By Shane McGinley
The CEO of Sony Entertainment tells us how he plans to sell the gaming giant’s one millionth Playstation 3 in the Middle East by the end of the month
As president and CEO of Sony Computer Entertainment Europe, Andrew House’s remit for the Japanese entertainment giant means he is in charge of 99 different territories, spanning Europe, Africa, Australasia and the Middle East.
As a result, he travels a lot and regularly misses his favourite TV shows. However, he rarely gets the chance to catch up with the programmes he has set to record as his 15-year old daughter monopolises the PlayStation, and is constantly online playing games with her worldwide community of friends. With Sony having set an annual target to sell fifteen million PlayStation 3 consoles by the end of March 2011, House isn’t complaining too much.
He says his team aims to achieve the target set by Sony by repackaging the games console from a niche entertainment medium - dominated by kids and played in their bedrooms - into a mainstream entertainment unit used by the whole family and positioned centre of stage in the living room.
“That is very exciting and our goal is to establish PlayStation as the defacto standard for people who are starting to embrace this form of entertainment and cement the brand’s strength,” he says.
Before he took over management of nearly 100 territories, House was previously Sony’s chief marketing officer in the US and it is obvious that he has been media trained to within an inch of his life. That said, in between the corporate jargon and American business speak it is obvious that he is confident the Middle East will be contributing a healthy share of Sony’s expected sales. ets.
“We already have tremendous share in the Middle East. We are in a very strong position competitively. We are able to work in conjunction with our parent company, which has long historic ties in the region. We are able to piggyback on the strength of that infrastructure and brand presence.”
In fact, it appears that Sony is the big fish in the Gulf and is the one which its rivals are eager to overthrow. It currently holds a stake of around 60 percent of the games console market in the Gulf and PlayStation 3 has conquered half of the ‘next generation’ sector, with the remainder divided up between Microsoft’s Xbox console and Nintendo’s Wii.
In Saudi Arabia the stake is even higher with Sony owning an estimated 75 percent share of the overall market. House doesn’t reveal how big the Middle East market is for Sony on a global level, only going as far as to describe it as “significant and growing”.
His colleague Tim Stokes - the sales and marketing director of the PlayStation Division of Sony Gulf - has equally ambitious targets set his team: “Close to a million units by the end of March 2011 since the launch in March 2007.”
Despite the recession, Sony achieved 30 percent growth in the Middle East last year and House says it will “certainly strive for the same growth year-on-year.” So we can expect another 30 percent I ask? “I would hope so,” he says, giving little away.
One of the catalysts behind PlayStation 3’s success has been the high demand for the new Move motion controller, which was launched in September 2010. In the first two months that the controller was on sale, Sony reported that sales had far exceeded expectations and had hit 4.1 million worldwide, 1.5 million of which were in Europe, the Middle East and Africa.
“The initial sales response has been so far in excess of our initial plan that we’ll probably be looking at accelerating production,” says House. However, Microsoft is hot on Sony’s heels and launched a similar controller-free device called Kinect, which has proved to be just as popular and sold more than 2.5 million units worldwide in its first 25 days on sale.
One of the benefits of the video console business model is that every few years a new version is launched and users are forced to upgrade. “With each new cycle you have an opportunity to build the business and reach out to people. PlayStation 2 has retained a lot of strength in this region but we are starting to move into the tail end of the cycle so most of the growth is going to come from formats, in particular the PlayStation 3,” says House.
House says each version of the PlayStation had a unique selling point: PS1 had 3-D games and the PS2 gave users the ability to connect with other players over the internet. The appeal and success of the third incarnation is the fact that it is more than simply a games console, it has other elements built into it, he says.
“We took a gamble that the consumer would embrace not just a dedicated video console, but something that was also a Blu-ray player that offered a suite of network services. I think the rise of what I would term ‘fully networked consoles’ has been the big shift,” he continues. “We are only really scratching the service of what that can deliver. What is the next generation of network games and services going to look like?” he asks.
