Q&A: SCEA's Jack Tretton; still in the catbird seat?

Sony exec punches a few holes in the launch logic of Microsoft; claims early lead holds little advantage.

LOS ANGELES--One day after the dual data dumps of the Microsoft and Sony press conferences this week in Los Angeles, GameSpot spoke with Sony Computer Entertainment America executive vice president Jack Tretton.

While Tretton was not among the short list of Sony execs that climbed the stage and glowingly presented the PlayStation update during the Monday-night event, it's not as if he doesn't take a pivotal role in influencing the level of success Sony enjoys in this region.

Tretton looks after first-party product development operations and oversees SCEA's sales and channel relations in the US. In other words, when money flows into the coffers of Foster City, California-based SCEA, it is a reflection on the skills of Tretton and his staff.

As Tretton is a core member of the executive team, some might go so far as to call what has been built on the launches of the PlayStation, PlayStation 2, and PSP, the house that Jack built.

With Microsoft vowing to tear that house down, it seemed an opportune moment to catch Tretton before the playing field got too hot.

GS: Microsoft effectively bypassed the game press early on and took its promotion of the 360 direct to the mainstream--via the MTV special, most prominently. What grade do you give them with that approach?

JT: I think at the end of the day you can control what you do; you can't control what your competition does.

Ideally, you'd execute perfectly on your end, and your competition would make missteps. And I have to say that in my opinion, that's pretty much the way things have gone over the last several years.

GS: When you look at the various ways to promote, how do you approach the options?

JT: We believe that the consumer, the gaming press, the trade, are all one and the same. They're all intimately related. If you're addressing one, you're addressing all of them. And we feel like we've got a great relationship with everybody because ultimately, to be successful in this business, you can't just go out and say it's all about the consumer, or it's all about us and our bottom line.

Ultimately you need four key elements, and I certainly put the press in there as part of the trade. But you need to deliver a bottom line, otherwise why are you in this business?

That's something that we've done better than anybody--we've delivered a great bottom line. I think for our competition, lord knows they can afford it, but it has not been a financial success at this point.

Then you need to create an opportunity that the development community is going to embrace, where they say, "I get this. I'm on board. I want to support this platform. I can make a lot of money with this." You also need to support the trade itself, the retail community, the press, the analyst community and say, "OK, I need to create an opportunity where this is a fruitful business for them."

And in the last piece, but probably the most important is the consumer. I think you have to go after all four of those elements at the same time and not favor one over the other.

GS: So, playing to the consumer alone isn't enough.

JT: Well, we were new to this industry 10 years ago, and we were against two very formidable competitors. I've heard our competition say we asked permission to play [to compete] the first time.

Actually, we were about winning from day one. We intended to be number one when we launched our first platform, and we became number one. We did that by building a relationship with all those constituencies I just talked about. I think right now those constituencies are evangelists for us.

Let's start with the consumer. The consumer has gone out and said, "I bought the first PlayStation back in 1995, and because of backwards compatibility, that first game I ever bought not only plays on my PS 2 but will play on my PS3. These guys have given me great games and great value for the past 10 years, and from what I see of their new technology, why would I want to go elsewhere?" That's what I believe the vast majority of the consumers will say.

GS: The development community?

JT: The development community says, "I've supported these platforms since 1995, and they told me on the original PlayStation that despite PlayStation 2 coming out, they were going to have great success with the original PlayStation that was going to have a 10-year product life cycle."

The average developer probably didn't buy into that message. But we proved them wrong. It did have a 10-year product life cycle--25 percent of all the PlayStations sold were sold after the PlayStation 2 shipped. So what are they saying this time around?

We're not going to abandon the current generation at the expense of the next generation. That's a lesson that we taught them, and they realized that their development investment in PlayStation 1 paid off much greater than originally anticipated. We proved again with PlayStation 2 that we were the system and support.

I think if you have to place bets, and you have to bet on the future, if you see our technology and you look at our track record, it's not a real risk or a leap of faith to say, "Yeah, we're on board for PlayStation 3. We're on board with the PlayStation message."

GS: The analysts?

JT: I think the analyst community, the trade, it's all about results at that point and the way you conduct yourself and whether you're consistent or not. I think because we've been consistent with the way we've approached the business the last 10 years, I think everybody's pretty well on board, and we attract new evangelists every day.

This time around it's about winning.

GS: How do you go up against a company that's willing to spend so much to succeed?

JT: I look to our strengths. I was just in a presentation and I said: "I challenge you, if you're a consumer, to think about how many times you've touched a Sony product over the last week, whether you were watching a movie, a TV program, listening to music, what electronics device you're either watching that on or listening to that entertainment on. And if you're a gamer, chances are extremely good, given that there's 90 million of you on PlayStation 2 worldwide, that you were using a PlayStation product."

