From Spider-Man to God of War and Final Fantasy.
It's been 30 years since the PlayStation first
brought to life some of the most iconic video game
franchises.
Hello New York!
Whether it's coming from third party partners, that
release stuff that is exclusive to their
platform or their own first party studios making
stuff, the library has been the number one thing
that really pushes the success of the systems.
For PlayStation, the game has always been, no pun
intended, great content to a great console, and I
think that that is where the exclusivity brings
people and creates a loyalty and engagement
that is really hard to replicate.
During its pandemic era rollout, the PlayStation
five was nearly impossible to come by.
Hunting for a new PlayStation for Christmas
or an Xbox Series series ten?
Good luck!
Sony's always done great hardware design, and it's
one of our strengths. It's one of our points of
difference.
The PlayStation two is the best selling video game
console of all time, with nearly triple the sales of
Sony's latest PlayStation five.
Annual gaming sales exceeded $24 billion for
Sony in fiscal year 2022, which makes up over 30% of
the company's overall revenue. The PlayStation
network, the company's online gaming platform,
has 123 million active monthly users.
For reference, that's about the same number of
people who tuned in for the record breaking Super
Bowl 58.
If you include mobile, you include global.
You put it all together, the video game industry is
a $200 billion plus industry.
It's bigger than music.
It's bigger than movies on a revenue basis, the
largest entertainment sector in the world.
The Nintendo Home Entertainment System
entered Japanese homes in 1984 before spreading
internationally two years later.
It utilized game cartridges that were
inserted directly into the device, a standard for
that decade's gaming consoles.
You mean you haven't.
Played it yet? We can play it on my Nintendo
Entertainment System.
In 1994, the PlayStation launched in Japan, which
accelerated the gaming industry's shift away from
cartridges.
Going over to a disc format was a big deal
because of how much data could be stored on those
discs versus what was possible on cartridges at
the time, and that was a large reason why a lot of
third party studios even moved over to PlayStation.
While competitors in the modern video game
landscape, Sony and Nintendo, had privately
signed an agreement in 1988 to jointly develop an
optical disc game player, there were even 200
Nintendo PlayStation prototypes that were
manufactured, but the relationship fell apart
before its release.
Just when we were about to announce the launch of
this, Nintendo backed away and they ended up
going with Philips for their optical disc format,
and Sony was kind of left at the altar standing here
with this beautiful compact disc reader.
And so the PlayStation was born.
Sony's first foray into the video game space
entered the US in a 1995 launch that was announced
at the first Electronic Entertainment Expo known
as E3. Sega, one of Sony's biggest competitors
at the time, also announced its US release
of its Saturn console with the price point of
$399.
Before the launch, there was considerable
uncertainty. We were moving into a space that
had two pretty entrenched occupants, Nintendo and
Sega.
The then president of Sony Computer Entertainment
America took the E3 stage and made a short but
significant announcement.
$299.
The price of the PlayStation launching in
the US.
That was throwing the gantlet down.
It's like PlayStation is not here to play, we're
here to win, and we're going to come in $100
under all of you. But it just blew the blew the
doors off when people thought, wow, Sony's not
here to dip their toes in the water, they're jumping
all in.
There was no way that we could assume that we were
going to be successful. And it was really not
until the day of launch.
You know, we woke up that morning and we saw big
queues outside, retailers of excited people waiting
to get their hands on on their PlayStation, that we
realized that we were probably on to something
there.
The original PlayStation went on to sell over 100
million units worldwide.
Jim Ryan joined Sony in 1994, the same year that
the PlayStation was born in Japan.
He is set to retire in March of 2024 after a 30
year tenure with the company.
I have hugely fond memories of the original
PlayStation, and I'd never really played too
many games before joining what was then Sony
Computer Entertainment, putting CD discs to that
thing and really experiencing Tekken,
experiencing Ridge Racer, uh, experiencing Resident
Evil. Those were great days.
From the beginning, the company knew just being a
tech company wasn't enough. You had to bring
some secret sauce in from the entertainment world.
And by doing a joint venture between Sony Music
and Sony Electronics, I think that was the key to
the early success of PlayStation.
The PS2 was released in 2000, and went on to
become the best selling video game console of all
time, selling a total of over 155 million consoles.
We went into markets where video gaming had never
really been a thing. So, you know, southern Europe,
for example, Italy and Spain and places like the
Middle East, we established a gaming
culture where none had existed.
