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Writer's picturePhil Steventon
Jul 21, 2021

Commercial Awareness Vol 6 : PlayStation's expanding library of Studios

Hey look, I'm now able to write up a Commercial Awareness Volume on one of my favourite hobbies! Score!


Headline: PlayStation Studios is expanding, and always on the lookout for incredible experiences



Main sources:


The facts:

In May 2020, Sony Interactive Entertainment (SIE) announced the formation of PlayStation Studios (PS Studios) which would be formally introduced with the release of the PlayStation 5 (PS5) console in November 2020. PS Studios serves as an umbrella company for a number of its first-party videogame development studios, as well as for branding on games developed by studios that Sony would bring in for work-for-hire instances.


The new brand also brings a new logo and animation.

(Ooh, how very Marvel, right!)


This move brings together a number of existing videogame development studios, including a number of Sony's first-party studios, under the PS Studios banner. These studios developed strong brands through the development and release of strong titles for the home videogame industry.


Some notable studios and releases include:


Guerilla Games - known for Horizon: Zero Dawn, and the sequel Horizon: Forbidden West.


Insomniac Games - known for the Ratchet and Clank series, Marvel's Spider-Man, and Marvel's Spider-Man: Miles Morales


Naughty Dog - known for the Uncharted series, The Last of Us, and The Last of Us Part II.


Polyphony Digital - known for the Gran Turismo series.


Sony Santa Monica - known for the God of War series


Sucker Punch - known for Sly Raccoon, Infamous, and Ghost of Tsushima.


So from this, PS Studios, the brand name for SIE, is acting as the parent company/brand for these individual subsidiary studios.


Eric Lempel, the senior vice president and head of global marketing at Sony Interactive Entertainment, gave this quote as to how PS Studios came about:


Over the last few years -- and even the last decade -- the strength of the titles coming out from our studios has been stronger than ever. We have been thinking about how we unite all of these great games under one brand, and really the purpose of that is to make the consumer understand that, when they see this brand, they're getting ready for a robust, innovative, deep experience that they've come to expect from games coming from PlayStation.


PlayStation has been one of the go-to brands for home video gaming since the release of the original PlayStation in December 1994. The strong brand portfolio it has built over the last 26 years has meant it has performed excellently against competition from the likes of Sega, Microsoft, and Nintendo.


In recent months, we have seen SIE acquire more studios to bring into its PS Studios brand such as Housemarque Studios and Nixxes Software, and a leaked upcoming acquisition of Bluepoint Games.


Aside from acquisitions, PS Studios has been announcing a number of partnerships with studios such as:

  • Firewalk Studios

  • Deviation Games

  • Haven Studios

By doing this, SIE is avoiding getting into a huge acquisition war with its main completion Xbox (remember its well-publicised acquisition of Bethesda Studios?) and is instead empowering creators to join the PS Studios brand, retain their identity, and be a part of a huge brand which will give them a huge amount of exposure to the fastest-growing sector right now.


By empowering creators, including veteran creators like Hideo Kojima, their creativity is unleashed and they can create their best work.

We saw this with Kojima's recent masterpiece Death Stranding, where he was effectively given a blank cheque to create what he wanted. By lending its expertise and financial clout to some of the videogame industry's best creators, the end result for PS Studios and for players is a range of masterpieces that you'll want to invest much time and money into.


SIE has created a House of Brands by the subsidiary studios retaining their name, branding and identity, whilst also being a part of the PS Studios "House". You'll see when you load up a PS5 game such as Returnal that the Housemarque Studios branding appears in the next breath after the PS Studios intro animation.


Think of PS Studios as Unilever, and the subsidiary studios as their own brands such as Lynx, Domestos, Walls, Marmite and Persil. Only here, the corporate brand PS Studios is front and centre on a lot of games being released quite recently, whereas Unilever has typically not had much of a branding presence on products created by the sub-brands apart from a very small logo on the packaging that doesn't overshadow the sub-brand like Marmite or Lynx.



If you want to learn more about the different brand strategies that companies consider, then have a read of this Jargon Buster (here).