“An early indicator for me is the game Little Big Planet, which is innovative in two ways: it has very strong network community components and is one of the first games that allows users to create their own content and share it. With the rise in Youtube and social networks, it is a major consumer trend, particularly among younger users.”
The networking and community element, - where users are able to create their own content - has produced some “quite spectacular” statistics, says House. To date, he says around half a billion consumers have played the Little Big Planet game since it was launched in March 2007.
“If I look into the future you are going to see games that are going to have a community network element to them,” House says confidently.
Sony’s success in the Gulf has been reflected on a global level, where it reported a $847m operating profit for July-September, against a loss a year ago. Sony also raised its annual profit forecast to $2.43bn from $2.18bn, boosted by strong sales of the PlayStation 3 game consoles.
While House may be hoping that Sony can maintain its 30 percent growth in the Middle East in 2011 and eat further into its rival’s share of the market, indicators from the major markets around the world show mixed results.
In the US, Microsoft’s Xbox 360 benefited from the popularity of the Kinect motion-capture controller and was the best-selling video-game console in the US in November for the sixth consecutive month. The total industry sector was worth nearly $3bn for the month and the Washington-based software giant shifted 1.37 million units, compared to 1.27 million sales for Nintendo’s Wii. However, Sony’s PlayStation saw sales slump 25 percent to 530,000 units.
Figures estimate that Kinect was responsible for 77 percent of Microsoft’s video game sales, while Sony’s Move device directly accounted for only 22 percent of sales. Therefore, it shows that US consumers have an appetite for motion-control devices and are a major determining factor in purchase choices, something the team in Dubai are no doubt keenly aware of.
In Sony’s homeland of Japan it has performed better, with the PlayStation Portable and PlayStation 3 outselling Nintendo’s DS and Wii machines in November. Sony sold 123,748 PlayStation 3 game consoles in Japan in November, compared to Nintendo Wii’s 109,660 unit sales. The spectacular sales were mainly attributed to the hugely popular Gran Turismo 5 game, which was the biggest selling game in Japan and was exclusive to the PlayStation 3.
Gran Turismo has proven to be one of the most popular video game series in the world and the first four versions of the franchise sold around 56 million copies since it was launched in 1997. In the first twelve days that the fifth edition was on sale during the 2010 Christmas season, Sony shipped a massive 5.5 million units to retailers.
In March last year, the God of War III helped increase PlayStation 3 sales in the US by 44 percent and was the catalyst for the console to start turning a profit on hardware sales. This shows that popular games can make or break a console, but House says it is difficult to carve up the relationship between the console and the game and which consumers are more loyal to. “Content will always be a massive driver but with the PlayStation 3 you are seeing multi-functionality. There are more reasons to be loyal,” he says.
Of course, one of the big issues in the Gulf is that some of the biggest games on the market, such as the Grand Theft Auto, Mafia and Godfather franchises have been banned due to their explicit sexual or violent content.
“That is an area that presents a challenge for any company engaged in the content or entertainment business. You are essentially trying to find the right balance between innovation and creativity while being respectful of the cultural differences,” says House.
“A robust rating system is a great tool to establish that balance... Educating parents about parental responsibility about what is age appropriate,” he adds.
In a bid to combat this, it was reported in October that Rubicon Group Holding and Modern Electronics Company, Sony’s Saudi Arabian distributor, were teaming up to localise games for sale in the Saudi market and remove “unacceptable content”.
While Sony is not currently working with local producers to create Arabic-specific content for the PlayStation 3, House says it is something that he is interesting in pursuing.
In Poland, developers introduced the Polish language to the game and Polish celebrities were used to dub over characters voices and House says this worked very successfully and helped to propel sales.
“We are getting to the point where there is sufficient interest. We are as happy working with development talent in the Middle East as we are in Central and Eastern Europe or anywhere else. It is early days right now. I would classify it as in the exploration phase at the moment.”
But the big question everyone wants to know is whether there is a PlayStation 4 in development. “If there is we are certainly not talking about it right now,” House says cryptically as we say our goodbyes.