With PlayStation 4, Sony seeks to balance past and future

In designing the new PlayStation 4 game console, Sony seems to have learned some hard lessons from its experience with PlayStation 3. As Mike Wolf noted, adopting the ready-made x86/AMD architecture for its 8-core CPU likely saved Sony tens of millions — if not hundreds of millions — of dollar and years of lost time compared with the estimated $400 million it sank into developing the proprietary Cell chip that powered the PS3.

The switch to widely used chip designs will also make it easier and cheaper for game-makers to develop for the PS4 compared to the PS3, while allowing them to reuse some of that development work in porting games to other platforms. Both are likely to prove an advantage in keeping developer resources focused on the PS4 at a time when game publishers are putting more emphasis on creating games for iOS and Android, and when new competitors such as Ouya and perhaps Apple are edging their way into living-room gaming.

The integration of PS4 with Gaikai, the cloud gaming platform Sony acquired last year, is also a welcome step away from Sony’s traditional orientation toward physical media and disc drives, such as the Blu-ray Disc format baked into the PS3 that did little but add cost to the console, make it more expensive for publishers, and add a year to PS3’s time-to-market, which cost Sony dearly in market share.

According to a report on gaming website Kotaku, the PS4 will launch in two SKUs, priced at $429 and $529, making it cheaper at launch than PS3, which weighed in initially at $599. Other analysts speculate the PS4 could be priced under $400 at launch.

Sony also plans to offer PS4 users free previews of games via Gaikai, a marketing service for which it will likely be able to charge publishers.

Yet those steps to take cost and development time out of the PlayStation 4 are not without a price of their own. And the trade-offs involved speak directly to Sony’s high-stakes effort to balance the game industry’s past and future.

By switching chip architecture, Sony has broken compatibility between the PS4 and earlier PlayStation games. That means Sony is essentially asking PS3 owners to write off their existing investment in the PlayStation platform in order to upgrade to the new console. Sony said this week that it plans to leverage Gaikai to deliver PS3 games to PS4 consoles but said nothing about whether that capability will be in place by the time of the launch. Moreover, the online service presumably will come at a cost, which means users may be paying to access games via Gaikai that they already own on disc.

Sony also needs to strike a difficult balance in its overall strategy for Gaikai. The game industry is changing rapidly, and the next generation of high end consoles like PlayStation 4 (as well as the Wii U and whatever the next Xbox will be called) is almost certainly the last, and its life cycle is likely to be foreshortened relative to the PS3 generation. The future is in mobile gaming and low-cost, cloud-enabled streaming devices like the Ouya cube and the GameStick. The cloud-based Gaikai platform, therefore, is likely to be critical to Sony’s future in the games business.

For now, however, Sony remains a device company. It’s business model still depends critically on selling consoles and extracting rent from publishers for selling games on its platform. That means for now that Gaikai needs to drive sales of PS4 consoles, which means it needs to stay within the PlayStation ecosystem. As with any cloud-based content platform, however, its future success almost certainly depends on cutting it loose from any particular device.

Letting go too soon could undermine sales of PS4 consoles; holding on too long will undermine the future success of Gaikai and Sony’s investment in acquiring it. Sony’s future in the games business hangs in the balance.