Earlier today trade magazine MCV reported that the European Leisure Software Publishers Association (ELSPA) was allegedly involved in a row with Sony over a recent study on the future of the console industry. The study, which was commissioned by ELSPA and compiled by analysts at Screen Digest, suggested that Sony's share of the European market would shrink to 47% by the end of 2004 as a result of the release of new systems from Microsoft and Nintendo next year.
Sony have taken issue with this figure, but that didn't seem to explain why everybody was apparently getting so agitated about the whole issue. We contacted ELSPA's Director General Roger Bennett to find out what was really going on and how this will effect ELSPA.
Sony obviously weren't happy with a report pointing out that they will lose market share over the next few years, but the findings could hardly have come as a big surprise to them when they were released last week. In fact, according to MCV it was a story in the Financial Times which was responsible for sparking the argument, with Roger Bennett quoted as saying that the offending article was "misleading" after receiving complaints from Sony. As it turns out though, there's more to it than that.
"It was the heading which really caused as much trouble as anything", Roger told us this morning, referring to the bizarre headline 'Sony poised to lose battle' which the FT used for the story about Screen Digest's report. "It wasn't just misleading, it was outrageously misleading. Quite a disgrace really. It [was] quite clear when reading the article that in fact Sony would retain a significant market share, the biggest market share of all formats."
Unfortunately Sony seem to have got as far as the headline and then blown a fuse. "I think generally speaking that but for the headline they would not have necessarily been quite so upset about it. I think that the headline was totally misleading and entirely incorrect. Indeed Sathnam Sanghera [who wrote the story for the FT] himself agreed that it was the most appalling headline, and did not in any way reflect the content."
More Than Meets The Eye
Indeed, if you read the original FT story which has apparently caused the whole row, it's hard to see what there is to get so upset about. Sony are predicted to lose market share, but they will still come out as the biggest player in the console industry by quite some margin, despite heavy competition from both Microsoft and Nintendo.
As Roger explained, the report shows that "while Sony would have less market share than they've got at the moment, it would be a three format race and they would still retain the vast majority of the market share compared to the others". And although Sony's market share is predicted to decline as the new console formats appear, the market itself will be growing at the same time, meaning that overall their performance shouldn't suffer.
According to Roger, the new console launches are "going to expand the market because of the amount of market spend that's going to be involved in introducing these new formats". Microsoft for example has already committed itself to spending $500m on marketing for the Xbox's launch. And while they are predicted to sell over thirty million consoles worldwide as a result, that isn't necessarily going to be at the expense of Sony, and will in fact help the industry as a whole to continue its current rapid growth.
What's Going On
Sadly the row with Sony over this latest report could have a knock-on effect for ELSPA and their relationship with Screen Digest. As Roger explained to us, it's "a question of whether we are part and parcel of the commissioning exercise for the report, or whether it becomes an entirely independent report produced purely and simply by Screen Digest without any association with us whatsoever".
"The downside to that is our association [with the report] allows us to use it directly in providing an identity for the industry [to the] government, the media and the general public, and ensure that everybody in the industry, and in particular our members, have got a basis from which they can see how the industry is likely to perform in future. It's a very valuable tool for us to present the industry as being a very successful and important economic contributor, and cultural contributor now, to the entertainment sector and the economy as a whole. And that integrity is something that we will probably want to maintain."
"Whilst one can get reports from the USA about the overall global market from various commercial sources, I think the fact that the Screen Digest centers more specifically on the UK and Europe gives them the opportunity of discussing matters directly with the individuals concerned within the industry to get a feel of exactly what's going on. Screen Digest has achieved considerable affinity for us and those reading [the report] in the context of exactly where the industry's come from, where it is now, where it's going, what it's worth, how many people it employs, what the exports are worth, what it generates in terms of revenue for the Treasury... So it is a very valuable industry document for the UK and Europe."
If Sony stick to their guns the future of such reports could be threatened though. "It's a question of the definitiveness and integrity of the report. At the end of the day, do we need to be associated directly? We were the ones that initiated it and commissioned it in the first instance three years ago. Whether we want to drop that association is something that the council will have to decide."
"Alternatively we can continue to be associated with it on the principle that our members are made familiar with some of the content which relates to their own particular interests [prior to publication] so that it's not likely to upset them. [But] if you start doing that, then you start influencing the content, and that's not what we're in the business of doing. It's currently produced entirely independently by Screen Digest, we have no input in the way in which it is produced, and to that end maybe we should divorce ourselves from it completely. It then becomes purely a commercial exercise on behalf of somebody outside of the industry reviewing how the industry is performing."
As Roger admitted "it's a difficult one", but personally he believes that ELSPA should continue to be involved in producing such reports. If ELSPA was no longer able to commission new reports examining the future of the gaming industry "we would just become an entirely retrospective organisation that is providing historical information" instead of looking forward. "We're in the business of ensuring that the industry has a good strong profile and is seen to be a valuable facet of the UK's economic activity, not least in the creative sector. Without a question it's seen as one of the strongest, if not the strongest nowadays, as far as the UK is concerned."
ELSPA will be discussing this issue at their next council meeting, although the council's Vice President Nainan Shah is himself an employee of Sony's European division, SCEE. "No doubt Nainan will present his position on behalf of Sony in a pragmatic and objective manner, as he always does", Roger told us. "The remainder of the council will obviously take considerable attention as to what he has to say."
What they will decide after hearing the arguments from both sides is far from clear. As Roger told us, "we shall see what happens".