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PLAYSTATION NOW – Is this yet another cash cow for Sony to milk?

SONY is one of the world’s most renowned and revered technology brands. They have identified and innovated for niches that have transformed the way we live our lives. Sony is responsible for many innovations from the first-ever remote controlled BetaMax video recorder in 1977, the first Walkman in 1979, the first Camcorder in 1983 and even the first CD was invented in partnership between Philips and Sony. The end of the 20th century found Sony innovating at a frantic pace. In 1994, Sony launched the PlayStation – within ten years of launching the PS1, Sony had shipped 100 million units. The PlayStation 2, launched during the new millennium, became the best-selling home video game console ever. By 2011, Sony had shipped 150 million units. The PlayStation 3, launched in 2006, has to-date sold 80 million units. In November 2013, Sony launched the PlayStation 4 and shipped one million consoles in the first twenty four hour of sales. There is no denying that PlayStation has been hugely successful for the Sony group of companies.

Sony Logo  - Ultimate Gaming ParadiseAccording to financial data from 2012/13, Sony was “not able to return the electronics business to profitability on an operating profit basis in the fiscal year.” Sony’s entire business is bolstered by two divisions; entertainment and financial services. That means TVs, phones, laptops and other electronic items make Sony no money whatsoever – they actually lost money for Sony. In 2014, Sony wants to diversify its financial services element (Sony, as an old Japanese company, has a large pension pot it wants to invest and thus financial services have been a profitable sideline) along with its entertainment division (including PlayStation). It also wants to explore new ventures in medical equipment and security. Sony is an ever-evolving entity. This evolution means money is needed and a company with so many divisions can see profitable elements lose out to the failure of others. The transfer of capital could impact on the future development of the PlayStation along with other elements that could damage the brand.

PlayStation as a video gaming marque, has a heritage and pedigree that requires investment, research and development along with end-user nurturing that has helped make the PlayStation One, Two, Three and now Four into successful games consoles. This, with the advent of PlayStation Now, is at risk. For those who are unware, Sony has launched a new service. The service is called PlayStation Now. It’s remit is to create a streaming game service which can be played on multiple platforms – from PS4, PS3, Televisions, Smartphones, PlayStation Vita’s and Tablets. In other words, electronic things SONY sells. The process is simple – think Netflix but with games. PlayStation Now allows you to access the PlayStation catalogue of games. This service was made possible by Sony’s acquisition in 2012 of Gaikai Inc, a cloud-computing specialist firm. Gaikai will help Sony PlayStation Now by simplifying the streaming process. The move also means Sony is not at the mercy of cloud-operators like Google, Microsoft and Amazon – who are technically rivals. Therefore, by cutting out the cloud-middle-men, Sony PlayStation Now will create a better streaming experience connected to your Sony Entertainment Network account. Once the ‘app’ is installed and you are logged in, you can find the most up-to-date version of the game and all progress is saved to the cloud.

Sony argues that the move will “provide significant opportunities for further business expansion.” However, this ‘expansion’ has a cost – not in fiscal terms but in emotive capital. The mobile gaming market – which has been enthused by Android – has allowed tablets, phones and even cameras to allow you access to ‘apps’ which have created avenues for monetizing services and products – especially video games. Therein lies the issue, Sony needs the ‘entertainment’ divisions income to help further Sony (as a whole). This means future development could be stymied by a lack of investment. However, this issue seems insignificant when compared to another threat. The threat posed by PlayStation Now.

Gaming is a personal experience. It allows the individual within the context of their life to engage with visual images built around dialogue that creates a narrative. This narrative helps to define the console and gamer relationship. The issue with PlayStation Now is that it moves away from solid gameplay to throwback to (some might even argue retro) gameplay. Your Plants versus Zombies or Angry Birds Seasons are two-dimensional. The reason why mobile games can’t compete with PCs, Xboxes or PlayStations is that they don’t, as of yet, run on 64 bit architecture and as such games engines fail to really bring out the best in such a low-tech game. PlayStation Now will re-introduce older titles – with similar gameplay to the mobile market. This will create issues as the revenues will be high. That will see young developers replicate PlayStation Now titles in order to cash in. This could stymie the development of next-gen titles.

PlayStation NowPlayStation Now will make Sony Corporation buckets of cash. It will help, in all probability along with the PS4 and EMI records, to help return Sony Corp to profitability once again. However, it will impact on the future development of the PlayStation. There have been mutterings, even from members of the Sony board, that perhaps Sony needs to ‘spin-off’ PlayStation to help it refocus on it’s core business interests – personal and corporate electronics. Such a ‘spin-off’ would help Sony by initially giving it a bumper one-off cash lump sum in the billions mark. This could help Sony. It would also help PlayStation as, an individual entity, it could focus its own financial affairs in-house. Money could be re-invested into the console and games development. This issue has seen ‘activist’ investor, Dan Loeb, a Billionaire investor, with a 3 per cent stake in Sony, renew his quest for a Sony break-up. His argument is that Sony needs to focus on core products and services – the corporate structure and management is a key reason for the company’s decline. He continues by arguing the ‘shoring up’ of the electronics divisions by entertainment and finance highlights this unease. He argues that the company can be even more profitable by splitting up.

