(headline taken from the Metro UK newspaper)
Sony has become my go-to example of how not to behave if you are the kingpin. Of all the major platforms PlayStation is the most branding- and marketing-led, and yet it is the least well regarded. Developers, journalists and many fans like some of the games on the PS3, but Sony PlayStation the entity? Not so much.
Sony’s big mistake was to develop the most recognisable game platform in the world and then decide to strip mine it for profit. It acted as though its position was unassailable, that authenticity and branding were the same thing, and so it could do as it pleased. In so doing it sacrificed execution in software, hardware and even its fabled design standards, and so lost trust.
Trust is an essential part of succeeding in the viral economy because relying on advertising in prime time is not that effective any more. Given that the future is going to be about more platforms rather than less, and you may one day end up running your own, you would do well to take heed of Sony’s slowly unfurling demise.
Of Gates, Relationships and Commodities
With suspicion there can be no love, but sometimes this doesn’t matter.
BSkyB is a satellite broadcaster of premium TV stations. It is associated with the Rupert Murdoch empire, and so not particularly loved. It is not loathed either, but despite the (pretty good) value of what it offers, it doesn’t have many fans beating a path to its door. For BSkyB (or Comcast etc) this doesn’t matter because it operates what is effectively a toll gate business. Its customers may view BSkyB ambivalently, but they have few options other than Sky if they want to watch football on Saturdays. So they pay up, and Sky does the job that it said it would.
A similar analogy could be drawn for power companies, supermarkets and mobile phone networks. Gatekeepers sit in a position where the customers need them more than they need the customers, and the incumbent advantage that that brings is very profitable even if the execution is merely competent. Gatekeepers don’t especially care about maintaining a relationship with their customers as long as they pay. Trust is only a requirement to the extent of legal obligations and anything beyond that is generally more of a branding statement than a genuine part of the company and its products.
In non-toll industries there are really only two business models: Make a commodity or build a relationship. If you go into any electronics store, for example, you will see banks of identical cheap laptops. They are commodities, all much the same, and the companies that make them operate on thin margins. They too are not especially interested in the relationship with their customers beyond a cursory nod to whatever the competition is doing because they rely on prominence at retail. You only ever see about half a dozen PC manufacturers in any branch of the UK chain PC World, for example, because those are the manufacturers that have partnerships with PC World to get prominence on the shelves.
The commodities business relies on controlling visibility. By being ubiquitous to the point that there are no other choices, the PC World customer buys one of the laptops from one of the half dozen manufacturers selling much the same machine with different liveries.
Then in some stores you see the Apple stand, which sells laptops and other items that cost much more than their generic counterparts. They can afford to because the customer believes in their superiority and because Apple laptops actually are superior. One feeds into the other. It’s a relationship. The difference between the relationship company and the commodity company is that customers care, and even evangelise, on the company’s behalf.
Breakout successes are mostly based on either relationship-style or toll-gate style business models. Toll gates work because they offer access to relationships, and relationships work because they engage the passion of a community. Trust matters a great deal, however, when relationships are your business. In the television age (1950 to 2000) relationships were established in a broadcast environment. Since television is both massively popular and also a constrained-visibility environment (though this aspect is in decline), the trust came through a channel that could also be heavily advertised, and this is how many commodity companies also managed to make large gains.
In the internet age (2000 to now) the biggest change is that visibility is a Google away. There are no constrained shelves or channels, and trust is established along social rather than broadcast lines. Toll gates exist in a new form called aggregators (Amazon, Google and Facebook are examples) that worry more about relationship aspects. It also means that relationship companies are doing well because they can find their customers everywhere, and their customers can find them.
However commodity companies have the the most to lose. Their business was based on a kind of marketing that simply dominated attention and smash-and-grabbed its way through business without a care. What happened to Sony PlayStation was this: It started out as a relationship company, believed it had become a toll gate company, and came to be regarded as a commodity company.
The Fall of Sony
Sony was the Apple of the mid-90s in that its electronics products were held in higher esteem for design than its competitors. A significant part of why Sony made such a success of PlayStation to begin with was that it already had a great reputation for superb design, and the lifestyle market that really evangelised the product loved that. Developers loved it, Publishers loved it, the magazines adored it and Sony seemed untouchable.
Over the course of the next decade its sheer success did something to the mentality of Sony. It started to act more like a toll gate, as though the battle for the console industry had been fought and won for all time. PlayStations went from simple pieces of hardware with great games, to complicated dual chip systems, to super-complicated Cell systems with development kits that did not match pace.
