March 26, 2008 - Launched on March 24th, 2005, this week marks the third anniversary of the release of the PSP in North America. The system has gone through a ton of changes since its inception, both in terms of numerous firmware updates that have added a plethora of new features, as well as the lighter and slimmer redesign.To celebrate its anniversary, we had a chat with John Koller, senior marketing manager for the PSP, to talk about the system's past, present and future. We hit on things like upcoming peripherals, UMD support, system packages and more, so PSP fans will find plenty of interesting tidbits inside. Have a read.
John Koller: So coming into last year -- and I think we may have spoken to you then, maybe on this anniversary -- we talked about year three of the PSP really kind of being the year when it was going to come out fighting and I think what we saw was, with the price drop and with the new hardware configuration, the PSP 2000, that we really saw an incredible jump in demand -- so much so that we really had a worldwide demand bump that was very, very significant and allowed us to increase our total shipments worldwide. So for us, in North America, we saw an 85% jump since the price drop in April of last year and we've really seen a wide variety of casual gamers get into the PSP market. Some of them are driven by the games, but others have been really driven by a lot of the multi-functional features and we've noticed a substantial increase in the amount of consumers using the PSP for music, using it for Internet browsing, using it for video -- which isn't as big a surprise to us, just because the PSP was really made for showing off brilliant graphics on the screen. So we've seen, as I mentioned, the demand coming from various places.
As we continued into the holiday, we saw a fantastic jump, and you saw some of the numbers there in sales, and I think a lot of consumers now are really looking forward to the games that are going to be coming such as the previously launched God of War, which has really been doing very, very well for us, Final Fantasy in a few weeks and then some of the other titles that'll be launching later in the year, but also some of the features that we've added. We've added Skype, we've added Internet radio, we've added some other multi-functional features that continue to expand what the PSP is and does. It continues to make it differentiated from the competition, whether it's the DS or the iPod or the Zune or the Zen or any of the other handheld devices that are in the space.
And for us, we look at this upcoming year as being the year when we can really expand our offerings. We've announced, obviously, the God of War Entertainment Pack, which is going after a little bit more of the hardcore that have jumped over to the PSP world, but we have a number of Entertainment Packs to come as well as some upcoming peripherals, such as the GPS system which we announced at CES, which are really going to aid some of the more casual or even family-friendly, as we go along, type of consumer and really try to expand our total base. Our numbers are strong right now; we've been very pleased from a corporate perspective and I think this going to be another very, very strong year for us. It's shaping up that way from a sales perspective already, so as we go along, I think that the PSP business is in very good shape and we're very pleased so far where we're at.
IGN: Okay, great. What's the lifecycle on the PSP going to be? Is it going to be in line with the console where you're talking a five or six year cycle, or is it something different in the handheld space?
John Koller: I'm going to parse that question a little bit. We've talked about the PSP being a 10 year product, but a 10 year product in the continued... how can I put this... in the continued lifecycle, so we obviously had the 1000, we have the 2000, so the PSP as it was first launched in March 2005 isn't going to the be the PSP that it ends up as in 10 years, but it will still be a very strong portable gaming device that is centered in gaming and has a lot of multi-functional features. We look at it just like our console business being a 10 year cycle, but we do see iterations as we go along to really adjust to the market. What we've done is the 2000 series adjusted to the market in terms of making it more portable. What we're seeing now, at least in the near- to mid-term, is going to be firmware updates that add features and other functions that the consumer's asked for.
IGN: You mentioned that there are some more bundles coming. How popular are the bundles? Is that a huge selling point for the system -- is that going to be the focus on how they're sold in the future?
John Koller:They have been extremely popular, and for us, corporately, it makes a lot of sense, but also from a gift giver perspective, we've looked at it and said... we saw the tremendous sales success of the Daxter Pack which launched last year, that launched the 2000 series. That was something that we had a game with Daxter, we had the Family Guy and then we had a Memory Stick and it was everything that a gift giver needed in the Holiday to just be able to pick up and take with them. And so we look for opportunities like that to show off what the PSP can do, so in the future, yeah, we're going to have the PSP Entertainment Pack be a central part of the business. The Core Pack will still obviously be very strong as well, so we look at it as a two to three SKU policy, as a Core Pack and then trying to have an Entertainment Pack or two that appeals to various areas of the demographic. As we look to expand that demographic, it's going to hit various parties, so God of War is obviously more of a hardcore play, but we have other thoughts in mind for future Entertainment Packs that hit other areas of that demographic to really continue to expand it.
IGN: Now a lot of these Packs that come out have some sort of movie tie-in, either where you copy the movie to a Memory Card or, in the case of the God of War Pack, Superbad's coming with it. It seems that, pretty obviously, UMD support as a whole as kind of fallen off and wasn't as strong as at launch. How is that going? Is that still getting a lot of push from Sony? What's the status of UMD support right now, and what's going to happen in the future?
