IndustryGamers: So what in your view is the big story for PlayStation Network right now?
Eric Lempel: I think the biggest story is actually PSP Go because this really speaks to PlayStation Network; the Go and the delivery mechanism to the device is completely powered by PSN... So we're saying to that consumer, 'This unit is just for you, it speaks to your lifestyle and what you've been asking for.' It also helps us push a lot more content through the network for PSP. PSN of course still exists on the other PSP units, but I think this reminds people that there's a lot you can do with those units as well. So that's the big news, that we've got a network-powered device.
IG: I know Sony has said the PSP Go is not intended to replace the traditional PSP model, but it does sort of seem that with this digital push that is going to eventually happen. Don't you think this will phase out UMD permanently?
EL: I think it really depends on the consumer and what they want. As Kaz [Hirai] mentioned it was really about going out there, talking to people and seeing what they wanted. That's what led to PSP Go, but it wasn't 100% of people saying, “We wan't something that just connects to the network and we're done with UMDs.” There's a good amount of the audience that still wants a tangible product; they're more comfortable with it, they like it better or they may not have the means to buy online. In our region we're doing pretty well with online penetration but it might not be the case worldwide. So I think there'll be a shift and the shift will be greater over time, I still think the tangible goods business is a viable business for us. It's still important to a segment of the market that we still want to sell to.
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IG: So every game is going to be released both in digital form and on UMD going forward?
EL: Yes, that is the plan. So it'll be day and date with retail, and in some cases depending on where people are today in development, they might not have the rights for digital distribution, but the goal is to get 100% day and date with UMDs and I think we'll do pretty well in that area. We're also converting a lot of the back catalogue; we already have a lot of “UMD Legacy” titles on the PlayStation Store and we're looking to rapidly increase that now with PSP Go. We've been working on that behind the scenes for a while so that when Go launches you'll see there's a lot of titles already available [on PSN] that you've known about for years.
IG: And the pricing on the digital games will be identical to the UMD counterparts?
EL: Well, we don't actually control pricing, so we can sell to retail at a wholesale price and then they set the resale price. On the PlayStation Store we do set the pricing for first-party titles, but on third-party they give us a wholesale price. On games where we do control pricing, what we'll steer towards is having it cost the same; it won't cost more [at retail or digitally] for the launch of a new title.
"...at this stage of the game when I really look at PSN and the entire offering I think we're in great shape. I don't think there's a lot of “catch up” [with XBL] anymore. In some cases, I think we've got more, and we've got some other things they don't have."
IG: What kind of feedback have you gotten from retailers? As you go more and more towards digital they are kind of left out...
EL: [Feedback] has actually been quite positive. Some of the retailers were brought in early on this, and we said, 'Hey, here's the direction we're going with this.' As you know, there are lots of other devices on the market that just don't have a software component at retail. So surprisingly, they're excited. So I definitely understand where the question's coming from and I also thought it would be interesting to see what happens when you say [to them], 'Sell this but there's not going to be a software component.' But there's still an accessory component and we've got a pretty strong accessory line; there will be new accessories planned for Go at some point. So retailers were embracing it and it seems like they're happy with the product. They're happy with the [model] 3000 PSP as well. Currently we're also doing a pretty good PlayStation card business with our $20 and $50 cards. Surprisingly, it's a good segment of our audience that uses cards only... so they can still sell these things. I think in other cases with other digital products, they really don't have anything [else to sell].
IG: I know one of the focuses also has been to bring PSOne classics onto PSN and PSP. Is there a certain goal for the percentage of that PSOne library that you plan to get onto the network?
EL: From my perspective, it's as much as possible. We're going to have a lot more by the end of the year. We'll easily double the amount we have currently, which I believe is 38. We'll at least double that by the end of the year, but the goal for me would be to get as many on there as possible because consumers love it, it's easy for third parties and our first-party studios because the content is done, and it's a place where you can get a lot of games that perhaps you never had or some that are out of print and you can't find anymore. In a lot of cases there are legal issues or contractual issues, because if you think back to the PSOne business no one was thinking “How can I someday distribute this content digitally for another device?” So when you look at a lot of these contracts, you're licensing it for that media on that specific device and you're done. But we've done a pretty good job in our region so far of getting some good stuff over and we'll aggressively seek that on both the first and third-party side.
