SCEA: PSP Will Be Big Revenue Driver

The PlayStation Portable just came off one of its best months, selling over 221K units in the U.S. during May. We chatted with Senior Marketing Manager for PSP, John Koller, about the state of Sony's portable business, what they've learned and why they're such big believers in the platform.

Posted by James Brightman on Tuesday, June 26, 2007

GameDaily BIZ: So how do you feel about the progress you've made since entering the portable gaming space?

John Koller: Very strong. It's been a fantastic experience for Sony and SCEA overall. We were to new to the handheld space on the gaming side, and we really carved out a new area. We created a product with the PSP that differentiated significantly from all the other portable products that are available, whether it's the DS on the gaming side or the iPod on the video/music side. Nothing really comes together with all the feature sets that the PSP has... I've been giving my "Knut Rockne speech" for the last six months or so, but this is really going to be a big year for the PSP. That kicked off a few months ago with the price drop campaign, but if we continue through the year with the number of titles that'll be coming out, some of the announcements at E3 and then beyond, some of the things that'll be happening in the fall... The PSP is a fantastic growth platform for SCEA and we look at it as a significant revenue driver for us as we continue through the year and beyond.

BIZ: If you look at the competition, Nintendo has owned this space for such a long time, and with the DS they're outselling the PSP worldwide about 40 million to 20 million units. Do you even think about trying to become number one or are you just happy to be able to carve out a niche for the PSP, considering that in all the previous years competitors (Game Gear, Lynx, etc.) met their demise facing the Game Boy?

JK: We certainly look at the competition and see how they're stacking up and what they're doing, but we have our own strategy in place. And we do look at the DS as a competitor on the gaming side but we also look at what Apple's doing with iPod and what Microsoft's doing with Zune and even what some of the mobile phone companies have been doing with their products, so we can make the PSP that much better. I think where the PSP has the opportunity to gain the most traction over the next few years is really in the teen and younger demographic, which Nintendo traditionally has carved out. We've been targeting the 13- to 17-year-old throughout this whole year and we've seen a significant amount of sales coming from that group. In fact, that's the number one owner group now of PSPs.

In fact, I just got new quantitative data from NPD stating that the 6- to 10-year-old consumer is now starting to gravitate more towards the PSP as well... And I think that's important as we continue to broaden this demographic, because when we launched the PSP the key demographic for us was really north of 25 years old. It was that consumer who was on the subway in New York or the BART in San Francisco or traveling by air – the business professional that wanted to utilize all the multifunctionality that the PSP has. And as we've gone along in the life cycle of the PSP we've seen that teen demographic and younger really pop up as a key contributor to sales. A big part of that has been games, but really a second part has been music. Music has come on very strongly for those that reside in that demographic, so we look at those statistics and we look at the PSP sales have been growing since the price drop and we see a hugely bright future for the PSP. And quite honestly, it's very, very important to us at SCEA as a revenue driver, as I mentioned earlier.

BIZ: Right, so when you say it's going to be a big revenue driver, do you anticipate it contributing to the bottom line more than the PS3, or what is the balance there?

JK: I can't get into percentages, but it'll be significant... just as the PS2 will as well, incidentally. But we view the PSP as a very important platform for us this year, and it already has been. We've seen a big volume increase from the price drop, and management is very pleased with where we've been and where we're going. From a revenue perspective, the PSP will be a very important contributor to where the final numbers stack up for SCEA and SCE overall at the end of the year.

BIZ: Regarding the younger demographic, how much of the newfound success with that group do you attribute to the recent "Dude, Get Your Own" campaign?

JK: Anecdotally from retailers, it's had a very large effect. Most of the top retailers that we deal with have said that they believe that campaign really drove most of the sales from the price campaign, which we choose to believe as well. And I do think the other part of it is strictly the fact the drop in price really did impact the 13- to 17-year-old consumer with the amount of discretionary income they have more than an older consumer who has more to spend. So I think that teen consumer looks at it now and says, "Wow $169 now, that's more in my wheelhouse." That's really where we are starting to see the most opportunity for sales. That's why we feel so bullish about it as we go on through the year, because that 13- to 17-year-old group has really been a key driver for us with PlayStation and they're largely a loyalist group, especially on the PS2 ownership side. If we tap into that, and I think we will... we have a lot of opportunity on PSP.

BIZ: Well perhaps Sony is catching on to the magic of price drops. The PS3 sure could use one...

JK: There's certainly a time and a place for a price drop. PSP's time was April of this year. We had launched two years before, and you need the time to establish the product in the market. And we had, so excluding any discussion about other consoles, on the PSP front it was the correct time. I think we really hit one out of the park with the campaign.

BIZ: What would you say have been some of the biggest mistakes and lessons learned with the PSP over the last couple years?

JK: Well, according to consumers, and I'll utilize them as the backbone here, the porting of games from console to handheld has been an issue and something that we've been dealing with here because we realize that consumers want to be able to play unique IP on their PSP when they take it outside the home. They don't want to play the same games that they play on their LCD or plasma [television] at home. So it's been a learning process I think for the third-party community. Our first-party projects by and large have been unique and have stood out on their own, but the third-party community now is really learning and we've done a lot of evangelizing to them. I think you'll see a lot of products coming out this year that will be very unique. For example, Star Wars Battlefront: Renegade Squadron -- completely unique product coming out this fall and the franchise is number three franchise in PSP sales overall. You see a product like that, exclusive to the PSP, unique IP, and one that you can't play on console... it's a fantastic opportunity for a teen consumer (or older) to jump in with a great brand, great franchise.

And on the first-party side we have a title like God of War: Chains of Olympus; you have to play this God of War on PSP to be able to complete the story for the trilogy. So those kinds of ideas are what's going to really help drive game sales. You can call it a lesson learned or an issue we've experienced since launch, but I think it's something that will be overcome this year.

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