John Koller: We're still very strongly supporting UMD. We recently launched a UMD program here, actually, where we're taking content from studios and release them -- using our distribution, sales and marketing strength -- to the market and we've seen some good initial numbers. We just launched this about a month ago, but it's been a good program for us thus far. I think that the issues that have come up with the UMD in the past have been well documented, but I think that we have noticed that the content and the pricing model weren't necessarily there for many of the studio offerings and so our goal with the UMD program -- especially in this initial push that we signed up with MTV -- is to be able to offer content that's relevant to the demographic and offers it at a price that the consumer is asking for. 70s romantic dramas for 30 dollars is a non-starter, but Jackass for between 10 and 15 seems like it's kind of hit a sweet spot. So for us, we look at that as a good data point for where UMD business can go and in terms of what it's added to the Entertainment Packs, the Entertainment Pack is inclusive of movies and games and other items, and so when we talk about a movie, we wanted to include a UMD just because of the available content. In the future whether we'll include a download or something like that, that remains to be seen. It's something that we continue to study, but for now it'll be on UMD, and I should mention that the God of War Pack features a game download, Syphon Filter: Combat Ops, which is kind of a good first step for consumers to be able to access the PC Store that we launched recently.
IGN: Speaking of the store, when are we going to see the PSP-specific store?John Koller: It's something that's being reviewed. It's not something that's specific right now, but certainly the PSP is very, very important to the store's future and vice-versa. The store's content is going to be critical for PSP expansion as we go on, and that's really why we wanted to include a game download with the God of War Pack because we want consumers to start realizing what the PC store can offer. It's something that we look at as kind of a big jump from our TiVo to Go offering, but when you think about it, if you get up in the morning and you're going on a trip or you're going to school or something, you can do a quick download of a game you want or content that you'd like. That makes a lot of sense for us, so I think that the importance of the PC store is going to continue. When it's going to be PSP-only remains to be seen at this point, but it is something that's important to us to review.
IGN: Continuing on with movies, what's the status of the ability to copy Blu-ray movies over to the PSP?
John Koller: Yeah, so that's a program called Portable Copy, which our Sony Pictures sister company initiated. It was their technology. They unveiled it at CES and it's something that as we get into the Summer you're going to see many/most of their Blu-ray titles include this code and basically what it allows is for consumers to be able purchase one Blu-ray movie and then be able to really port it over to their PSP, to their Memory Stick and bring with them. So it's really being called "second session," but it allows you to bring that content with you on the road, and it's just a fantastic program. There are a number of other studios that are interested. I know that Sony Pictures is championing it to all the studios and so we do think we'll see some growth in other studios as an option. Right now, it's just a Sony Pictures technology, but as we go along and you look at the really strong install base of the PSP, it makes a ton of sense as kind of an extra marketing push for studios to be able to add their code set.
IGN: So to be clear, this is something that has to be included with the movie as opposed to something you can do to any movie that's already out there?
John Koller: That's right, yeah. It has to be already included. We do think that most Blu-ray movies from Sony Pictures will include it starting this summer. There are some DVD movies that'll include it as well. The first one was the latest Resident Evil, and that launched, I believe, in November, so there'll be a few DVD movies as well that will be included in this program. It won't just be Blu-ray.
IGN: Gotcha. Let's talk a little about accessories for a minute. You mentioned the GPS accessory that's coming out and then there was a keyboard announced at some point. A lot of these things have been talked about for a long time, but were slow in coming to market. Why weren't we seeing them sooner?
John Koller: There's really a couple of reasons behind it, but we look for the best opportunity to launch in our market, and now as we are a global company and our other territories look at their markets differently vis-Ã -vis what the demand is from the demographic, we saw opportunity this year for GPS and the camera and the keyboard. Where in the past we didn't think the demographic had quite gotten to that point yet. In addition to that, we're able to flesh out some of the technical quirks and whatnot and really be able to offer a tremendous offering for the consumer. An example of that is on GPS, we were able to add 3D cities to the code and this is something that's not available really on any GPS right now, and it probably won't be on commercial GPSes probably for the next 6-12 months. Our European group or territory will be launching their GPS peripheral in the next few months. They're going to be ahead of the curve; we expect to be ahead of the curve here in North America in the time that we were able to spend not launching it here last year and holding it, being able to work on it. That allows us to be able to create the 3D cities and landmarks and things that are really unique, and to be honest with you, competitive against any GPS system on the market today. That was very important to us; we didn't want this to just be another kind of add-on. "Hey, nice you can see where you live," and, "nice, now I'm on Market Street, great." It was something that we really want to have this be a good offering for the consumer. Same goes for the keyboard, the keyboard is something we look at we look at it as an opportunity for consumers to be able to, on the PSP, to be able to interact, use the Internet browser, maybe, in an easier fashion. E-mail, IM, text, all those things that... it's required, and I think the consumer has been asking for. We needed the keyboard to be in such a state technically to be able to facilitate that and also to be portable. It needs to be something where you can either fold it up... you need it to be small enough that you can take it with you. So those things take some time, and the time that we allotted for it allowed us to launch this year with an offering that I think will be what the market demanded.