IG: Microsoft unveiled an Xbox 360 games-on-demand service for Xbox Live, which will let users actually download full 360 games over their network. I know Sony has done a little bit of that with bigger PS3 games for download, but is their a plan in place to bring full PS3 games-on-demand to PSN?
EL: Not right now; it's not something we have planned, just because the size of the games is massive. With Blu-ray we can put up to 50 gigs on a dual-layer disc, while [Xbox 360] is still on a 9-gig media. So technically it's possible, but I think the issue would be, “Do you want to download 40 gigs and keep that on your hard drive?” I think there's great opportunity there in the future, and it's something we'll always look at, but for the time being it's not a direction we're going in.
IG: Obviously Xbox Live has had a big start on PSN, but how do you feel the two services stack up today? What do you believe are some of the things you need to work on to get on parity with Xbox Live?
EL: That would be a much different question two years ago and I'd have a much different answer, but at this stage of the game when I really look at PSN and the entire offering I think we're in great shape. I don't think there's a lot of “catch up” [with XBL] anymore. In some cases, I think we've got more, and we've got some other things they don't have. In terms of strengths, of course we're still free, and we're giving you a lot for free. It's not just free online gaming, but we've got PlayStation Home, which is a massive community and application that's totally free to use. Our video download service is also a little bit different from theirs in that we sell movies in addition to renting movies, so consumers who want to keep that digital media or pull it off their hard drive and store on an external device, [we offer that]. I think there's a lot we're doing that in some cases they're not doing, and I don't see a lot of things they're doing that we're not.
From my perspective, we have our own strategy and we've always been building our roadmap and saying here's what comes next; I think you've seen PSN has evolved tremendously since we've launched. In 2008 we redid the store and brought the store to PSP, we launched the trophy system, the in-game XMB feature which was much needed, along with other UI enhancements and other smaller features. So we'll continue to do that and I don't see anything now that makes me say, “Oh we must be able to do X,” because I think we're doing a lot really well ourselves.
IG: One thing that I noticed from Microsoft and Nintendo was a bigger focus on social networking like Facebook, which is going to be integrated into XBL and is going to work with DSi for photo uploads. Is Sony looking to partner with Facebook or Twitter as well?
EL: We're always looking at new partners and for things to do. Right now you can access Facebook from the browser on the PS3, so that's something the other guys couldn't do – so we were kind of ahead of the game there.
IG: I still think getting Netflix integrated into the XMB as part of PSN would be great. And Microsoft also announced their own separate 1080p streaming video on XBL. There's still no HD streaming on the PS3 – is there any plan for streaming video on PS3?
EL: There's no streaming plan right now. From our perspective, when we set out to build a video delivery service we wanted to do a few things. One was to give the consumer full choice – which again goes back to the fact that we don't charge a subscription to access our service and we don't charge any fee to access a movie service. [For Netflix on XBL] you're paying two companies to get that piece to work, which might not be appealing for everyone. The other thing we were looking at doing was providing a high quality experience. I haven't seen their 1080p streaming, but with us when we do these downloads it's a high quality file. With a lot of the streaming I've seen elsewhere it's not that great, and it's a little grainy and doesn't really match with the PS3 in the living room on the nice big TV. It's also about selection. We wanted to make sure we had a nice selection of new releases... you can't get the brand new DVD or BD releases on a streaming service early. So right now we're happy with where we are. We've added some new partners; we have all the majors and we're going after some more niche and interesting genres for our users.
IG: Regarding the new motion technology from Sony, from a PSN perspective how do you see the network leveraging that?
EL: From the PSN perspective, I would see a lot of great PSN content for that device. It looks like a great device that can do really deep and intense games or components of games that also use a controller, or just kind of mini-games or other applications for fun... PSN would be great for that. We can sell something at a low price that takes advantage of it and could probably provide hours of fun for the user. So I'm excited to see new content coming our way once the device is introduced.
