Sony’s emphasis on engagement time over unit sales makes sense for PlayStation |opinion

Sony announced that Announced full-year 2023 financial results earlier this weekthe PlayStation business continued to post solid growth, essentially in line with revised forecasts from a few months ago, although the PlayStation business was well below the very high expectations we initially had at the beginning of the year.

As always, there were various interesting bits and pieces in the results – I’m personally always impressed by the long-term story that Sony’s financial reports tell of PlayStation’s increasing dominance over the company’s business. However, the annual financial report aspect looks like this: What was most interesting was not the details of the report, but rather the framework.

Specifically, Sony’s senior vice president, Naomi Matsuoka, spoke at an earnings presentation about a shift in internal strategic thinking from unit sales and hardware installation rates to indicators, and said that the sales of the game and network services division, which includes PlayStation, was changing from unit sales and hardware installation rates to indicators. Talked about profit growth. Time spent on the console and its services.

By structuring its business this way, the company created a decidedly predictable storm with critics. When pundits hear such words, they tend to expect the worst from companies in terms of live services and monetization strategies.

But in this case, I think the concerns raised by Sony’s statement were largely misplaced. What people are concerned about is that moving from focusing on units sold to measuring engagement time would create a set of perverse incentives for Sony to sell monolithic games with no service element. This raises the possibility that the company’s interest in the project may be undermined. It’s definitely a big loss, as that is without a doubt Sony’s strongest suit, and the company’s first-party products in that category have been a solid backbone of PlayStation for over a decade.

Unit sales no longer capture the entire PlayStation business

However, Sony did not make any positive statements about its strategy here, but merely explained a historical change.

A shift in thinking occurred around the time of the transition from PS3 to PS4, and up until the PS3 era, connection rate was the holy grail of console success metrics, and since then engagement time (minutes) has replaced it. In other words, much of Sony’s “golden age” of first-party studio work came at a time when the company was already chasing engagement rather than attach rate, without any obvious disadvantages.

If we take a step back from the controversy caused by the comments and consider them on their own merits, it’s hard to argue that engagement time shouldn’t be considered an important metric for PlayStation.

That’s not to say that software sales aren’t still important – the company reports software sales quarterly as one of the key numbers for its gaming division – but there are now all sorts of ways to do it. Unit sales no longer capture the entire PlayStation business People may be able to use PlayStation software and services without actually purchasing games in the traditional sense.

At some point quite a few years ago, the company realized that it could achieve better growth overall by focusing on that metric rather than just chasing unit sales. This isn’t new, it just hasn’t received much attention in the company’s financial results in the past.

Sony has basically been thinking about their business this way since the PS4 days, and while their current interest in service-based games definitely fits into that focus, I think it’s due in no small part to the influence of Genshin. Masu. The biggest third-party driver for the platform in recent years – there’s no suggestion that games like God of War or Spider-Man also don’t think they fit into this paradigm, or that such games aren’t still core drivers for the platform. Sony’s upcoming first party lineup.

It’s just that the paradigm is a little broader. This includes games that people continue to play for years on end (like the aforementioned Genshin, Fortnite, and Bungie’s Destiny), as well as ways to access games that don’t involve direct purchase, such as PS Plus subscriptions.

In some ways, the broader understanding of the PlayStation business suggested by time-based rather than unit-based metrics is reminiscent of the ambitions of the PlayStation business during the Kutaragi era, in some ways mirroring entertainment venues. Masu.

At the time, Sony had a not-so-secret ambition to make the PlayStation the central hub of media and entertainment in the home. This device went far beyond simply playing games and directly challenged the then-nascent dominance of the household. Computers in those areas.

More or less, this is the exact reason why Microsoft felt forced to enter the console market in the first place, behind the highly unorthodox Xbox project, in order to prevent Sony from gaining the lead in both areas. The weight of the company was placed on the company. Companies envision a battle over the future of consumer electronics.

Both were wrong. Because smartphones have finally pulled the rug out from under that entire vision of the future. But that era’s ambitions, even if the most obvious recent outburst is the Xbox One, became some kind of powerful device for TV viewing.

Sony’s focus is now dramatically narrower and more pragmatic. In the company’s current thinking, the PlayStation is still first and foremost a gaming device. However, the definition of gaming has expanded significantly over the past few years.

Sony now sees the PlayStation once again as the core of the home entertainment experience, but that’s not because the console has become the hub device for all other types of media consumption, and it’s not because games are taking more and more time away from other media. This is because we believe that PlayStation has the following potential. From other platforms it takes longer.

With this idea, tracking time spent across PlayStation software and services (as well as PlayStation games and services on other hardware platforms) is the only way to really measure success. The vision for gaming expansion necessarily includes service-based and online games that bring back players regularly and generate a steady revenue stream, but that’s just one aspect.

The “pillar” games that sell the platform are also an equally important, if not more important aspect. But what’s really interesting is that many of Sony’s decisions regarding hardware and services start to make more sense when considered in the context of increased engagement time.

Being time-focused rather than unit-focused also means lower barriers to access and remove friction in player engagement. For example, the incredible work Sony put into making his SSD in the PS5 as fast as possible makes more sense when you consider that it was driven by a desire to minimize friction. .

Sony’s focus now is narrower and more pragmatic. In the company’s current thinking, the PlayStation is almost exclusively a gaming console, but the definition of gaming has expanded in recent years.

Eliminating loading delays as much as possible means allowing people to quickly immerse themselves in the game and play a little when they have a little free time, but with annoyingly long loading delays. You may then have to look for other things to fill your time instead.

Similarly, the PS Portal device is a beautiful piece of hardware that many people, myself included, tend to see as a solution to a problem, but it makes much more sense when you consider that its purpose is to remove barriers. (like others are using) such as the TV in the living room) to maximize engagement time.

Still, focusing too heavily on hours played instead of units sold isn’t without potential downsides. The reason people reacted so negatively to Sony’s framework is because we’ve all experienced too many low-quality live service games over the last few years, and this has led to a lack of engagement and revenue. It serves as stark evidence of the fact that the temptation to exploit is real. There are always numbers with loot boxes and copy-pasted grinds, and even the best developers can fall into that hole from time to time.

Nevertheless, the engagement-focused paradigm that Sony is talking about is one that Sony has followed in over a decade of putting out incredibly high-quality first-party games, services and hardware engineering. From this perspective, reducing frictions and barriers to access is a worthy goal. Whether that in itself is through hardware tweaks or new service offerings (here, Sony offers new PS5 owners a service clearly designed to increase engagement with the new platform). (The amazing PS4 hit catalog comes to mind).

The risk of turning the monetization dial too high in these efforts never goes away. But it never hurts to have your entire organization focus on creating hardware, software, and services that people want to spend more time with.