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Sony aims for comeback win with PS3

With a bumpy launch and a slow sales year, the road hasn't been easy for Sony's PlayStation 3. But Jack Tretton, president of the company's video-game business in the U.S., is taking the long view.
Jack Tretton, head of Sony Computer Entertainment America, shrugs off lackluster first-year sales for the PlayStation 3: "While I fully admit we’d like to have sold more units, it’s hardly cause for panic."
Jack Tretton, head of Sony Computer Entertainment America, shrugs off lackluster first-year sales for the PlayStation 3: "While I fully admit we’d like to have sold more units, it’s hardly cause for panic."

The last year couldn’t have been easy for Jack Tretton, president and CEO of Sony Computer Entertainment America.

The PlayStation 3 launch last Thanksgiving was marred by hardware shortages and bad press over the high price and the lack of exclusive titles. And worse: The PlayStation 3 has consistently finished third to Microsoft’s Xbox 360 and Nintendo’s Wii in monthly sales.

But Tretton shrugs off the slew of bad news, saying that Sony is taking the long view with the PlayStation 3. They’ve played this game before, he says, and they’ve taken home the trophy more often than not.

“The first year is important, but it’s the first inning of a nine-inning baseball game,” he says. “You’re not going to win many baseball games if you panic when you’re down 1-0 in the first inning.”

No one can deny that Sony knows what it’s doing when it comes to video games. The first two PlayStation consoles sold a combined 230 million units worldwide. And Tretton says the company will sell more of the seven-year-old PlayStation 2 consoles in 2007 than it did in 2006.

There are signs that the beleaguered PS3 may be gaining ground. Sales of the console doubled during the week of Oct. 29, following a $100 price cut. Exclusive, well-reviewed titles such as “Ratchet and Clank” and “Uncharted: Drake’s Fortune” are beginning to trickle out to hungry consumers – although biggies such as “Final Fantasy XIII” and “Metal Gear Solid 4” still haven’t launched.

I spoke with Tretton before Thanksgiving to find out what’s next for the PlayStation platform, how long they plan to support the PlayStation 2 and what he thinks Sony did right — and wrong — with the PS3 launch.

A recent report says that the price cut on the PS3 has helped sell over 100,000 consoles in America last week. That’s obviously great news for you guys. Do you think things are starting to turn around a little bit?

While I’m thrilled about the price move and the impact that’s had, what I’m more excited about is that we really get our first holiday selling season on the PlayStation 3, and I think that’s lost on a lot of people. It’s the first time that we have the PlayStation 3 in stock, that we have a great software library for it and we’ve got very attractive pricing. So I really feel like we’re able to go into the holiday season with a fully loaded weapon as compared to last year.

Exclusive titles can help the momentum that you’ve gained here – and they can make or break a system. Tell us about some of the titles you’ve got coming over the next couple of months.

We’ve got 19 exclusives, and again, I think that’s something that’s a pretty amazing feat in the first year of a platform’s lifecycle. And they’re not just games that are exclusive for the sake of exclusivity, they’re games that are built and differentiated for the PlayStation 3 and just couldn’t be done on any other platform.

Some of the bigger titles, “Metal Gear,” “Final Fantasy,” aren’t due out for a bit longer. That’s got to be a nail-biter for you guys because those are huge titles.

The beauty of this business is that it isn’t all about one day, it isn’t all about one title, or one month. I think there’s a tremendous amount of software for the holiday season — 160 games coming out on PS3 alone for this holiday, on top of the 200 games that have already been out there, so there’s more than enough great software for consumers to sink their teeth in for the holidays. And as you pointed out, there’s some absolute blockbusters coming post-Christmas. So, hopefully, a lot people go out and buy the hardware and enjoy the great software that’s available for this holiday — but I think they also have some great software to look forward to in the first quarter of 2008.

Bloggers, reporters and analysts have not been terribly kind to Sony or the PlayStation 3 this year. Were there missteps on Sony’s part, or do you think that the criticisms have been unfair?

I don’t think there’s any question that there were missteps, but I don’t think anybody is being honest with you if they say that the first year of any platform goes perfectly according to plan. I think the biggest miss for us was the launch, in that we had easily a million consumers in North America alone that wanted to get their hands on a PlayStation 3 … and we had roughly 200,000 units to take advantage of that demand. … I think that that was probably the biggest disappointment for the first year.

The reason why we don’t end up on window ledges, where other people might not have the perspective, is we’ve been through this many, many times, and we’re the only company that’s gone out and had 10-year product lifecycles and sold over 100 million units — and we haven’t done it once, we’ve done it twice.

