Social networking will win the console wars

Comparisons between the Xbox One and PlayStation 4 home gaming consoles usually revolve around chipsets, display resolutions, and controller designs. But integrating social tools and fostering online community may be the most influential factors in which of the two take the superior position in terms of market share and consumer loyalty in the eighth generation console war.

According to Entertainment Software Association data from 2013, 62 percent of the video game audience played games with others, either in-person or online, and 77 percent of them did so for at least an hour a week. The success or failure of Microsoft’s and Sony’s newest consoles will be tied to how they leverage this audience — and the strength of the online communities they create to hold these players once their attention has been captured.

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Xbox 360 was for gaming, PlayStation 3 was for entertainment

Nielsen’s 2013 Gaming Report gives us a snapshot of how American consumers interacted with the Xbox 360 and PlayStation 3 last year. The ways Microsoft and Sony chose to reveal the Xbox One and PS4 in 2013 make perfect sense when we consider that the Xbox 360 was the clear winner as a gaming system and the PlayStation 3 was the clear choice for entertainment features.

According to Nielsen’s data, twice as many people in the United States bought a PlayStation 3 for its entertainment features versus the Xbox 360. This is not surprising as the story of the previous generation console war included the battle between HD-DVDs and Blu-ray discs as the predominant high-definition media format. The Blu-ray won. The PlayStation 3 has a Blu-ray player. The Xbox 360 does not. Console users also typically spent 24 hours per week watching video-on-demand or streaming video services on the PlayStation 3 versus 13 hours a week watching video-on-demand or streaming video services on the Xbox 360.

Remember the consternation when Microsoft chose to reveal the Xbox One through its media functionality? It needed to demonstrate that the Xbox brand could compete in the entertainment sector. When we look at console use purely for gaming in 2013, however, the numbers do a 180-degree turn, which is why Sony has tried so hard to position its system as being “for the gamers.”

The NDP Group reported in October that 50 percent more players used the Xbox 360 for online gaming than the PlayStation 3. Nielsen’s numbers back up this conclusion. Console owners typically spent 33 hours per week playing online games on the Xbox 360, versus 18 hours per week playing online games on the PlayStation 3. These numbers reflect the split in gaming time, period, on the two systems: 19 percent of all gaming time was spent on the Xbox 360 versus 8 percent on the PlayStation 3.

Unfortunately, neither Nielsen nor the NDP Group have detailed information about why consumers preferred the Xbox 360 over the PlayStation 3 for gaming. We have to make a supposition that considers the differences between the two. They’re roughly comparable in terms of hardware power. They both have excellent sets of platform-exclusive games. The Kinect is an obvious difference, but it was also never considered an effective tool for gaming, and therefore doesn’t seem reasonable to consider as a potential explanation.

The most obvious difference between the two consoles is how they handled online community and social interaction. Microsoft offered an improved and robust experience with Xbox Live. Sony offered PlayStation Home. The two services are radically different, and it would be difficult to find an unbiased critic who cites Home as the better of the two. The Xbox 360 also offered chat services that were clearly superior to what the PlayStation 3 offered. In a market where 62 percent of consumers are gaming online, these sound like reasonable explanations for user preference between the two systems.

Players, please come Home?

In an interview published in December 2008, Jack Buser, the then-director of PlayStation Home, said, “We really consider Home a ‘3D social gaming community.’ A place where our community can go and meet their friends, meet new friends, visit themed public spaces. … Create a custom avatar and virtual space, but the crown jewel of our service is the ability to jump from home directly into our online games together.” Buser also said that Sony saw Home as “revolutionizing the concept of the ‘friends list’ for console gamers.”

A year later, Sony was presenting Home in a different light. “In the early days when we built Home, we really were building a social network for gamers … through that, over the last year, it’s developed into a game platform, first and foremost,” said Buser in an interview published in October 2009. Home was a platform for minigames, themed virtual spaces that marketed PlayStation titles, and microtransactions for avatar items and games. Home is currently accepted as a very strange space within the video game world and rarely spoken of as a social hub.