Overview of the general performance of the industry during COVID-19


In contrast to a number of other industries that have suffered in the last 16 months or so like the hospitality, retail and transport industries, the video gaming industry has been far more resilient to the economic effects of the pandemic. Most developers have been able to move their staff to remote working relatively well to sustain game development, and with so many of us at home and physically distancing, video gaming has been a popular activity with which to entertain ourselves.


For more stats, see this NPD report dated 20 July 2020 about the increase in gamers and gaming in the US: How Many People Play Video Games | NPD Group


That's not to say that the industry hasn't been impacted.


The Electronic Entertainment Expo (E3) 2020 trade event, one of the biggest events in the video gaming calendar, was cancelled, which may have impacted the relationships between publishers and developers, especially smaller indie developers who rely on events such as this for exposure and meetings with potential partners.


Esports leagues had to either alter plans or cancel them altogether, which may have impacted relationships between developers, pro players, sponsors, venues, and anyone else involved in these events.


Supply chains for electronic parts from China are expected to be impacted which may limit hardware sales (ie consoles, peripherals etc). Though happily, this didn't impact the releases of the Xbox Series X and the PS5 in November 2020.



Now let's do a quick SWOT analysis and consider the potential risks here



SWOT ANALYSIS


STRENGTHS TO THE APPROACH

  • Name and reputation - PlayStation is one of the biggest names in the home console market and has built up a huge amount of trust and goodwill since the release of the original PlayStation in December 1994 (I've still got mine too!).

  • Distribution and network - the world knows PlayStation. So its reach is already undeniable. But the more studios that PS Studios either acquires or partners with, the greater reach that PS Studios will have from a geographical standpoint. And also with the reputation and strength behind the name and seeing a local studio as part of the "House", it may give local gamers that sense of reassurance and trust.

  • Financial position - each acquisition and partnership will inevitably cost money and time and effort. So for SIE to be doing so much, the financial position of the company will be strong. For each acquisition, there will of course be the money payable to the Target studio, whether it is all upfront or over a period of time. Also, there will be money moving in the partnerships too, no doubt, whether its from PS Studios to the Target studio so that it can fund new projects, or licensing out some IP to the Target studios in exchange for a fee.

  • Risk mitigation - having such a large portfolio of studios under the banner not only means a huge range of game titles, brands, genres and series etc, but it also means that PS Studios will be in a better position to mitigate any shifts in the economic landscape. Videogaming has been an industry that has done extremely well during the pandemic era due to so many of us being at home, to the point where we saw the Play at Home campaign by offering free games such as the series of Uncharted games, Horizon: Zero Dawn and a range of add ons, and it is believed that this industry will continue to do well in a post-COVID era due to the shift towards home- or hybrid-working models.


WEAKNESSES TO THE APPROACH

  • SIE taking on liabilities - if the Target studios have their own liabilities that they have incurred in the lead up to the acquisition, then SIE will be taking on those liabilities unless otherwise agreed. SIE might find itself putting its hand in its pocket to cover these liabilities.

  • Impact on character and identity of each sub-brand - would the sub-brands that are acquired brands still be able to keep their character and identity and company culture? Or will it be drowned out by the weight of the name PlayStation in the PS Studios name and the entire brand run the risk of homogeneity, meaning each sub-brand losing what made it unique in the first place?

  • Historically unsuccessful at integrating firms - different individual studios in the House will mean lots of different work cultures. Historically, SIE hasn't done well at integrating firms it acquires into its own working culture. If this challenge follows into the PS Studios era, then whilst bringing smaller firms into the fold might not be an issue due to the balance of power during negotiations being firmly in SIE's favour, bringing bigger firms with their own individual work cultures into the fold may prove difficult.


OPPORTUNITIES

  • Sharing of expertise and knowhow across the House - especially with the newly acquired studios, there may be opportunities for the sharing of knowledge and expertise between studios. For instance, Nixxes Software appears to be working on more technical development work as opposed to game development, but other brands could make use of its technical expertise to finesse their upcoming games. Same with story writers - The Last of Us garnered a huge amount of praise for its exceptional storytelling, so perhaps other studios would benefit from the expertise of Naughty Dog here?

