Sony Changes the Game

In a small office inside Sony interactive studios America, a tightly packed collection of programmers, artists, and marketing specialists in San Diego, Holliday Horton is putting all-pro wide receiver Tim Brown through his paces. At Horton's command, the 6 foot, 190 pound Oakland Raider breaks into a sprint, stops cold, and leaps for a pass. Then he does it again. And again. "Now watch this," Horton says, clicking her mouse and magically removing all lateral motion from the athlete's powerful stride. On Horton's screen, the digital line drawing of Brown seems suspended in mid-air. The receiver's legs are churning uselessly. "That's how some people do it," she scoffs. "But without that side-to-side motion, it's like he's a bug pinned to the wall. It's totally unrealistic."

These are not idle criticisms. As a top artist in Sony Corp.'s North American video game group, formally known as Sony Computer Entertainment America (SCEA), Horton, 31, has a big stake in the degree to which little simulated men can be made to run and jump and smash into one another, realistically, on a television screen. Two years ago, she was a lead artist on NFL "GameDay" -- one of the most important titles behind the rise of PlayStation, Sony's blockbuster entry in the $15 billion video game market. With sophisticated on-field simulations and astonishing 3-D action, Horton's game was an instant smash. More important, it made other sports games look like "Pong." Virtually overnight, GameDay was heralded as the first true "second generation" console title.

Expectations are already just as high for GameDay '98, the second sequel to the original hit. And until it ships, Horton and her colleagues will put in 12 to 14 hour days, every day, as will the PlayStation programmers creating other sports games (NHL "Face Off," NBA "ShootOut") plus a collection of action, adventure, and fantasy titles with names like Blasto and "Spawn: The Eternal."

Somehow, though, the San Diego studio remains calm -- and visibly free of "management." Horton sets her own hours (she usually rolls in about 11 a.m. and stays until midnight) and is basically left alone to get things done. Her explanation: "They trust me." In fact, during crunch times, Horton's manager, Chris Whaley, has actually barred Sony brass from so much as visiting the studio. "As long as we keep bureaucracy at bay," says Whaley, 38, a jock and computer whiz with a taste for loud shirts, "we can get the job done."

Someone is obviously doing something right. PlayStation is the most successful new product from Sony since the Walkman and one of the most successful consumer products from any company in a long time. Until recently, the global video game market was dominated by two seemingly invincible giants: Nintendo and Sega. Then came PlayStation -- and everything changed. Sony launched PlayStation in Japan in December 1994; SCEA launched it in North America in September 1995. By Christmas 1996, Sony had shipped nearly 3 million units in North America and 9 million worldwide. Through May 1997, it had shipped nearly 5 million units in North America and 16 million worldwide.

That's just hardware. PlayStation owners have also purchased 30 million pieces of game software in North America and 114 million worldwide. And many of its titles have made the transition from video game hits to pop-culture touchstones. Crash Bandicoot, the star of one of PlayStation's most beloved games, comfortably holds his own against Nintendo's Super Mario and Sega's Sonic the Hedgehog as a digital celebrity.

Talk about growth: a business unit with literally no sales three years ago will generate worldwide revenues of more than $5 billion this year (on gross retail sales of $9 billion). Talk about productivity: PlayStation has achieved these staggering results with roughly 1,500 employees worldwide and just 500 people in North America. That means the unit generates $3.3 million of revenue per person. Microsoft, a company legendary for its productivity, generates only $420,000 of revenue per person.

But what's most compelling about PlayStation isn't the breathtaking scale of its growth but the subversive logic behind it. How did Sony become a force in the video game industry? By changing the rules of the game. It redefined the market to include customers that Nintendo and Sega had ignored. It made technology choices that both enhanced the performance of its hardware and recast the economics of selling software. It designed a tough-minded approach to innovation that helps its in-house studios (and outside developers) churn out a string of popular games. And this year, in a unique effort to "close the loop" between producers and consumers, it released a product that lets players develop their own games.

"We are in uncharted waters," says Kazuo (Kaz) Hirai, SCEA's executive vice president and the highest ranking Play-Station executive in North America. Hirai runs the unit's day-to-day operations out of SCEA headquarters in Foster City, California, a Silicon Valley town about 20 miles south of San Francisco. "That means we're setting our own course. From the beginning we said we didn't simply want to take the gaming business away from Nintendo and Sega. We wanted to present our customers with a new form of entertainment. PlayStation is more than a toy. It's our dream to see a PlayStation console in every house, just like VCRs and CD players."