IG: Sony has been pretty good at expanding its slate of original PSN games from independent developers. What guidelines do you follow as you look to grow the library of original PSN titles?
EL: We wanted to be an independent experience but a high quality experience when we look at this stuff. I think a lot of what you're talking to is that the games are innovative and really unique, but they're also made for PS3, so they're usually HD and they're different. That's what I love about PSN, as opposed to our consoles in the past where you had to put something on a disc to get it out there, and there were mass distribution costs and retail issues, but now we can provide a channel for these unique games. We have things like Flow and Flower and PixelJunk and Everyday Shooter, and Fat Princess coming... just all this neat content that's great on the console. We're always looking at new people, and we have several different groups within the company on both the Worldwide Studios side and our third-party relations side doing that. I think we've made strides there. As Kaz announced, we lowered the price of the PSP development tool – that's a step in the right direction because now a lot of people who might not have been able to make the big investment can get in and start making content for us. So the guidelines right now are not that stringent; we have some technical guidelines to protect the experience, but it's really about quality and bringing something innovative. If it's priced right and the consumer likes it, we're happy to distribute it. That's one of the greatest benefits of the network. As opposed to what others are offering, we're offering truly new and unique games that you can't find anywhere else. And about 45% are exclusive to PSN, so it's one of our biggest strengths.
IG: With PSP Go being all digital and the fact that you can access the store on the PSP itself, do you feel it's one step closer to competing with the iPhone?
EL: What's a little bit different with us is that PSP is a game-centric device; it was built for gaming. A lot of this other stuff you see on other devices – lots of smaller games, not that deep – might not provide the best experience. The PSP Go has a lot more horsepower and there's a lot more you can get out of this. I think the Go will open [the door] for more unique stuff that you probably wouldn't find on another platform because they can't run it or they just don't have the controls.
IG: Have you given any thought to encouraging more free software for PSN/PSP? The App Store has lots of free content, including free games. Is there consideration being given to expanding a free catalog?
EL: Right now our free catalog consists of demos, wallpapers, themes and videos about games. I don't think we want to degrade the experience you get from a PSP. Because [iPhone] is not a gaming-centric device, I think a user picks it up and [plays a simple free game] and says, “This is kind of dumb, but I don't care because I know this device wasn't intended for games.” So I want to make sure we uphold the quality of games on PSN; that doesn't mean they can't be shorter or quirky but we don't want to see a bunch of little things that don't quite make sense or provide a good experience because I think that takes away from what the device is intended for.
IG: How much marketing are we going to see for PSN? It still seems to me like awareness around the network with consumers is not quite where it needs to be.
EL: There will be a lot of marketing around PSN later this year, aside from the PSP Go launching, just focusing on the network. We will have the network kind of tagged on to all of our big marketing campaigns, and we'll probably have a separate network campaign as well just to speak to all the different features because there's lots to talk about now. You're right, we need to educate the consumer and let them know that there's all this stuff you can do at no cost. All you need is the device and you're set to go. I'd like to see us do a much better job there because there's a lot to say.
IG: With PSP Go launching for $249, will Sony look to drop the price on the old PSP to say $129 to match it with DS Lite?
EL: There are no plans in place to adjust pricing. There are bundles coming out over the next few months and the hardware plan is kind of locked and loaded. I don't think anything will be changing. [The old PSP] will be in the market and we're fully supporting the UMD PSP along with this; we're happy with where it is today.
IG: Some people may be worried about filling up the internal memory of the PSP Go, so what would you say the average size of a game file is going to be? How many games could a user fit onto the device?
EL: If you're strictly talking games, and not movies or other stuff, with the average game being perhaps 800 MB you could probably get about 20 games onto the PSP Go.
IG: And of course there's still memory stick storage...
EL: Right, and you can hook up via USB so you can offload this stuff if you need to. You can use the Media Go application to manage all of that.
IG: Thanks for your time, Eric.
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