NOV. 19, 2008 • Sony started investing in the game space in the late 1980s because the company thought that a game system could one day become the central entertainment hub of the household.  The original PlayStation focused solely on games and Sony Computer Entertainment (SCE) used this period to build up a major in-house software development organization.

The PlayStation 2 was intended to be more of an entertainment hub, and, in addition to acting as a DVD player, was supposed to have significant online capability.  However, the PS2 was clearly known as a game machine and most of the players that were serious about online play migrated to the Dreamcast’s Sega Net, and later, Xbox Live service.  Now with the PlayStation 3, Sony is making its biggest push ever to position the system as the household entertainment hub.  The online features of the PlayStation Network (PSN) are a central part of this positioning.

DFC Intelligence met with key team members from Sony Computer Entertainment America (SCEA) to discuss the current and upcoming features of PSN and how they might compete with Xbox Live.  Susan Panico, Senior Director of PlayStation Network for SCEA, gave an excellent overview of the components of PSN and the vision for the future.

One thing that is clear is that Sony seems intent on finally following through on its goal of making the PlayStation brand into an entertainment network. SCE is going through major internal operational changes in an attempt to go from a “gaming company” to a “media company.”  Panico says that having former SCEA head Kazuo Hirai over in Japan as the CEO of SCE has really helped develop a stronger relationship with the hardware engineers that will help fulfill the content vision.

The PlayStation Network is the key driver for Sony’s entertainment network.  As of November 2008, there were 14 million registered PSN accounts and 56 percent of PS3 consoles are registered.  PSN has quietly expanded its feature set through the regular release of firmware updates.  Recent updates have included a redesign of the PlayStation Store in April, the launch of a video delivery service and trophy system last summer.  The biggest new addition for PSN is the upcoming PlayStation Home virtual world which is currently in beta and scheduled to launch in 2009.

The key components of the PlayStation Network are free and this includes actual online game play and eventually access to PlayStation Home. The part of PSN that charges for content is clearly labeled as the PlayStation Store.  The PlayStation Store contains downloadable game and video content.  This includes PSOne classic games and also exclusive PlayStation 3 titles that are not available at retail, such as PAIN and Wipeout HD.  The PlayStation Store features a total of nearly 150 downloadable games, with another 28 new PSN games slated for release in the first quarter of 2009.  There are also over 150 game demos and over 1,000 pieces of downloadable content.

Content is purchased on the PlayStation Store using a PlayStation Network Card.  The card, which comes in $20 and $50 denominations, can be purchased at not only traditional retailers like Wal-Mart and Best Buy, but also outlets like7-11 and Rite Aid.  As of November SCEA had shipped 1.5 million cards in the U.S.  Other countries use a similar card system, but unlike the Microsoft Points system, all the cards come in the local currency.

The PlayStation Store is also home to the PSN’s video distribution service which launched in July of 2008.  After only a few months of operation the service offers 900 movies and 2,400 TV episodes for rental and/or purchase.  The video content can actually be shared with up to three portable PSP systems.  TV programs cost about $24.99.

The goal is to eventually make the PlayStation 3 the entertainment hub that replaces the cable box.  To reach this goal, Sony is actually creating original programming for the PlayStation 3, much as an HBO or MTV does.  This includes shows like X’amed Lost Memories, a popular anime show created by SCE Japan specifically for the PSN.  Another exclusive is the gaming lifestyle TV show Qore which launched in summer 2008.  Qore is a monthly show that costs $2.99 or an annual subscription is $24.99.

Of course, online gaming is a big part of the PlayStation Network.  The good news for PS3 owners is that, unlike the Xbox 360, online gaming is free.  Sony has been trying to add features and functionality to create more of a sense of community around the online games.  This includes launching a PlayStation Trophies system to compete with the Xbox 360 achievement system.  There are basically four levels of trophies, bronze, silver, gold and platinum that Sony hopes will be consistent across all PlayStation titles.  Super Stardust HD was the first title to launch with trophies and Panico claims that in the three weeks after the trophy system was launched average weekly downloads went up 570 percent for Stardust.

Of course, when it comes to community the big new push is the much delayed  PlayStation Home virtual world.  PS Home is currently in beta and scheduled for launch in 2009.  PS Home is a 3D virtual space that features high resolution avatars that are clearly much more realistic than both the Nintendo Miis and the Xbox 360 avatars.

PS Home will be a way for users to meet and launch into games.  There will also be a game space in a virtual bowling alley where users can bowl, play pool and play classic arcade games.  A movie theater will act as social viewing setting where users can watch movies together and actually see other users avatars in the theater.  PS Home will be free, but there will of course be a PlayStation Store component where users can buy items to decorate their living space in PS Home.

There is some skepticism about how the PlayStation consumer will react to a product like PlayStation Home.  Nevertheless, it is a sign that Sony is investing heavily in its online infrastructure.

The other ace up Sony’s sleeve is the potential to interact with the portable PSP.  The PS3 is of course a good way to download content for use on the PSP.  The Remote Play feature allows PSP owners to access the PS3 Media Bar via a wireless connection.

Sony is also making an effort to give users a portable PSN identity that they can take with them.  By registering and creating a PSN profile users get an ID that they can use not only on their PSP but also take to their PSBlog, forums, Facebook, MySpace etc.

Clearly the PlayStation 3 seems to finally be living up to the hype of being a complete entertainment system.  Sony has always been an innovative hardware company, but like many consumer electronics giants they have struggled with software and services.  We would argue that it is still all about the games and in that respect one of the clearest signs of the potential was the recent release Little Big Planet.  Little Big Planet is a true community game that is ripe for user generated content, YouTube videos, online game play and downloadable add-ons.  To truly see the potential of PSN we suggest you first look at Little Big Planet.