IGN: Do you think that the keyboard will sort of open up the system to be maybe more of a sort of a mini-PC of sorts where you have an office application or something where you can do some actual production work?
John Koller: Probably not as much on the productivity side. It'll be much more on the, I think, Internet usage side and really be able to facilitate entering URLs more easily, being able to able to e-mail, chat, forum posts, those sorts of things from the road. I think it'll be a little bit less of the productivity side, but it really depends on the brilliance of developers and what they want to put together, but we're not looking at it as a productivity development-type code set.
IGN: Shifting to software, how are software sales doing in terms of an attach ratio because it seems to us like the system is selling very well, but the software sales don't seem to match the hardware sales.
John Koller: Yeah, software sales are doing well. I think we look at, as a proof point, God of War. It launched about two weeks ago and has had unbelievable sales thus far and our retailers are very, very happy. I think the key, though, for software sales is two-fold. Number one is the percentage of consumers that are using the PSP for games, which has been hovering around 70 percent, but -- and that's since launch, by the way -- a lot of consumers are now interested in some of the ancillary, multi-functional uses of the PSP and so a lot of consumers are saying, "we're using this for music a lot now and movies and videos," so I think that they're still interested in games, but the other activities, the other multi-functional uses have also taking some priority.The second part is, I think, that developers and publishers are now just starting to see what the keys to success are on the PSP. It's not like the console world at all, and it's something we've been preaching for a while, but the PSP world is... the success points are key. A franchise umbrella such as a God of War or Daxter or a SOCOM for example on the first-party side. Making a unique game under that umbrella and making it creative and have it be something that you can't play on console. And I think the consumers really responded when those come together. Obviously, Daxter being from Jak and Daxter and SOCOM and God of War being from strong franchises under the console umbrella or bringing it over and having unique gameplay you can't get on a console. One thing we've noticed is that about 1 in 2, about 50% of consumers, are using the PSP at home. And if they are then... they don't want to buy the same console game that they play on a handheld. So, to avoid that kind of competitive play, a lot of developers and publishers are starting to say, "all right, maybe it's time we start making games that are unique to that system under a strong umbrella." You have a strong brand umbrella, you can do a lot with it. We've noticed some good sales strengths there on the software side.
IGN: Well, to the point of playing at home, there are a lot of the bigger titles that have come out on the PSP in the past year or two, and after the release on the PSP, have moved over to the PS2. Obviously this is going to make sense from a money standpoint because you're going to get it into the hands of more gamers, but it also seems like it could hurt potential PSP sales because gamers might say, "oh, I want to play Chains of Olympus, but I might wait for the PS2 version so I can play it on my TV."
John Koller: Yeah. Yeah, it's a very good point, and it's one we've wrestled with here and I know third parties have also. From our standpoint -- I can talk to the first-party standpoint -- it's that we've looked at opportunities after 12-18 months, usually on the north end of that, to provide console users with gaming content that was on the PSP and just to be able to show them what's available on the PSP and kind of whet their appetites. I think we've also tried to add some additional content on one side or the other, either the PSP or the console side, but that's something that's not a hard-fixed rule. For example, there's no plans right now for Chains of Olympus to come to the PS2. So those who want to wait are going to wait for a long time. We've done it for a few titles; we've obviously done it with the Twisted Metal series and a couple others, but it's not a hard and fast rule. I know on the third-party side, they have a little bit of a different financial structure than we do on the first-party side. There's some cost leveraging and some other things that they need to do, but we are really trying to make the point to all developers and publishers that when you provide the strong initial content under that strong brand umbrella on the PSP first, you'll see results and you'll see the financial gains that you want, and I think consumers have responded accordingly.
IGN: The last thing we're interested in talking about is Home, which is a PS3 product, but is there going to be any sort of specific PSP tie-in to that?
John Koller: There's certainly discussions, but it's nothing we have firmly in place right now. We look at Home as an opportunity to really connect all the broader online consoles we have, which happen to be PSP and PS3. It's a PS3 initiative, but there might be opportunities down the road; I don't think there's anything that we have hard and fast right now, but PSP is very, very important to our future business, so we look at all opportunities to be able to incorporate new technologies into it.
IGN: Well, that's all we have, unless there's something you'd like to add to any of the points that we've made, then... Yeah, thanks for that.
John Koller: Yeah, absolutely. We'll probably be talking to you in the next few months about GPS and some of the other exciting things I think that... We have a number of key announcements that'll be made in the next few months that'll be kind of expansionary in what the PSP can do. We've talked about GPS and some of the other things, but it's going to be a good year for the PSP and we continue to expand that base so we're very excited over here.
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