Sony Changes the Game

Which was a problem. Every constituency in the business had become addicted to blockbusters. Reaching a different audience meant persuading lots of players to try something different, to get a little wild. That meant reinventing the economics of the industry -- and that meant embracing a new technology platform.

Here too the establishment was vulnerable. Nintendo stuck with cartridge-based hardware because of its blazingly fast performance -- and because it was the platform on which it rose to power. But PlayStation concluded that CD-ROM technology was superior on almost every other dimension. CDs are cheaper than cartridges -- $5 to $10 versus $35. They're easier to turn into games. PlayStation manufactures CD-ROMs in three U.S. factories and fills orders within two weeks. Nintendo manufactures cartridges in Japan and takes as long as three months to fill orders. And CDs can store vastly more data than cartridges (650 megabytes versus 16 megabytes), which allows for more complex graphics and games.

"It's amazing how much more value you get with a CD," says Flock. "Not to mention manufacturing turnaround. The cartridge model does not allow for any meaningful inventory management among retailers. It also means publishers will not take any creative risks. The only innovation in interactive gaming is with CDs."

It's hard to overstate the importance of CD economics to the PlayStation model. Its flexibility lets the company test offbeat games in small batches and, if a hit appears, bring large volumes to market quickly. It also helps developers try to defy cultural barriers. Games that do well in Japan often bomb in Europe and North America. CDs let PlayStation troll for crossover titles by doing test runs of, say, 5,000 copies and monitoring the market response.

"Parappa the Rapper," perhaps the most unusual video game ever published, epitomizes PlayStation's willingness to experiment with genres and demographics. Parappa is a little dog who lives in a pop-art world with his friends, a cat and a bear, and his girlfriend, a sunflower. It's the flower's birthday, but Parappa has dropped the cake and, lacking money, heads to a flea market. There, he meets a rapping frog. Each time the frog raps out a tune, the players must match its rhythm by hitting the correct sequence of buttons on their PlayStation consoles.

Developed by Sony Music, "Parappa the Rapper" was launched in Japan last fall. Little kids didn't get it and teens were turned off by the childlike graphics. But the game was a surprise hit among twenty-somethings. It's been among the country's top 10 titles for a year and has sold more than 700,000 copies. With high hopes for a geographic crossover, Sony plans to release the game in North America this November. The company still needs plenty of hits in traditional genres -- sports, action, racing -- but offbeat games like Parappa are what distinguish PlayStation from the competition.

To be sure, for all of PlayStation's triumphs, the game is far from over. Last September, Nintendo launched its own second-generation video console (dubbed N64) with speed and graphics that clearly outperform the PlayStation. During its first nine months on the market, North American consumers bought an impressive 2.6 million units. But Nintendo continues to struggle with its blockbuster complex. As of this summer, PlayStation customers have 250 game titles from which to choose. When Nintendo launched the N64, there were just 2 titles on the market. There are still fewer than 20. For PlayStation, variety remains the spice of business life.

Free Spirits, Hard Work

So what is this? a military simulation? Rambo in a tank? A dessert topping?" In a conference room in Foster City, Jeff Fox sits at the head of a long oval table, looking mildly cross. For the past half hour, the 33-year-old senior PR director has been meeting with a dozen sales and advertising types, watching as Susan Nourai, an assistant marketing manager in Foster City, rolls out a tank-battle game called "Steel Reign". Nourai, 25, is understandably nervous: a warm reception today means a generous marketing budget, which means more sales and fatter royalty checks for her team.

The first part of the demo goes reasonably well. Nourai lays out the concept (tanks shooting at other tanks) and describes the weaponry (cannons, guided missiles, machine guns). She goes over the game's story line and setting, brushes off a friendly heckle ("It's the future, and all the bowling alleys are closed!"), and, after nervously driving her tank into a building ("ooops!"), proceeds to set the 3-D landscape on fire. Tracer streaks fill the screen. The room echoes with explosions. Nourai dispatches a progression of enemy tanks, then blows a helicopter out of the sky. The table erupts in cheers. "Check out how good that smoke looks," someone says.