The PS2 also functioned as an affordable home
entertainment system as it had a built in DVD
player. This helped some buyers justify the
purchase, as DVD sales reached $16.3 billion and
accounted for more than half of the US home video
market by 2005.
We put like The Matrix into a box with a PS2.
You don't like games, but you want to watch this
movie? DVD was a real accelerant for the
PlayStation two adoption.
But this momentum came to a halt when Sony released
the PlayStation 3 in 2006.
Our Icarus moment was when we launched the
PlayStation three. We created a huge hole in the
bottom line that we need to fill over time.
The machine was incredibly expensive.
I just remember anecdotally getting that
sticker shock when you guys announced the price
of the PlayStation three.
Oh my god, who's going to buy this?
This is ridiculous at the time.
Now, today, that kind of a normal console price, I
guess. Can you just talk a little bit about the
challenges in that generation that you guys
went through?
Yeah, I think if I had.
To kind of, um, encapsulate PlayStation
three generation, I think I'd sort of say that we
maybe we got a bit carried away with the
success that we'd been enjoying on PlayStation
two. And we we kind of stumbled a little bit at
the start of that generation, and the early
days were difficult.
It was very, very powerful, but it was also
very expensive and it was frankly hard to develop
for we needed to work really hard with some,
some amazing franchises.
The company slashed prices multiple times for the
PS3, but still lagged behind Microsoft's Xbox
360 and Nintendo's Wii.
The company picked itsself up, brush itsself off,
came up with some of the most amazing games of the
generation. Uncharted began on PS3, Killzone was
on PS3, resistance was on PS3 and knew that we had
to win out by not being a computer in the living
room, but by being a game machine in your house.
The 2013 launch of the PlayStation four proved to
be the hit Sony needed.
After the slump in sales from its predecessor.
It launched at a lower price than the PS3, and
Sony saw its fastest start in console sales up
to this point in the years that followed.
Sony went on to sell double the amount of PS4
consoles compared to the Xbox One.
I always played a fair bit of FIFA back then because,
you know, power of the PlayStation four allowed,
um, sports games in particular soccer.
Um, that as a European.
I'm crazy about to become really realistic and, uh,
you know, really great gaming experience.
I think PlayStation's success is really rooted
at the core of what they do best, which is content.
And, you know, in the industry, we always say
content is king and it's true.
There's this trend where gamers play, they spend
more time in fewer blockbuster games.
So what that means for us as game makers is we're
making these benchmark titles and they're their
big bets, they're big budgets, and that comes
with a lot of risk.
The PlayStation content library is composed of
first party and third party developed games,
meaning it's a mix of games created in-house at
PlayStation Studios and by outside developers.
The PlayStation depended on third party developers
and publishers to bring content in.
We built a platform, we built some software, but
the majority of the opportunity was spread
against Electronic Arts, Activision, Ubisoft,
Namco, Capcom.
Sony was happy not to be the biggest publisher on
the platform as long as they could increase it.
It wasn't about taking shares of the pie, it was
about making the pie itself bigger.
And I think that was a difference of approach
that helped the company to be successful.
But a slice of that pie was taken off the table in
2023, when Microsoft completed its purchase of
the video game giant Activision Blizzard.
Well, we were concerned about what the regulatory
climate would be, but we never thought that there
was any, you know, real reason that was
legitimate. Why these two companies couldn't
combine.
The big controversy is obviously Activision is is
a big producer of games, and the concern was that
with Microsoft acquiring them, they would own
pretty much what is left of independent big studios
and not share the games over with PlayStation.
You had this interesting argument about Microsoft
buying Activision and what that could mean for
exclusives, what that could mean for cloud
streaming. At the same time, Sony has done very
similar things buying studios to make them
exclusive or making exclusive deals with
companies like square.
In your view, why was the Activision deal wrong or
bad for the industry?
Yeah, the the reason that we felt this one was, was
different to anything that had happened in the
past was the sheer size and importance of the Call
of Duty franchise.
So we were absolutely thrilled to be able to
negotiate a deal with Microsoft to ensure that
that franchise remains available on PlayStation
platforms for the next ten years, and that was
very important to us, and we're very happy to have
done that deal.
But the timeline is a little different, though,
right? Because why didn't you agree to the deal when
it was first offered, and instead you were part of
the case with the FTC?
A key witness for the FTC?
Yeah, I you know what?
