Sony Playstation Now Announcement

The Sony announcment at CES 2014 stunned gamers.  It wasn’t their new TV’s or tablets, but more surprisingly, a subscription service: Playstation Now.  Playstation Now is Sony’s answer to backwards compatibility.  The service will stream legacy games from the original Playstation, Playstation 2 and Playstation 3 to an assortment of different devices.  By next summer, Sony plans to roll out the streaming to Playstation 3 and 4 users which is no surprise.  But in the future, they’ve included plans to start serving up their hit classics to their portable Playstation Vita, their flat screen TV’s in the Bravia series and even tablets.

Background
Sony has fallen under harsh times as sales and market share for just about every division declined.  By late 2011 and early 2012, there were even some far fetched rumors of Sony shedding the entire Playstation department and more realistically, a smaller role for Playstation.  That theory was shattered when Kazuo Hirai became the CEO in April 2012.  Coming from the computer and video games division, it was obvious where the focus for the next decade was going to be.

Sony made a rather interesting purchase in July 2012.  They bought the game streaming company Gaikai for $380 million, fueling rumors of a strange new generation of Playstation.  Gaikai was specialized in streaming PC games.  Used in the past for demos, full versions of games like Dead Space were streamed through their service with a timed limit.  Sony was obviously thinking bigger.

By the time Playstation 4 rolled around, there were a large number of streaming features.  Personally, I thought that was the end of Gaikai’s involvement and that Sony missed an opportunity.  Realistically, the game recording and sharing, demo streaming features were already a big undertaking, I didn’t realize just how far Sony was going to go with this.

Implications for the Future of Sony
This is a bit of speculation, but when Sony announced the Vita TV in September 2013 (then released it in November 2013 in Japan), they underestimated just what a game changer they had.  The Vita TV let you play Vita games on the TV with a PS4 controller, but also allowed you to stream your PS4 games and content through the internet.  They announced it as exclusive to Japan, but soon rethought that statement as tech blogs filled with comments about imports.  I think this is the point where a few heads were turned at Sony.

Selling a Vita TV puts roughly $100 into Sony as a company, minus the cost, but the positive externalities are huge.  After selling a Vita TV, Sony’s entire Playstation line benefits.  At minimum, they’ll sell another PS4 controller and a few Vita games.  The Vita TV also connects to the Playstation Store, so some digital PSP titles will be sold.  More importantly, to take advantage of the PS4 streaming feature, owners of the Vita TV are likely to go out and buy a Playstation 4 as well.

The non-obvious one is that the Vita TV can hugely boost Vita development.  The Vita hasn’t sold that well compared to its competitor: the Nintendo 3DS.  It is losing out to the Nintendo 3DS its install base is small so developers don’t make games for it.  It’s a vicious cycle as fewer people purchase the console and fewer games are made.  At this point, it’s great hardware for a pretty decent price now, and Sony must recognize that just one or two excellent titles can sell these things (much like Pokemon X and Y did for the Nintendo 3DS).  With that in mind, the only escape of the cycle they have is to get more customers and sell more games.  Short of developing a title themselves, they need the customers to bring back the developers.  The Vita TV is a great way of doing that.  For those interested in playing Vita games, the Vita TV is a cheap alternative.  They will also sell a lot of these to Playstation 4 owners that want to stream their games and perhaps might take a second look at the catalog of Vita games.  Of course, Vita owners are free to buy one, and so are people who are interested in getting this just for Netflix and YouTube.  This increases the install base of the Vita and makes it look quite a bit more attractive to develop on.

Sony has seen some pretty immediate effects of this compounding positive feedback.  And I think it was enough to start shaping their current strategy.  At the end of the day, it comes to the term that businessmen love to say when they make an acquisition, and that is: synergy.  With their acquisition of Gaikai, they now have the means to bridge their products together and offer a complete package to tie in their customers.  It’s a classic strategy with a new technology driving it.  Sony is slowly bridging together their different departments and using their successful products to lift up their not so successful products.

So where am I going with this discussion about Vita TV?  Well, I’m using it as an analogy for Playstation Now.  Just as the Vita TV helped to pull the Vita out of the slump, at no expense of the PS4, so too will the Playstation Now leverage the success of the Playstation 4 to their other divisions, from TVs to tablets.

I think this is only a recent realization and new strategy at Sony.  They’ve announced that the Playstation 3 and Playstation 4 will be the first to stream, and further down the line the PS Vita will be included.  These are quite predictable and hardly synergistic.  What’s surprising to me, and to all the other gamers out there, is the inclusion of TV’s, tablets and smartphones.  It doesn’t seem like there’s a time schedule yet, but I think distant future is the safe assumption here.  I have my fingers crossed, I’d love to see Sony take a giant stride forward away from the slump they’ve been in.