Sony’s Gaming Biz Coming to America

Sony on Tuesday announced plans to merge its PlayStation operations in a new company to be headquartered in the U.S. Sony Interactive Entertainment will open for business on April 1, starting with US$2 million in operating capital.

The new California-based firm will merge the operations of Japan-based Sony Network Entertainment International and Sony Computer Entertainment.

SNEI handles the PlayStation Network for online games, the PlayStation Store digital distribution platform, the PlayStation Plus game subscription service, the PlayStation Now streaming games service, the PlayStation Vue cloud-based TV service, the PlayStation Music music-streaming service, and the PlayStation Video video-on-demand service.

SCE manages PlayStation’s hardware division and Sony’s World Wide Studios, as well as game approval and third-party relations.

By merging the two entities into SIE, Sony is giving its PlayStation business more strength and focus, noted Andrew House, global CEO of SCE.

SIE will push toward maximum corporate value by “coordinating global business operations across San Mateo, Tokyo and London, by leveraging local expertise,” he said.

Long Time Coming

The reshuffling makes sense and has been a long time coming, said Christine Arrington, senior analyst of games at IHS.

“Having the network, hardware and content units in separate businesses made sense when the console was a distinct unit on its own,” she told the E-Commerce Times. “Now that connectivity is one of the main features of the console, it doesn’t make sense for those businesses to be separate.”

A lot has changed since SCE’s founding in 1993, the year before the original PlayStation was launched. Back then, there was no PlayStation Network or PlayStation Now or any of the other system-selling services that flesh out the PlayStation ecosystem.

“The console is the hub for the end goal of making the PlayStation brand an entertainment platform across multiple access points and devices,” Arrington pointed out, “so being able to develop strategy, products and execute jointly has the potential to make this new entity much more agile.”

Welcome to the Neighborhood

For many gamers, PlayStation hardware is the gateway to Japan’s beloved role-playing games. While JRPGs are considered niche in the U.S., moving PlayStation’s headquarters to the States could be received poorly by gamers in both countries, suggested Rob Enderle, principal analyst for the Enderle Group.

“On the negative side, this is a Japanese company, and Japan is massively nationalistic. Moving leadership out of Japan could be seen as abandoning the country — putting the business the firm has there at high risk,” he told the E-Commerce Times. “They could end up taking a massive sales hit, and in Japan, this could open the door for a Nintendo revival.”

Sony may have to battle some negative reaction over moving PlayStation to the U.S., but the company’s financial struggles are ongoing. Despite besting Microsoft during the current console generation, Sony needs to drum up its revenues.

“The US appears to have more influence on Asia than the other way around,” Enderle acknowledged. “A widely dispersed company bridging two very different cultures tends to be dysfunctional, so combining the units should improve agility and effectiveness.”

In coming to the U.S., Sony has put itself on better footing to compete with Microsoft’s Xbox division, and it is putting itself closer to a company from which it could learn a good deal.

The company “you’d likely want to emulate is Apple,” said Enderle, “and you can do that better by being in closer proximity than remote.”