With just less than two weeks away from the official debut of PlayStation 3, SCEA executive VP, Jack Tretton, shares the party line on PS3 supplies, Blu-Ray, retailers, publishers and rivals.
(News Source: BusinessWeek.com; by Colin Campbell)
The desks at Sony HQ are mostly unoccupied. Their usual inhabitants have gone to prepare the way for PlayStation 3’s arrival; analysts to be courted, journalists to be persuaded, retailers to be assured, publishers to be mollified. Sony people are whizzing around the country.
Those few left in the humming Foster City office are also at Hardware Launch Defcon 1, a state of heightened being that transcends mortal needs such as rest and relaxation. For most SCEA people, this launch will count as a shining moment in their careers. It will take a Nuclear Apocalypse, the Rapture or PS3’s Abject Failure for this event to be rendered irrelevant as far as their resumes go. If you’re in the business of interactive entertainment, this here is the Big One; the one you don’t neglect to mention at job interviews.
Jack Tretton is in his office handling calls at a Cell processing rate. He manages to spare 27.4 minutes of fast-talk.
Tretton is executive VP in charge of the launch. If he should ever require the use of a resume, his will catalogue Sony’s journey from PS1 to PS3 with PSP in the mix.
On November 17
What he’s learned about launches is that Day One is just One Day. “November 17 is just one day on the very, very long road that is the platform life cycle. We think in increments of ten years, not 24 hours. Look back at what the 500,000 PS2s we sold on launch day was to the 41 million we’ve sold since then. Six years later, it’s not a big thing.”
But at this remove from the launch, interest is inevitably hanging on Sony’s ability to handle massive demand; a need that cannot possibly be satisfied. The story isn’t the shortages so much as Sony’s ability to handle their consequences; good and ill. The days when shortage-stories were shorthand for mere demand are gone. Now they are about corporate competence in manufacturing, in calling the market, and in handling the media.
He says newsreels of miserable, huddled consumers waiting forlornly on sidewalks are “very damaging”. “What people can’t deal with is bad information,” he says. “When we communicate that number [of units] we’ll deliver against it. We’re going to try to accommodate as many people as possible. We’re going to avoid creating false expectations. Retailers will know their quantities well in advance of opening their doors. They’ll say, ‘this is the quantity we have to work with, we’re going to distribute numbers, if you’ve got one of those numbers, you’re good to go. If you didn’t, I’m sorry, we’ll do the best we can to have subsequent supply.’
“So you don’t have somebody who waits hours upon hours only to find out that they aren’t getting one.”
On that 400,000 figure
For Tretton, the task at hand isn’t just about getting as close as possible to that previously suggested 400,000-unit figure, but also in backing up the launch with new supplies, prior to the Holidays. “The first question out of a retailer’s mouth is ‘when are you going to have more?’ We will provide subsequent information that says, ‘here’s when the next shipment is coming and here’s what you can expect.’ So they can give consumers accurate information.”
Tretton is stressing the importance of communicating accurate launch numbers, so I wonder aloud if the 400K thing is now a target rather than a deliverable. He replies, “It’s certainly the goal. We’re talking about daily production, right up until November 16. We’re not stamping out widgets here. It’s not possible to just say ‘how many did we build yesterday? How many days are left?’ and just multiply accordingly.”
So you can forget about a nice image of a warehouse filling up with completed boxes of PS3s, heaving pallets multiplying across the floor in fast-forward time. Tretton says, “We’ve got very solid numbers on parts. It’s a matter of assembling those in time and getting them on a plane. I am very, very confident of the so-called launch window and getting the units out there, but I’m a firm believer in, until you do something, it’s just talk.”
On Blu-ray
As is well documented, one component in particular is causing the problem – the Blu-ray laser diode. “I’m like everybody else. I’m saying ‘come on! Just build ‘em, man! What’s so complicated?’ But think about what that blue laser diode has to do. It has to read audio CDs, standard DVDs, Blu-ray DVDs, PlayStation 1 games, PlayStation 2 games, and PlayStation 3 games. Six completely different formats that have nothing to do with each other and you’re going to have one device that’s going to read all those.
“That’s a tremendous concept. But when you turn to the engineers and say ‘go build that for me,’ they ask ‘are you crazy?’ But they’ve managed to pull it off. We’ve got the blue laser diode’s yield now. Okay, it’s not necessarily where we’d like to be but it will get exponentially healthier as we go forward. The production capacity on November 6, is better than the production capacity on November 1 which was better than October 26. It gets better every day and as we get closer the numbers get bigger and better. It’s just a matter of physically getting them here.”
I ask if it’s possible that the numbers will be well shy; say as low as 100K. He says this won’t happen. “I don’t think that there’s any risk of us having 100,000 units out there day one. To me that would be disastrous because we just have too many doors to spread.”
