Secret Octopus Dad Has Indie Key to Sony’s Console Success: Tech

When trying to revive one of the world’s most iconic consumer-electronics brands, it pays to have a mollusk on your side.

The gangling, accident-prone star of “Octodad: Dadliest Catch” may hold the secret to success for Sony Corp. (6758)’s PlayStation 4 console in one of his eight suckered arms. Sony wants independent developers -- like the college crew who dreamed up the game about an undercover octopus trying to keep his true identity from his human family -- to give it an edge in the $93 billion-a-year industry.

“They realized independent developers make a variety of games, different types of games that you can’t always get everywhere else,” said Philip Tibitoski, who produced the original version of “Octodad” with fellow students at DePaul University in Chicago and now runs Young Horses Inc., a small studio in the city. “We have more flexibility to make interesting things because there’s less risk.”

Sony is trying to differentiate its PS4 from Microsoft Corp. (MSFT)’s Xbox One -- due out today -- by offering a wider selection of popular and eclectic titles. After shocking investors this month with a second-quarter loss, Chief Executive Officer Kazuo Hirai needs hit games to generate a buzz in the run-up to Christmas and build on the more than 1 million consoles shipped in their first 24 hours on sale.

Photographer: Simon Dawson/Bloomberg

Initial PS4 sales topped those of its predecessor, which failed to attract buyers because of a lack of titles. Close

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Photographer: Simon Dawson/Bloomberg

Initial PS4 sales topped those of its predecessor, which failed to attract buyers because of a lack of titles.

“Indie games are crucial to the ability of the PS4 to sustain sales momentum,” said Koki Shiraishi, an analyst at SMBC Nikko Securities Inc. in Tokyo. “Not being able to attract general users, besides the core gamers, contributed to the PS3 failure.”

‘E-mails Exploded’

Initial PS4 sales topped those of its predecessor, which failed to attract buyers because of a lack of titles. Sony’s games unit had four consecutive annual losses following the PS3’s 2006 introduction, returning to profit under Hirai in the year ended March 2011.

GameStop Corp., the largest specialty retailer of video games, said its initial allocation of PS4 consoles sold out, and 2.3 million customers were waiting for the Sony player and the Xbox One. PS4 probably will generate $2.6 billion in profit over its estimated eight-year lifespan, Kota Ezawa, an analyst at Citigroup Inc. in Tokyo, wrote in a Nov. 14 report.

Tibitoski and his friends were on a games-making course when their quirky creation caught Sony’s eye. The Tokyo-based company loaned them kits to create titles and gave them a spot in its June presentation at the E3 trade show in Los Angeles.

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The shadow of Hiroshi Kawano, president of Sony Computer Entertainment Japan Asia (SCEJA), during a news conference in Tokyo on Sept. 9, 2013. Close

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The shadow of Hiroshi Kawano, president of Sony Computer Entertainment Japan Asia (SCEJA), during a news conference in Tokyo on Sept. 9, 2013.

“Our phones, Twitter accounts and e-mails exploded” after that, said Tibitoski.

Development Kits

Sony, which has offered free development kits for a few years, more than doubled the number distributed to several hundred and boosted funding for independent studios ahead of the PS4’s release, said Brad Douglas, who works closely with gamemakers for Sony Computer Entertainment. He declined to say how much Sony invested in indie titles.

“It is important to make that broad universe of content,” Douglas said. “Probably 99 percent of all games released on the mobile platform, no one ever sees them. If we don’t help them, they’ll disappear.”

Sony paid for the development of “The Unfinished Swan,” in which players chase a bird that escaped from a painting, said Ian Dallas, who dropped out of a master’s program at the University of Southern California to lead the project. A team that grew to 12 people over three years developed the game for the PS3. “Unfinished Swan” was the console’s top-selling title in January, three months after its release.

Similar Hardware

“A lot of it is about differentiating the consoles,” said Dallas, 35, who heads Giant Sparrow games company in Santa Monica, California. “Sony is deliberately encouraging people with unusual whims.”

It needs a strategy. U.S. sales of packaged titles for consoles fell 21 percent to $8.9 billion last year, while those for games played on phones, tablets or downloaded to computers rose 16 percent to $5.9 billion, researcher NPD Group says.

Sony said yesterday it will cut $250 million in costs at its entertainment units over two years as Hirai works to tie the company’s content to its hardware.

Focusing on indie studios meant PS4 hit the market with one more title than Xbox One will offer. Sony classified five of the 23 games available in the U.S. for the PS4 as “indie.” Xbox One will have 22 in total.

Microsoft only began courting independent developers in August, promising free kits to approved programmers. David Dennis, a Microsoft spokesman, said there won’t be many indie games when the Xbox One goes on sale, though “you should expect to see plenty coming soon.”

Programming Snag

Sony also is financing games for its handheld PlayStation Vita. The company backed the development of “OlliOlli,” a skateboarding game created by London-based Roll7 Ltd.

“Any money we needed, we said ‘we need X amount’ and they put that money forward,” said co-founder Tom Hegarty, 33. “What that allowed us to do is to really focus on ‘OlliOlli’ to make sure we got that right.”

When Hegarty hit a programming snag, Sony sent a specialist to his studio.

“Fostering growth of indie game makers is an important strategy,” said Citigroup’s Ezawa. “If you help them grow, it’s more likely they will provide exclusive titles for you.”

Industry leaders such as Activision Blizzard Inc. make titles for multiple consoles to reach the broadest audience. Its “Call of Duty: Ghosts” and “Skylanders Swap Force” can be played on PS4 and Xbox One.

“If you look at the cinema, it’s done extremely well over the course of decades by capitalizing on talents that exist in Hollywood around big-budget major features while at the same time having a very vibrant art-house independent community,” Sony’s game chief, Andrew House, said.

Tibitoski said Young Horses is still considering whether to offer games on Xbox. For now, Sony has the lead.

“Sony reached out to us very early on,” he said. With “Xbox, we’ve spent more time to get meetings, although they’ve been very kind to us as well.”

To contact the reporters on this story: Mariko Yasu in Tokyo at myasu@bloomberg.net; Grace Huang in Tokyo at xhuang66@bloomberg.net

To contact the editor responsible for this story: Michael Tighe at mtighe4@bloomberg.net

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