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Microsoft took a much simpler approach to online community with friends lists and chat functions. Xbox 360 users could chat 1-on-1 regardless of which game they were in, but audience feedback made it clear that the system was too limited. In 2008, Microsoft patched on Xbox Live party chat to the Xbox 360. “The most important metric is usage, and party chat is one of the most frequently used forms of communication on Xbox 360,” said Richard Irving, the Xbox group program manager. Microsoft also introduced tools that allowed players in a party to smoothly join each other in online games.

Microsoft did not appear to be protecting the advantage of Party chat with the launch of the Xbox One. The friends list interface on the Xbox One is much less simple than it is on the Xbox 360. It forces players into a separate app if they want to Party chat on the Xbox One, and they have to turn on the Party chat channel after they join. In February, Microsoft announced an upcoming patch to the Xbox One’s Party chat and friends list features, and if you look at the details of those changes, Microsoft is making these services operate on the Xbox One very similarly to the way they operate on the Xbox 360. If it ain’t broke, don’t fix it.

Microsoft has also split its audience between the Xbox 360 and Xbox One. Users on either system can text-message each other, but they can’t form party chats between the two systems. It isn’t as though Microsoft couldn’t make this happen. “We are always looking to improve the gaming and entertainment experience,” said Irving. “While it could be possible for party chat across consoles, we don’t have anything to share about introducing the capability at this time.”

Meanwhile, the PlayStation 4 offers a Party chat system that resembles what the Xbox 360 offers, which means Sony has nullified a clear advantage of the Xbox brand. Sony has also handled the question of social media far more effectively with the PlayStation 4 compared to what the Xbox One offers, such that now it feels like Microsoft is playing catch up.

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Social is a foundation, not an add-on, for the PS4

When Sony began developing the PlayStation 4, incorporating cross-game chat was “a pretty significant priority,” according to John Koller, the vice president of platforms marketing at Sony Computer Entertainment of America. “It was one of several areas that we wanted to insure that was included. And I think, just to take a quick, broad overview of the PS4 development, at its core it was developed as a socially connected and very communal platform.”

Sony was already talking with Facebook and Twitter about how best to incorporate those services into their new console as far back as 2007. Sony wanted to make sure both services functioned on the PlayStation 4 right out of the box, without the requirement to download a separate app. “Each of them have various engineering requirements that we needed to follow, so it was very much hand-in-hand in terms of how we did that,” said Koller. These early design priorities make sense of Sony’s emphasis on the Share feature of the PlayStation 4 during the system’s reveal.

Sony considered integration with Twitch TV as just as important as their efforts with Facebook and Twitter. “Myself and some others here were initially pretty surprised in ’08 and ’09 about the sheer gravity that was going toward Twitch,” said Koller. “And at the time, to integrate with Twitch, a gamer had to really put together this kind of janky platform. We said, let’s make this as easy as we can.”

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“We had one of the individuals who works on our digital team come down in ’09 and show an absolutely massive amount of people following one person who was playing Call of Duty at the time, and I have to say that personally I was very surprised,” Koller told me. “I looked at this, and I said, there’s something here.”

He was right. In January of this year, the official Twitch blog reported that between Dec. 23 and Jan. 3, 20 percent of Twitch’s broadcasters were from PlayStation 4 consoles. That’s one-fifth of the content from one of the most popular online gaming communities on the Web — and it’s a powerful marketing point for a company trying to position its console as a product for gaming first and foremost.

Microsoft’s late start with Xbox One’s social tools

Microsoft, on the other hand, retired the Facebook and Twitter apps from the Xbox 360 in October 2012, recommending that players take advantage of Internet Explorer on the Xbox 360 to interact with those social networking tools. To be fair, Facebook engineer Colin Creitz has stated that maintaining native apps on consoles was high maintenance, so this could have had something to do with Microsoft’s decision.

I asked Irving if he could give me some insight into why Microsoft removed those apps. “We retired the Facebook and Twitter apps in October 2012 when we released Internet Explorer for Xbox 360,” said Irving. “Adding Internet Explorer on Xbox gave Xbox Live subscribers the ability to access these sites through the browser optimized for their TVs, offering a more streamlined experience.”

