Can The Sony PlayStation Remain The Top-Selling Gaming Console?

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 co

nsole, 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 bi

llion 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 2

00 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 Electron

ic 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 w

as 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 waiti

ng 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 Entertainme

nt, 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 tha

n 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 g

eneration. 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 game

rs 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 b

uilt 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 complete

d 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. Y

ou 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 import

ance 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 ar

e 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 A

zure. 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 billi

on 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 worl

d, 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 w

ith 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.