  • Sub-brand goodwill and reputation - PlayStation as a brand has earned a huge amount of goodwill by consistently over the last 25 years distributing excellent products, whether from its own studios, studios it partners with, or studios that it goes to outside of its bubble to create something amazing for them. So surely each studio in the House, or that SIE approaches to acquire or invite to partner with, will receive a goodwill and reputation boost. By aligning themselves with one of the biggest names in video gaming, each brand is given more spotlight and exposure to players and partners, which will mean they may think "if PS Studios thinks highly enough of them to want to acquire or partner with them, then they must be worth a look!" More exposure and more goodwill gained means more people want t work with those studios, which means more games being created!


THREATS

  • Training required if collaboration with other studios will be the norm - if there will be times when studios need to work together, then training on each others' way of working will be needed so that there isn't anything getting lost in communications or working practices. This will cost time and money to actually do though, and there will need to be some guarantee that the time and money being invested here will be worth it.

  • Brand synergy - each studio will have its own way of working that has been fine-tuned to them and their staff. Whilst it is accepted that homogeneity across studios and brands might not be the goal, it would do the House well to have a framework or accepted standard ways of working so that there can be synergy between the studios, especially if some will be working closely with each other. If it can't be achieved, there may be the risk of a studio breaking off and going its own way and even competing against PS Studios and its House.

  • Information sharing - during an M&A transaction, there is a due diligence process where information is shared. At this point, the buyer can get a much more detailed look at the Target's situation regarding finances, debts, or maybe something that the Target didn't want to be made known - maybe a private side project, or an old tweet or post on social media from a while back that isn't appropriate in this day and age, it could be anything. One loose cog in the machine could cause the whole thing to fail, and there is a big risk of this should SIE find something in a Target that doesn't fall in line with its own values or mission.


HOW TO MITIGATE RISKS

  • Cyber-security - PlayStation in 2011, Nintendo in 2020, CD Projekt in February 2021 and EA in July 2021. What do all these have in common? They all got hacked! It tends to be that video game studios get hacked quite often because they don't need to adhere to the same standards and regulatory demands to protect customer data as, say, banks or hospitals. And with more brands as part of the House, that's more targets for hackeHeyvoid this, enterprise security tools like VPNs, firewalls and antivirus software for the business assets are essential. But for employees who will continue to work from home, these security measures will need to be extended so that sensitive company and customer data remains secure off-site.

  • COVID-19 becoming less of a "thing" - COVID-19 and the stay-at-home orders has seen a surge in the number of gamers and a surge in the purchase of video game software and hardware. Now that restrictions on movement in the UK are set to be lifted and more people perhaps returning to their offices if they choose to, this means less time at home to play due to a combination of working hours and commuting hours taking time away from potential game time for those employees. Obviously SIE can't control COVID-19, but it can dictate how it reacts to lifting restrictions. So how can they keep gamers invested post-lockdowns? Maybe invest into mobile games or mobile features for console games, some different loot boxes to keep players investing into their gaming experience, or other offline features where gamers can still be invested even whilst away from the console.

  • Human error - more brands in the House means more humans working under the sub-brand and under the PS Studios brand. Particularly if the studio is quite small, being a part of a household name brand like PlayStation could be quite daunting and be a big learning curve and mistakes could be made here. But we're all human and making mistakes is part of the learning process, so training on anything that pervades the entire House will be needed to minimise the risk of this happening.


I've been able to look at this from a gamer's/fan's perspective, as well as a business advisor's perspective.


When developing the skill of commercial awareness, it can help to pick an industry or a topic that you're interested in so that you can start in a place where you're interested and it doesn't feel like a slog either!


Or even if you're confident in your skill levels here, its always nice to be able to analyse news and stories in an industry that you have a real interest in!



Be safe and be well! :)


P



Further reading:


Credit: Cover image photo by Kerde Severin on Unsplash

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