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In my experience, accessing Facebook and Twitter on the Xbox 360 through Internet Explorer is clunky. In fact, the only time I share Xbox 360 content with my friends on Facebook is when I play Minecraft, which has an easy tool for taking and sharing photos that conceptually sounds an awful lot like what the PlayStation 4 uses.

Irving gave me no indication that Microsoft has plans to approach Facebook and Twitter on the Xbox One any differently than they approach them on the Xbox 360. Microsoft may have no concrete reason to do otherwise at the moment. Sony isn’t trumpeting any statistics about Facebook and Twitter engagement by PlayStation 4 users, so Microsoft has no bar to chin up to. We just don’t know if Facebook or Twitter on these new consoles will actually amount to anything in the first place.

But the difference between how each company has tackled the issue of Facebook and Twitter does say something about the relative importance they place on social networking tools, and Sony’s approach has led to a success that I doubt anyone could have predicted and which may have a lot to do with their current lead over the Xbox One.

Microsoft also had no Twitch broadcast integration at launch. “We understand that the broadcasting component of Twitch is very important, and it is a major focus on our roadmap as we work to ensure it is seamlessly implemented on Xbox One,” Richard Irving told me in our interview earlier this month. Microsoft had chosen to focus on Twitch’s viewing audience rather than expanding its broadcaster base. “Unlike the PS4, Twitch on Xbox One will provide gamers with the ability to view Xbox One and Xbox 360 gameplay, as well as gameplay from PCs and other consoles.”

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Microsoft announced on Feb. 25 that it would patch in Twitch broadcast capability to the Xbox One by March 11. That’s the same time-frame within which they’re addressing the shortcomings of Party chat and friends lists on the new console. Both decisions probably have everything to do with the imminent release of Titanfall, the sci-fi first-person multiplayer shooter that appears to be the first “must play” game for the Xbox One, and Microsoft’s recognition that they do not want to miss out on this important opportunity to hook their online player base into the Xbox community.

Setting the tone matters

More than ever, console cycles are marathons, not sprints. The Xbox 360 and PlayStation 3 evolved considerably from launch to the present, and it’s therefore unreasonable to look at the Xbox One and PlayStation 4 in their current forms, and with their current slates of functionality, as the definitive representations of those systems. Microsoft will also be the first company to release a game which might serve as a system seller.

Sony currently holds a decisive advantage in eighth generation console sales. Sony announced on Tuesday, March 4 total PlayStation 4 sales of more than 6 million units worldwide, while Microsoft’s most recent quarterly financial report cited the sale of 3.9 million Xbox One units worldwide. Sony claims that it sold twice as many PS4s as Microsoft sold Xbox Ones in January. You may also try your local retailers to see if you can find a PlayStation 4 on the shelf versus an Xbox One.

The amount of time the gaming audience spends on one console or the other translates into profits gained or lost. According to Nielsen data, last year 35 percent of monthly game spending in a household was spent on the Xbox 360 versus 19 percent for the PlayStation 3. And there’s a tiny difference in the consoles’ performances last year which speaks to the importance of digital media, when we consider that the PlayStation 3 was the clear choice over the Xbox 360 for entertainment appeal. Consumers spent 7 hours per week watching downloaded movies and television shows on the Xbox 360 and 4 hours per week doing so on the PlayStation 3.

It makes sense that if you have more users spending time online on your console, the more those users are exposed to your online marketplace and the more purchases they’ll make, in this case purchases of downloadable media. This shallow gain, as well as their overall dominance in online activity, might explain why Microsoft was so enamored with the idea of dispensing with physical media on the Xbox One.

It would be ironic if that gambit was responsible in large part for Sony’s early lead in the newest round of the console wars, inasmuch as it gave Sony a powerful marketing tool to align themselves with the game playing audience specifically. That and a $100 price difference surely have everything to do with how much stronger Sony has been out of the gate. The best way Microsoft can erase that lead and take over the number one position is by creating superior online community tools and, as in the last generation, inspiring the preponderance of online video game players to stick with Xbox brand, because that’s where more of their friends are.

At least for now.