Another fiscal headache faced by Sony is the revelation that PlayStation 4, according to Reuters and CNET, will be sold at a loss. Sony executives argued the price was lowered to help compete against Xbox. They saw that Microsoft had the competitive advantage last time – when PS3 was more costly than Xbox 360. They believe that by replicating that ploy they can sell more units. They believe they can make-up the loss by generating revenue through the now mandatory PlayStation Plus services and Sony’s own launch titles. Whatever the outcome, PlayStation 4 has performed well during the Christmas and New Year periods. According to data, Sony has sold nearly five million units globally. PlayStation Now could impact on the current drive to make the PS4 profitable. The ‘nostalgia’ and ‘retro’ markets are big. However, educating gamers to the difference will be the crucial difference. A new generation of gamers could have their initial ‘experiences’ of gaming through tablets and PlayStation Now. This could impact on PlayStation 5 (and thereafter) by taking away the ‘special relationship’ between the console and the gamer. There has been encroachment after encroachment with digital services, entertainment and social media – but at it’s core its about gaming – those discs will be the cash-cow for Sony in the long term. This needs protecting from Sony’s thrust to profitise the group. PlayStation’s heritage is at risk of being eroded by executives who simply look at the next quarter and the next day’s trading figures as oppose to visionaries who created the consoles in the first place – who thought about changing a decades worth of engagement and experiences.

Sony PlayStation Now will, in the medium term, help Sony to continue it’s quest to monetize and reduce group losses. This is good – it will protect jobs, investment and growth. However, therein lies the conundrum by moving capital away from the profit-making elements to the profit-losing elements, the company could hinder future development. This possibility is made worse by the acknowledgement that each console is a ‘loss-leader’. They are ‘hoping’ to make enough digital and games revenues to recoup the losses – i.e. to break even. Protecting the PlayStation should be central to Sony’s long-term roadmap. However, the financial woes of the ailing Japanese consumer electronics and entertainment giant means PlayStation, in the short to medium term, could be manipulated in order to protect the company as a whole. This, I believe, along with the destruction of console gaming as envisioned through PlayStation Now, will create future development problems for the tech giant – problems that money will not be able to fix.

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The curse of microtransactions and the bleak future of gaming

You have a console, that’s roughly worth between £349 and £449, depending on whether you opted for Xbox One or PlayStation 4. You then paid online subscription to either Xbox Live or PlayStation Plus which costs around £39 to £49 a year. Then you purchased a game, any game from Grand Theft Auto 5 to Call of Duty: Ghosts for, on average, around £50. That’s, on average, just a bit over £500 just for the console, network access and a game. You might be thinking that, “that’s it; I can play and keep playing without having to spend any cash all year!”

Well, you’re actually quite wrong! In-game purchasing, in the form of microtransactions, has been in existence for over a decade now. However, mobile gaming has taken microtransactions to the next level. As such, games publishers and developers have started to go all ‘dollar-eyed’ over the prospect of ‘monetizing’ their video games further. This week saw the launch of Angry Birds Go! on Apple’s iOS platform – the iPad and iPhone OS environment. This game, takes microtransactions to the next and most obscene level.

Angry-Birds-High-Priced-microtransactionsMany commentators, including The Metro, found the game’s “sickeningly offensive use of not just microtransactions, but every underhand trick in the marketing handbook” an embarrassment to video gaming. Fast food operators ‘sponsor’ car upgrades and all sorts of other must-haves! 8Ball Pool, Plants vs Zombies and Angry Birds are part of a plethora of mobile titles that are either a couple of quid or are completely free that make their developers money through microtransactions.

Now it’s easy to argue that because the game is ‘free’, the developer needs to cover costs – so microtransactions help them to profiteer their product. This isn’t an issue, what is the issue is the cost associated – some perks on Angry Birds Go! include a £39 upgrade pack and the way the characters are geared towards you ‘having’ to pay to continue playing all points towards a money-centric development approach. Not so micro any more! This is a racket, in all intents and purposes, and one that Android, Windows Phone, Blackberry and Apple are propagating.

You might be thinking, well I don’t pay for such things! I enjoy my PlayStation 4, my Nintendo Wii U or even my Xbox One. But take a moment and ponder? Map packs on Call of Duty, Dream Teams on FIFA and even in-game currencies for games like Grand Theft Auto V. This is a cancer, one that will destroy the current video game marketplace. I am not arguing that all change is bad. I believe sponsorship in games is a better alternative to microtransactions. It’s what Rovio initially did before it started ‘flogging’ Angry Birds across the different phone OS platforms.

If this behaviour becomes mainstream during the lifetime of the current next-gen platforms, it will, due to the initial investment costs, create a fracture in the relationship between gamer and console. The very relationship is built upon a conflagration of extreme passion and loyalty. This unique relationship, on a consumer level, helps mould brand loyalties. However, these loyalties will be tested if every time you need ‘an extra perk’ on Battlefield or Call of Duty you’re forwarded to your credit or debit card payment page.

It’s a personal choice – we, as gamers, need to understand that every bit of money that’s paid towards in-game purchases will only embolden the developers and publishers to continue their behaviour. They are, right now, financially loyal to these funding formats. However, if enough people re-think their attitudes and it become fiscally unviable, the developers and publishers will move on to the next ‘big thing’.

Microtransactions Advertising RevenueVideo game development is a multi-platform endeavour. That said, the behaviour of developers on mobile platforms is starting to creep into the mainstream of top-end video game development. The ownership and game play costs cannot be increased by ‘cash hungry’ developers wanting to further their product monetization. Therefore, if you want to help keep the platforms of the next generation consoles clean of microtransactions and “sign-in to PayPal buttons”, you need to think about whether in-game purchases are really that important to your current video game-play enjoyment? If more and more developers force players to pay by microtransactions, the end result will be a commercialised drip-feed of adverts, mini transactions and expensive (and in all intents and purposes useless) discs. What we need is a thriving development scene – a scene that focuses on disc purchases and not in-game purchases as the central driver for consumption.

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