Sony vs. Microsoft: Whose Mobile Gaming Strategy Will be Better?

1Executive Summary

With a batch of pictures released this week, a growing list of technical specs and a filed patent, the PlayStation Portable Phone is looking more and more like the real deal, despite Sony’s initial denial. The phone, reportedly manufactured by Sony Ericsson, will run Android 3.0, feature slide-out controls, have access to an online marketplace and could arrive as early as this holiday season. And it may provide a boost to gaming on Android and help extend Sony’s PlayStation Portable platform, which has taken a beating lately.

The device also invites comparisons to Microsoft’s forthcoming gaming offerings. Microsoft’s plan is to integrate Xbox Live with its new Windows Phone 7 platform, which goes on sale Nov. 8. It’s a far more software-centric approach to mobile gaming than Sony’s apparent hardware-based plan of attack, which some gave up for dead following the demise of Nokia’s N-gage gaming phone. If a PSP phone proves successful, Sony may very well revive the idea of dedicated gaming phones. On the other hand, Microsoft could show that in this age of already sophisticated smartphone hardware, software and services are the keys to success.

What Sony Needs to Succeed

Judging Sony is a little unfair considering there’s no official confirmation of a PSP Phone. But the possibility of one could attract both hardcore gamers and younger consumers who would appreciate a smartphone with some enhanced gaming chops. With that in mind, let’s look at what Sony needs to do to make good on this potential strategy.

Prove that smartphone gaming can include more than casual titles. Sony has an opportunity to take the momentum behind mobile gaming and graduate new gamers who favor Angry Birds and other casual games to even more sophisticated titles — ones that respond best to physical controls. Core gamers already know the benefits of a directional pad, buttons and a joystick (though the PSP Phone will have a touch-pad joystick). But Sony has an opportunity to show why a multi-touch screen can be limiting for game play, especially for some genres, like first-person shooters. If it gets that message across, a PlayStation Phone could rope in newly minted mobile gamers. And that could bring in some much needed revenue for the struggling PSP platform as it prepares to launch a PSP 2.

Avoid the mistakes of the PSP Go and Nokia’s N-Gage. The PSP Go, a download-only version of the original PSP, has been a disappointment for Sony, which recently cut the price on the unit. The knock on the PSP Go was that the hardware was expensive, as were many of the games. The N-Gage was also too pricey, and compromised piece of hardware that didn’t seem to work as a gaming device or a phone. Sony will need to get game pricing in line with current mobile games, which rarely cost over $10. This is something the company is trying with its PSP Mini line of games. Sony will also need to ensure that the phone is not too bulky and still works well as a smartphone, and show why having cellular connectivity can enhance gaming on a PSP Phone. Peter Dille, the senior vice president of marketing at Sony Computer Entertainment of America, recently acknowledged that an always-on cellular connection could be good for the current PSP platform to facilitate multi-player gaming. 

Tap the wider community of mobile game developers: A PSP Phone will presumably have access to existing Android games, and Sony already has a few hundred games available for digital download on the PSP Go, which it will need to leverage to keep core gamers interested. But to differentiate itself and get new customers to buy a PSP phone over another Android device, Sony has to create a stable of new games that take advantage of its a PSP phone’s hardware. These are games like next-generation sports and fighting, which still feel more comfortable with physical controls. And that, I believe, means Sony will have to tap the wider community of mobile game developers. Sony has tried to encourage independent developers to write PSP Mini games, but many were just iPhone app store ports. Sony has to do a better job in engaging independent developers, cutting the price of its development tools and loosening the licensing rules so it can encourage more interesting games.

Extend distribution to multiple networks: Right now, Sony Ericsson only sells on AT&T and T-Mobile. I’m not sure how many gamers would leave their carriers in large numbers for a PSP Phone, let alone casual gaming smartphone customers. So it’s up to Sony Ericsson to make the choice easy by offering the phone on multiple carriers.

But what about Microsoft?

Meanwhile, Microsoft is following more in the footsteps of Apple by focusing on software and services, leveraging its investment in Xbox Live and its relationship with developers. All upcoming Windows Phone 7 devices will ship with an Xbox Live Hub that will enable users to share their Xbox Live avatar, achievements and gamer scores, and also participate in multi-player games, all from their phone.

Here’s what Microsoft needs to do to succeed:

Keep bringing the games. Since it’s playing catch-up to Apple and won’t have its own hardware to showcase games, Microsoft will have to work to get a good number of high-level titles. It already has more than 60 games on the way,  including some very polished exclusives such as IloMilo and the Harvest and Halo: Waypoint. If it can further leverage its strong ties with established studios, create its own first-party titles and encourage independent games that really soar on a touch-screen, it can establish Windows Phone 7 as a destination for quality mobile games. Microsoft has been aggressively evangelizing to developers and selling them on its easy developer tools. It will have to convince skeptical developers that there’s money to be made. And it will have to create some stand-out success stories to build and sustain momentum.

Show people why Xbox Live integration matters. Having an avatar is fun for a while, but for Microsoft to succeed, it needs to show people that investing in Xbox Live is worthwhile. On the console, Xbox Live is the best online gaming service. On Windows Phone 7, Microsoft will have to show more casual users that it’s fun to connect with friends, share achievements and play against other users. Mobile gaming is already getting more social with platforms like OpenFeint, Apple’s Game Center and Ngmoco’s Plus+ network. Microsoft needs to prove Xbox Live is a unique asset for Windows Phone 7, not just extension of the console.

Sony and Microsoft have a lot to do to catch up to Apple. But both have an opportunity to cash in on the boom in mobile gaming if they can execute. At this point, it seems like Microsoft has a better shot at winning with its mobile gaming strategy because, while both Sony and Microsoft have a heritage in gaming, Microsoft seems to be traveling the safer route. It still has to hope that it can sell a good number of phones in the first place (no guarantee), and it has to differentiate its games from the iPhone’s titles. But with the smartphone market growing at a fast clip, it makes sense to build a mobile games business around titles that don’t require special hardware.

If the PSP Phone is real, Sony will have to prove that it can defeat the ghosts of the N-gage and learn from its mistakes with the flagging PSP business. And it’s got to convince both core and casual gamers that it’s worth it to buy a most likely bigger and perhaps more expensive phone. That’s a taller order at this point, though I’d love to see Sony pull it off.

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