Is Sony Mishandling its Gaming Studios?

Sony's approach to managing its gaming studios has produced many critical darlings but few blockbusters. Could the PlayStation company stand to learn a thing or two from Microsoft and Nintendo in this regard?

Jan 19, 2014 at 6:49AM

With the PlayStation 4 posting impressive global sales numbers, Sony (NYSE:SNE) can breathe a small sigh of relief. The embattled company needs a strong, profit-driving performance from its gaming division after it posted major losses during the PlayStation 3 cycle. Early indicators show that PS4 is on track to do good business. With the Wii U a non-starter in Europe and the Xbox One almost certain to be one in Japan, Sony is the only console manufacturer with a shot of being market leader in all three major territories.

The PlayStation 4 sold over 4.2 million units to consumers in 2013, beating out the 3 million units sold by the Xbox One. Even with this data and indications provided by consumer interest trackers, it's still way too early to paint an accurate picture of how this console cycle is going to play out. The traditional gaming industry faces more outside competitors than ever and the software landscape is in the midst of some very interesting changes. One thing that will remain constant is the importance of successful high-profile games. Nintendo (NASDAQOTH:NTDOY), Microsoft (NASDAQ:MSFT), and Sony each have different approaches to intellectual property and studio management. Would Sony stand to benefit from adopting elements of its rivals' strategies?

Is Sony propping up weak IPs?
Sony has developed a reputation for allowing its studios a greater degree of choice when it comes to what they work on than would typically be found at Microsoft or Nintendo. Conversely, the company's only IP that can stand against the biggest sellers that its rivals have in their stables is "Gran Turismo." The PlayStation 4's current and upcoming software slate for the first half of 2014 sees Killzone: Shadowfall and Infamous: Second Son as the company's major first-party titles. There's reason to question whether or not these titles should have even been greenlit.

Killzone: Shadowfall, a futuristic first-person shooter, has been one of the best selling games on Sony's new system. The title is a non-numbered sequel in the "Killzone" series that saw its first release on the PlayStation 2 in 2004. The game was positioned as a "Halo" killer and doomed to be held to that series' lofty standards, but the series came into its own with the release of Killzone 2. This entry in the series was one of the first games to demonstrate the PlayStation 3's graphical capabilities. It would eventually win over a dedicated group of fans with its gritty aesthetic and gunplay and sell over two million copies. Killzone 3 was less commercially and critically successful, but Sony gave developer Guerilla Games the spotlight to make a reimagined take on the series its PS4 centerpiece.

What would Microsoft do?
In stark contrast, Microsoft canned an in-development sequel to 2005's Perfect Dark Zero, a game that had a comparable critical and commercial reception to Killzone 3 and was the best selling first-party launch title for its Xbox 360 console. Microsoft's studio management philosophy favors the use of partnerships to create massive blockbusters and is more focused on the triple-A model than Sony and Nintendo are. It could also afford to sleep on the "Perfect Dark" series because it had "Halo."

Infamous: Second Son is another non-numbered sequel that is being positioned to breathe new life into a franchise that has posted acceptable (but not great) numbers. Similar to the way that Guerilla Games has shown itself to be a worthwhile studio with its graphical wizardry, Sucker Punch Studios has shown that it can consistently create engaging gameplay with a unique style. It's great that these talented studios believe in their respective brainchildren, but one can't help but wonder if they would have produced something with broader appeal if they were instructed to start fresh and given the right dash of Microsoft-style guidance. Not that such moves have always yielded great results, of course. 

Nintendo relies too much on a strength
Rumors that Sony would be acquiring the "Crash Bandicoot" license from Activision Blizzard look to be false, but the platform holder undoubtedly wants to create or reinvent legacy characters. This is one area where Nintendo is unparalleled. The fact that the company has been routinely using many of its classic characters for roughly thirty years speaks to their appeal and the company's ability to invent fresh gameplay. Nintendo's problem is that it seems unwilling to step outside the comfort zone provided by its charming cast.

Standout exclusives are key to console contest
There are no doubt several years worth of secret games in development for the next-generation consoles. On the PS4 front, it will be particularly interesting to see what is coming from Sony's prestige developer Naughty Dog Studios. A game in the "Uncharted" series has already been announced, and a sequel to its highly acclaimed The Last of Us is also likely under way. With the PlayStation 4 mounting an early sales lead, it will be interesting to see what effect Microsoft's historically bigger exclusives and the remainder of Nintendo's Wii U slate have on the console console race. Sony has lots of talented studios, but its first year PS4 software lineup seems to lack in potentially explosive triple-A exclusives. 

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Keith Noonan has no position in any stocks mentioned. The Motley Fool owns shares of Microsoft. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

4 in 5 Americans Are Ignoring Buffett's Warning

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Jun 12, 2015 at 5:01PM

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David Hanson owns shares of Berkshire Hathaway and American Express. The Motley Fool recommends and owns shares of Berkshire Hathaway, Google, and Coca-Cola.We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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