Sony Launches PlayStation Home (Finally!)

This just in: After pushing back the launch date by more than a year, Sony's (SNE) video game division plans to release PlayStation Home, an online 3-D social networking service, on Dec. 11. Like Linden Labs' Second Life, Home will let users interact with others through their own computer-generated characters in a virtual setting.

Sony is counting on Home to improve the fortunes of its struggling video games unit. Home's launch comes two days after Sony announced 16,000 layoffs and other moves to cut spending as the global recession hurts demand for consumer electronics. The unit, which is in charge of the PlayStation 3 business, has been a huge drag on earnings, losing roughly $3.8 billion over the past two years. Credit Suisse (CS) has predicted that Sony's gaming unit could eke out a profit this year, but that's less than certain in the face of a long recession and an unfavorably strong Japanese yen.

Sony officials say they don't expect an immediate payoff from Home. Their plan is to offer it as a free software download to all PS3 users and to charge gaming companies and other brands to create shops, sell goods, host events, and advertise. "We think that Home will increase the opportunities for gamers to find each other," says Ryoji Akagawa, Home senior producer. "That, in turn, will increase the total number of people playing games, which is a key mission for us."

Behind the Competition

Home marks the latest phase of a rollout of online services for the PlayStation 3. Recently, Sony added video downloads to the PlayStation Network, an online smorgasbord of stuff—including games, music, movies, TV shows, and trailers—which, according to Sony, has attracted 15 million subscribers worldwide. But rival Microsoft (MSFT) still has the lead in offering a full range of online gaming and video-download services, and Nintendo (7974.T) is ahead in game console sales. In October market researcher NPD said Sony sold just 190,000 PS3s in the U.S., compared with 803,210 Nintendo Wii consoles and 371,000 Microsoft Xbox machines. (Since the PS3's release in November 2006, Sony has sold more than 16.8 million units globally. Nintendo launched its Wii that same month but has sold 34.5 million units.)

It's unclear what impact the delays will have on Home. The original plan was to have Home ready by autumn 2007. Sony Computer Entertainment chief Kaz Hirai announced the first delay in October 2007. The company had expected Home to be ready by April of this year, but instead announced another delay. In late August, the company started inviting a limited number of users worldwide to try out a working version of the service known as a "closed beta."

Sony asked for feedback to fine-tune the service before making it available to a broader audience. Among the things programmers learned: Japanese users complained that the virtual characters, or avatars, looked too Western. Home's programmers also changed the appearance of options menus and added voice-chat features. And they built in security measures so parents could prevent their children from visiting certain areas and gamers could report cyberstalkers.

No Global Interaction for U.S. Users

At Sony Computer Entertainment offices in Tokyo, a few hours before the Dec. 10 announcement, Junji Shoda, who is in charge of Home's global business strategy, went over a few of the basics. Every new subscriber will start with a fully customizable (and clothed) avatar and an empty apartment-like room. Expanding the basic wardrobe or adding fancier home furnishings will cost a few dollars, Shoda says. Home already has a few public areas, including an outdoor plaza and a gaming center, but more will be added soon. One potential frustration for gamers: Though PlayStation Network lets gamers compete against anyone across the globe, Home users in the U.S. can't interact with users in Japan or Europe. Sony created barriers between the regions to avoid sticky cross-border intellectual property problems, says Shoda.

The beauty of Home is that it's constantly evolving. Sony officials are already considering new features that will make Home more similar to social networks like Facebook and MySpace (NWS). In time, Home users will be able to post links to outside Web sites or upload photos for others to see. Want your avatar to eat or drink? That's not possible now but it might get programmed in later, says Sony's Akagawa. With so many features, though, could Home distract gamers from playing games? "We don't really worry about that," says Shoda.

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