Conversely, if you look at our competition, their heritage is in one thing and one thing only--software--and quite frankly, Windows. I'd say to the group, "Now, go over the course of the week. I guarantee you probably worked with Windows, but what other Microsoft product did you touch?"

And chances are you probably didn't touch another Microsoft product. So in terms of a heritage with consumers and entertainment, I think there's nobody that really matches what we bring to the table. So competition and willingness to spend money is relative to understanding in market expertise.

GS: Is there anything about the 360 that impresses you?

JT: I'm not real familiar with the technology, but I group competition in a big pile over there and say that we've had competitors ship first in the past, so I'm not worried about that. We've had competitors that boasted about their next-generation technology, and ultimately it didn't deliver. We've faced all comers over the last decade, and I sit here and say, we've got 72 percent market share right now. In the last nine months alone, we redesigned the PlayStation 2, and we can't keep it in stock fast enough--we're up 54 percent versus last year.

We launched PSP just six weeks ago, blew through a million-two [$1.2 million in revenue], delivered $100 million plus in incremental dollars, and opened up a completely new avenue of entertainment for ourselves.

You put that off to the side and you say, now we just unveiled PlayStation 3 and what looks to be a quantum leap in technological growth, and say, "Do I feel pretty good about the arsenal that I have assembled? Yeah."

I said to the group of Sony execs I just presented at: "This is perfect. This is the sweet spot. This is as good as it will ever get in this business." So, relative to competition, I say, given what we have going for us, I do not envy any competition trying to punch holes in that.

GS: Now the 360 is going to come out around six months ahead of the PS3. How long do you say it's going to take for PS3 sales, total installed, to match and surpass the 360?

JT: I think it's widely believed or stated by our competition that because we were out first that's why we ultimately did so well in this generation. We're at 33 million in North America. Now, we had 3 million of those machines out in North America before Xbox shipped.

If I knew that the next 30 million were going to be all about just getting the first 3 million, I wouldn't have worked so hard over the last five years. But I just don't believe that the initial early adopters or the people that buy your first system are ultimately the key to success.

And in the grand scheme of things, what is our first 3 million relative to 33 million five years later? It's less than 10 percent of what we've accomplished, and we're only halfway through our product life cycle.

So the launch period is important, but it's like saying, "How did you feel in the first 10 yards of the marathon?" And the guy looked at you like, "Are you nuts? I don't even know how I felt. It's a 26-mile race. Why are you asking me about the first 10 feet?"

That's what I consider the launch period to be.

GS: With the likelihood of a price point higher than what's been seen in the past, whom do you see as the upcoming PS3 consumer? A new gamer or just old-school gamers looking for the next new generation of machine?

JT: I think when you talk about pricing, one of the things that's most amazing to me is if you go back to the Atari 2600, it was $299. In 1995 when PlayStation came out with revolutionary technology, it was $299. In 2000 when PlayStation 2 made a quantum leap, it was $299. So the technology has grown in leaps and bounds, but the consumer has been given the same value for the past, what, 27 years for the same price.

I challenge you to look at another industry and say: What did it cost you to buy an automobile in 1978 versus what it costs you to buy a comparable vehicle today? So that alone is staggering.

In terms of the technology, I think the consumer grows with it. I think the same is true of gaming--that initial experience of playing Pong and you thought, "Wow, isn't this great!" It's still the same visceral experience, although in much more depth and much more technology than you could ever imagine back then. But today it's still the very same experience. It's interaction with technology. I think the consumer just kind of grows with it.

So to answer your question relative to demographics, I think what we've done with PlayStation is we've expanded the demographic greatly--and because of the technology, we didn't alienate the core audience of 12- to 17-year-old boys. We've expanded it to everybody.

I think what this new technology does is it just continues to open the door to basically every potential living human being on the planet. I think there are realistic limitations, but outside of infants and the infirm, technology means that there's going to be something there for everybody. As the technology progresses, more and more people get interested: young, old, male, female.

GS: One last question, Jack. A listener in Omaha wants to know when she can pick up a PS2 for her kids at a $75 price point?

JT: That may never happen, unfortunately. I think I alluded earlier on that you have technology that has progressed as far as it has, but 27 years later, the opening price point for PlayStation 2 technology was the same as the original Atari 2600. I think that's like saying, "When can I get a gallon of milk for 50 cents?" You probably will never get a gallon of milk for 50 cents anymore. But I would challenge that consumer to compare the type of entertainment they can get for $150 and the number of hours of entertainment they get out of that as compared to what they get in PlayStation 2.

And I would say that there's no better way to spend $150 than to buy a PlayStation 2.

Unfortunately, $75 just doesn't buy too much anymore.

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