On the media
We get onto the subject of Sony’s profile in the press these last few months, which have not been as positive as in years gone by. The firm’s public presentations have been hit and miss, while the launch, and Sony corporately, have seen troubles.
“We’ve had three very successful platform launches. We’ve dominated for well over a decade. It’s a fair question to ask ‘can Sony do it again?’ but I’d love to get a little bit more benefit of the doubt,” he says.
“Look, we understand that consumers won’t just line up blindly to buy our platform. We know that the competition won’t just lie down and die. But we feel pretty confident about our ability to execute. Right now we are in this frustrating period when it’s all speculation. I prefer to talk about the facts. I’m more comfortable talking about what is happening now, rather than what might happen in the future. Let’s get the battle on and see who the winner is and then talk about it.”
The media has undoubtedly been hooked on Sony’s travails this past year. Tretton sees this as symptomatic of our celebrity culture in which a company can be viewed in much the same way as a movie star or sports team.
“Bad news sells. All the success that we’ve had is not a sexy story, but any missteps that we’ve had is a story. Sony has gone from number four to number one in high definition television sets this year but people don’t want to write about that. They want to write about a battery recall. Sony is number one at the [cinema] box office, but people just want to write about the costs of the PlayStation 3 production delay.”
On hard stats
He talks about a hardware battle that isn’t getting much in the way of column inches – PS2 versus Xbox 360. “PlayStation 2 is outselling Xbox 360 for the year; we’re out-selling Xbox 360 month after month. The same machine that beat the Xbox in 2001 is beating the Xbox 360 in 2006. That’s amazing and that’s big news, but you don’t read a lot about that. I’ve been with this company twelve years and I don’t think it’s ever been better positioned.”
For Tretton, what’s most relevant is Sony’s achievements in the past. “We launched the original PlayStation and we did 250,000 units and that led to upwards of a 100million worldwide. And then people said ‘are you aware that no company has ever led the industry two generations in a row?’ So we shipped 500,000 [PS2s] at launch and we’re now up to 41 million [in North America] and we’re 30 percent ahead of where we were on the original PlayStation.”
On retail commitment
Meanwhile, for retailers the puzzle of PlayStation 3 isn’t just academic. They have brutal Holiday targets to achieve, the unforgiving matrix of floor-space yields and maximum margins.
How can they be expected to give over precious real estate for the sake of a few dozen units? Tretton says Sony’s history of success is a swinging factor. “It would have been much more difficult in 1995 when we had no shelf space and no heritage. But we have built up a lot of credibility with retailers by delivering time after time after time, platform after platform.
“They’ve seen that PlayStation 2 helped sell PSP and PSP helped sell PlayStation 2 and that PlayStation3 will not only generate revenue for them, it will also have a positive effect on the other two platforms.”
One part of Sony’s marketing is shipping 15,000 interactive pods to retailers. “Every consumer, whether they’re able to buy a PS3 or not, will have an opportunity to sample the hardware on day one. Retailers would like to generate as much revenue as they can on November 17 and over this Holiday season. But they also want to establish themselves as a destination for PlayStation 3, and that requires commitment just like it does for us and for anybody in the business.
On games publishers
He says the same dynamic works for publishers, who, at launch at least, will be selling to a small user-base. But support up front is expected and beneficial. “A publisher could say ‘development costs are so high, let’s just stay on the side-lines, wait until the installed base gets up to 10 million and then we’ll put out our first PlayStation 3 game.’ But they know that they can’t afford to do that because they’ve got to go through the technology learning curve. They’ve got to make a statement to investors that they’re on the cutting edge of software development. They want to be out there establishing themselves as a pre-eminent player. Fortunately everybody has the long term view on this.”
On rivals
We’re running out of time, so I don’t get to ask about the software library, Blu-ray as a format, Sony’s online plans, the whole kaleidoscope of activities that are going into this extraordinary product. But I do get to ask about Sony’s fabulously entertaining rivalry with Microsoft and Nintendo. When will PlayStation 3 overtake the Xbox 360 in North America?
“The honest answer is we can’t overtake them until we ship more units than they’ve sold. But we will ultimately accomplish our goals. Our goals aren’t necessarily about overtaking Xbox 360 or overtaking Wii. It’s our goal to maintain our leadership position.
“We entered this 12-17 year old male dominated toy business in 1995 and we’ve led the change to this being a mainstream entertainment business, that now appeals to a much larger demographic. The goal for PlayStation 3 is having a machine that has the staying power for the next decade. If there are 125 million television households in North America, we’d like to be in all of them. Right now we’ve made it into about one out of three so there’s two out of three households that we’re not in.
“If our competition gets to all the same number of consumers, you know, we’ve still accomplishing our goal. I’d be very disappointed if we were the world’s tallest midget. If all three platforms failed but we failed less than the other two I would not cheer ‘well at least we beat those guys!’ To me that would be disastrous. It’s not about doing better than the competition. It’s about doing better than we’ve done in the past even though the bar has been set very, very high.”