Fair enough. But I think the early quotes that I was seeing prior to launch were things like “this system will sell itself” because of the fans of the previous iterations. This couldn’t have been the year that you’d hoped for.

I think it fell short of what we’d ideally like. But if you put it into perspective, we’re not taking the safe route. We didn’t take the PlayStation 2 and add a few bells and whistles to it. … What we’re trying to do here is … refocus the game industry towards high-definition gaming, a real state-of-the-art, future-proof machine for the next decade.

I look at it very much like we looked at the business when we entered back in 1995. You’ve got two very formidable competitors, and we debut the original PlayStation — which is a complete departure from what our competition is doing — and we sold a million and a half units in the first year. Well, we exceeded that with PS2, and I see this as the dawn of a new generation of gaming. I think if you have that long-term perspective, while I fully admit we’d like to have sold more units, it’s hardly cause for panic.

The PS2 is still selling extremely well, as are, of course, the Wii and the DS — and those are much graphically weaker systems than the PS3 or the Xbox 360. Do you think you and Microsoft jumped the gun with these machines? Are consumers ready for broadband and high-def yet?

I think in the case of Microsoft, they’d taken the Xbox as far as it could go, and so if they wanted to remain in the business, they had to go back to the drawing board. As for us, we had the luxury of dipping a lot more into the future than maybe our competitors could because of the strength of the PlayStation 2.

We realized that not every consumer is going to be ready for what the PlayStation 3 offers in the first year and I don’t know that we expect or need them to be ready for it. We need them to be ready for it over the next decade. And if you look at the PlayStation 2, as you just pointed out, we sold 120 million machines so far — but we certainly didn’t sell them all in the first year.

We really feel like we have the luxury of being a little more forward-thinking with our technology and not coming up with something that’s a little more of a casual game experience. If price is an issue for consumers, and they want a diverse library and they want a more casual gaming experience, the PlayStation 2 is a great machine that addresses all of the above.

How long will you support that system?

I really don’t think there’s any reason to back away from it, unless the consumer tells us they’re not enjoying the experience and they’re not looking for more software. But the reality is that we’ll sell more PlayStation 2s this year than we sold last year. Our seventh year is bigger than our sixth.

More importantly, you’ve got a tremendous software library for it. You’ve got 160 games that are coming out for it this holiday season, we’re going to do 250 million pieces of software between our three platforms — and a lot of that is coming from PlayStation 2. So I don’t see any reason why PlayStation 2 has to end anytime in the near future.

Getting back to last year and the PlayStation 3 launch: What do you think worked for [Sony] in the past year?

I think we have a tremendous amount of PlayStation fans that who have seen innovation from us and seen creativity and seen risk ... I think they get bored with the tried and true. I think there’s a real temptation if you’ve had success in the past to just take the same page out of the book. But I think consumers saw an experience in PS3 that was unlike anything they’d seen before.

Another thing that I think really strikes a chord with PS3 consumers is that we’re giving them everything they need, in the box, day one. Our competition talked about the fact that they want to offer consumers a choice, but then they make it clearly apparent that if you really want to have the full gaming experience, you need to go out and invest a lot more money than you originally thought you were.

Have you learned any lessons from the PS3 launch?

Lessons in that when you’re making claims about when a unit is going to be available, you’d better be crystal-clear on what your manufacturing capacity is.

I think we knew there would be pricing sensitivities and I think we’ve certainly seen that. But I think the challenge of educating consumers on the technology is something that — I don’t know that we underestimated, but it remains a formidable goal. The days of just “Here it is, here’s what it cost, plug it in … and start playing” are over. There’s a learning curve a consumer needs to go through before they make a decision on which platform to buy, and I think it’s a lot more complicated than it was five, 10, 15 years ago.

Sony was charged with being arrogant toward its fans. Would you say that “here it is, plug it in” could be construed as such?

I don’t know that we were ever considered arrogant by consumers. … I think the arrogant claims came from the press and bloggers more than true consumers. … I think the arrogance claim comes with a leadership position and being unwilling to admit that you’re failing. And anybody who’s been through media training or been with the press isn’t going to get on a soapbox and talk about their failures. If that gets construed as arrogance, then I guess that’s a risk you have to take.

So, if next-gen was Internet-connected consoles and high-def, how long do you see this generation lasting?

I think it should last for 10 years. I think we’ve got more technology under the hood and more growth potential in terms of what developers can do with the software than we’ve had in previous generations.

If you summed up the mission statement for PS3, it’s short-term sacrifices for long-term gains. There was clearly an easier route to go, but we think the route we’re taking is the one that’s going to pay dividends for years to come.