We're at risk of getting very granular here, but
there are deals and deals. And, you know, the
deal that was offered at a certain point of time
may not have been the deal that was actually
signed.
Microsoft's Activision acquisition was by far the
most expensive in industry history, and more
than double Microsoft's second largest acquisition
of its 2016 purchase of LinkedIn.
I see the consolidation in the industry.
I see people like Microsoft or Embracer or
some groups out of Saudi Arabia buying up a bunch
of studios, and I see consolidation to be the
enemy of creativity.
If we've commoditized the product, you're just going
to get more of the same.
But throughout its time in the gaming industry, Sony
itself has also acquired more than a dozen game
development studios, and many of these studios have
gone on to produce some of its biggest hits.
Insomniac games was behind the PlayStation
five's record breaking success with Spider-Man 2
in 2023, and now the way these games are being
played is also evolving.
Over the past decade, Sony's game revenue has
shifted overwhelmingly from physical discs to
digital downloads.
Both Xbox and PlayStation began introducing entirely
disc free consoles with the Xbox Series S and the
PlayStation 5 in 2020.
Both companies are also improving their ability
for users to stream games directly from the cloud.
Both Sony and Microsoft utilize in-house servers
for streaming games for.
Microsoft, the advantage of doing that is that they
own Azure. And, you know, in that respect, obviously
their cost to deliver that experience is going
to be lower.
Microsoft controls 60 to 70% of the overall cloud
gaming market. Playstation plus has about
8 million subscribers to its premium tier that
allows users to stream from the cloud.
That's about 17% of its users that pay for its
subscription gaming service. However, right
now, cloud gaming accounts for a small part
of the overall gaming market.
Cloud enabled gaming generated just over $5
billion in revenue in 2022, which pales in
comparison to the $35 billion in console game
sales.
I've lost count of the number of times over.
Very many years that people have said the era
of the console is over, cloud will will emerge and
it will over time become a significant component of
the way that people enjoy interactive entertainment.
But it's not there yet.
Especially considering that the
telecommunications infrastructure needed for
smooth gameplay is just not strong enough in much
of the world, including certain parts of the US.
The fact that there is a rural broadband initiative
in the federal government indicates that rural
broadband needs work.
This inequality in internet connectivity can
also lead to delays in digital downloads,
indicating the modern relevance of physical
discs for both PlayStation and Xbox.
And oftentimes when people talk about things like
console wars and exclusivity and that kind
of thing, they really compare PlayStation and
Xbox more directly.
Nintendo doesn't get talked about in the same
breath as often. I feel like people kind of just
let Nintendo be its own thing.
Yet, Nintendo Switch is the second best selling
video game console of all time, behind the PS2.
I think that maybe the mobility aspect of it, and
because it's a handheld, people think about it
differently, almost more competing against the
phone than not a console, but it is a console.
If you think about what PlayStation has done now
with a handheld that you can pair with your PS5 and
be able to, you know, move around the home, it
kind of shows that they see Nintendo as a
competitor.
Shortly before Christmas, we launched PlayStation
portal, which is a device that allows people to use
our remote play functionality to enjoy PS5
gaming experiences in a handheld environment.
And more recent years, there has also been an
increase in leveraging the iconic PlayStation
content outside the gaming space.
I'm really pleased about the early successes of
PlayStation productions.
Working with Sony Pictures, we've taken some
of our best IP and converted that to to
movies with uncharted to the TV format with The
Last of Us.
I think what really impressed them was the
fact that I didn't turn into a monster.
And Sony plans to keep increasing the
intellectual property within its systems by
2025. The company says it expects to be putting 50%
of its investment into new IP.
That compares to just 20% back in 2019.
It's an important piece to kind of cement that that
idea that that games are part of the pop culture
now, and we reach broader audiences every time.
Quality in in the adaptations is just as
important as a quality of the games that we make.
But the gaming industry is facing some headwinds.
Thousands of jobs were cut in the gaming industry
in 2024, and last month, Sony laid off 900 workers
from its PlayStation division, or 8% of the
unit's global workforce.
Herman Holst put out a statement that day saying,
we are at a stage where we need to step back and
look at what our business needs.
At the same time, our industry has experienced
continuing and fundamental change, which
affects how we all create and play games.
I would say that it's really important never to
forget that we are in the entertainment business,
and that's what we do.
That's our strength. I think that's why we've
enjoyed some considerable success over the last 30
years, never losing sight of that as a cornerstone.