Sony believed that developers would follow because PlayStation was as vital as electricity, but the only thing that this accomplished was to push developers away to alternatives. When that strategy started to fail, it resorted to trying to fool the media instead. Incidents like the misleading Killzone 2 footage went on to blow up in its face (the Giant Enemy Crab moment in e3 2006), and only served to eject more evangelists than would otherwise have carried the torch. Sony stopped being ‘the power of PlayStation’ and became ‘Sony LOL’ instead.
Yet it still managed to hold onto to enough of a muggle audience. The people who play FIFA Soccer and pay no attention to what developers or the gaming media say could quite happily carry on, and that left Sony with room to innovate. It tried, with Home, Move, a slimmer PS3 design and so on, but the reaction it received was mostly apathy. Since the muggle audience doesn’t care about innovation, it doesn’t care for fancy boondoggles that much either, and that trapped Sony in an also-ran category for the most part. Its job was to execute for certain kinds of muggle well, as far as the muggles were concerned.
Meanwhile the media and the blog-sphere finds it hard to be interested in additions to a story that seems flawed to its core. They are more interested and likely to talk about George Hotz or other legal clampdowns. Each time a story of failure like that emerges from Sony, it reinforces an image. And now the bedrock of muggles could be lost because it turns out that the same toll gate attitude that led to poor execution in software has bled right the way into the heart of its operations. In a continuous series of scare stories, new revelations, apologies and then even more bad news, PlayStation is appearing untrustworthy.
Say what you like about the limited influence of the gaming media and all its woes, but when the overriding message about your brand is that your credit card details have been epically stolen from its servers then there is only suspicion. Muggles are not stupid, they’re just not engaged. They tend to move in packs when a seriously negative story that might affect them comes to light, and for Sony there are few worse stories than the one that says your platform is not to be trusted.
Can Trust Come Back?
Marketing stories can wag either the tail or the dog. The positive story has a storyteller, a vision and a joined-up kind of execution. The negative one is what happens when the story is one of suspicion and derision. Lacking a visible storyteller or believability, your marketing story becomes whatever the media says it is.
Yet trust can come back. IBM went from being a company with a reputation to a company with a mass market product that appeared to be the default. It too wanted to behave like a toll gate, which led to throwing the PC away due to poor strategic and execution problems. For a long time IBM tried to get back on that horse, to get the market interested in OS/2 Warp, and slid out of view ever so slowly as a result.
Its problem was that it was trying to reapply old thinking in a new time rather than accepting that the past was the past and figuring out a new direction. IBM eventually did do that however, becoming a very different business today to the one that it had been, and things have mostly gone well for it ever since. Sony is currently in that OS/2 Warp phase. Overcommitted, keenly aware of what it has lost, and political as a nest of vipers wrestling over a dead rabbit, Sony has tried to will the games industry to returns to its shores. It is just as lost as IBM was, and badly in need of a root and branch renewal.
A PlayStation 4 won’t do that. A new story needs a new name and a new leader. Nintendo managed to do exactly that from GameCube to Wii, restarting what had become quite a moribund story in the process. With a new brand, Nintendo managed to restate who it was for the new generation.
Can Sony do something similar? Does it have a mission, or is it just another stock market entity with a fake face and a tendency to put profit margin ahead of customer satisfaction and competent execution? Does it have anything to meaningfully contribute to the conversation, or does it just make stuff?
When it can answer those questions in a way that doesn’t sound like jargon or weak advertising speak, then perhaps it will have gotten somewhere. However I don’t think it’s there yet. Its failure has not yet been so total that legacy concerns won’t override all other demands. Sony isn’t yet ready to go to Corporate Anonymous and admit that it has a problem because it hasn’t hit rock bottom yet.
But it is sliding.
The Moral of the Tale
This lesson may seem arcane to many readers, but actually it’s important. The future is one in which the developer is going to be increasingly involved in defining their own platform. It’s not as simple as getting your game into half a dozen publishing venues any more, and in the future many of us will be operating a platform of our own. Some of us will get very successful in doing that, to the point that we’ll start to believe that we are unassailable.
The lesson that the cautionary tale of Sony tells is that no platform is ever as safe as its owners think it is. Neither Facebook, nor the iPhone, nor World of Warcraft are truly impervious to competition. The industry is always a landscape of shifting sands and new advantages, and the companies that tend to survive in the long term are the ones that get either the lock-in exclusives (like FIFA) or the relationship aspect (like Blizzard) or both (like Nintendo).
Everybody else sinks back into the sea eventually. Treat your customers like they need you, sell them lines rather than a vision, or otherwise kill your relationship with them and you will find it very hard to come back.