have always felt more like they're supposed to be IMAX experiences rather than on your dinky phone. If I were a studio game director auteur, I'd totally understand going all Chris Nolan.

But, some points:

Sony was doing Metaverse stuff years ago, with PlayStation Home on the PS3. PlayStation Home launched in 2008 and shuttered about 7 years later with 41 million users over its lifetime, which is about 41 million more than have used Horizon, I reckon. Anyway, PlayStation Home had it all: user generated content, user generated spaces, microtransactions for content over a digital store and all that jazz.

PlayStation also have Dreams, from the frankly totally illogically underrecognied Media Molecule studio in London which if I'm honest is pretty much "what if you could make stuff that's pretty much indistinguishable from Unreal engine games, but on a PS4 or PS5" and honestly, the shit people build with it is wild¹.

And then, just randomly you've got Hello Games with the stuff they've just been adding to No Man's Sky over the last six years, itself a PS4 launch exclusive and one that... wasn't that great at launch. But now, it's got base building and all that jazz, too.

In other words, you'd be looking at a sort of first-party, multi-platform, social, shareable, TikTokable, duet-able, re-tweetable, tear-offable, remixable, IP-friendly, live-service, streamable Roblox or Minecraft but, you know, with the PlayStation brand values all the way through. You know, all the buzzwords. And maybe yeah, it runs better with PlayStation hardware and peripherals.

I mean, Roblox's market cap is $23 billion right now, which is only a quarter of Sony's $83 billion market cap. Fortnite's revenue is 2021 was $5.8 billion, and Fortnite doesn't even have a player UGC double-sided marketplace and a thriving developer community. Who knows what Minecraft is doing because of its legacy, um, architecture and business model, I don't know if Microsoft breaks out revenue for e.g. the Minecraft store.

But it's not like all you'd have to do is come up with the game. You'd have to deal with moderating user content for starts and it's 2022 (not that this has ever changed) and you need a full on de-Nazification, trust, safety and abuse team and, you know, design for trust, safety and abuse straight from the start. Plus you've got a fight going on with platform holders like Apple who will like to take a cut of that 30% if people are accessing through their platform.

Anyway. You'd also want to add even more buzzwords like NFTs (sigh), or "metaverse", but at least what you've got is a walled-garden where you'd be talking about sharing assets and services between your first-party studio games. That would be a start. Tying that all to a single PSN ID, you're already doing that.

But then... I mean, would it be weird if PlayStation bought the US part of TikTok? Certainly much less weird than Oracle buying the US part of TikTok. Would it be weird if PlayStation had snapped up Instagram? (I mean yes, at the time) Would it be weird if PlayStation just went and bought Flickr? Arguably PlayStation may have missed out by buying Twitch (if they'd have been allowed), but perhaps there's the knowledge that a more profitable ecosystem is one where you don't own all the things, you just have to own the right bits.

If PlayStation did buy something like TikTok (which is interesting to me in this case because of the stupendous creativity and the ability of that duetted content -- setting aside the complicated shitty situation of celebrity content creator influencers, not that it's even possible to set that aside because it's intrinsically linked), then you'd want... what, game assets to be tear-offable, and reusable somewhere else? Can you quickly create like that on mobile? Video is super fast after all...

Bits and pieces

I was chatting with Steve McGhee about the whole Disney-as-visiting-infrastructure thing and he reminded me of Snow Crash's burbclaves, those gated, opinionated communities, or maybe even the franchulates (which presumably Stephenson extrapolated from or was inspired by Disney), but what I didn't get a sense of from Snow Crash was the idea of burbclave tourists -- that you might just visit a franchulate or burbclave... to experience it, not just to apply for citizenship or to transact with it. I guess the whole point of Snow Crash was to show the shift of those types of spaces to the metaverse, but now it's not just the Disney thing bouncing around in my head, it's burbclave tourism, too. Thank you Steve McGhee!

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Well. Still rattling around in my brain. That's probably enough for today, though.

How are you doing?

Best,

Dan