PlayStation's new, new CEO
Step forward or backpedal?
Games are a microcosm of the world at large.
If you had been tracking the Chinese games industry, this week's DeepSeek development would feel like déjà vu.
ICYMI, the Chinese-developed AI startup DeepSeek has dominated headlines since launching its free chatbot earlier this month, surpassing ChatGPT as the most downloaded app in the US app store ecosystem. The company's R1 model matches industry leaders' performance at a fraction of the development cost, triggering market anxieties that sent Nvidia's market value plunging by $589 billion.
OpenAI CEO Sam Altman initially struck a diplomatic tone, praising DeepSeek’s achievements as “impressive, particularly around the price” while promising accelerated development of “better models.” The breakthrough challenges the conventional wisdom that AI advancement requires massive capital investment, even as U.S. tech giants prepare to pour $51 billion into AI infrastructure this year.
[Not shown: the alleged next $40 billion funding round for OpenAI, led by Softbank, valuing the firm at $340 billion.]
Then came the plot twist: OpenAI claimed it had evidence that DeepSeek had leveraged its proprietary model. The irony is rich coming from a company that built its foundation on training data harvested from creators without compensation.
The writing was on the wall for anyone watching gaming's evolution over the past year.
China has been gaming’s quiet powerhouse in 2024. While Western publishers grabbed headlines, it was the relatively unknown Game Science that delivered last year's blockbuster Black Myth: Wukong on a modest $70 million budget. Chinese players' spending on premium Steam titles quadrupled in 2024, providing a crucial buffer against a steeper global market decline.
The gaming industry also foreshadowed another key theme: the shift away from raw technological horsepower. The dominant “better tech equals growth” narrative grows increasingly tenuous as simpler applications and devices capture expanding market share.
Innovation thrives under constraints. Despite U.S. restrictions on advanced chip access, companies like DeepSeek have pushed boundaries with less capable infrastructure. It mirrors gaming's current creative renaissance, where small, resource-constrained studios are reimagining play itself rather than chasing cutting-edge graphics.
The industry’s risk profile has reached a breaking point, with major studios converging on increasingly homogeneous titles. The transformative energy gaming needs is bubbling up from smaller, innovative teams that, like DeepSeek, may well define 2025’s success stories. Who would have thought that the Chinese would build something cheaper and faster?
That has literally never happened before.
On to this week’s update.
BIG READ: PlayStation’s new, new CEO
This week’s announcement of a leadership reorganization at Sony Interactive Entertainment, SIE, marks a shift in the company’s strategic direction, with Hideaki Nishino appointed as sole CEO. Moving away from the previous dual-CEO structure with Hermen Hulst reflects Sony’s recognition of the need to future-proof itself in an increasingly competitive gaming landscape.
It’s generally best to fix your roof while the sun is still out.
Despite record quarterly performance across PlayStation’s digital portfolio, SIE maintains a notably cautious market stance. While parent company Sony has seen its share price appreciate 22% over the past twelve months—bolstered by a strategic $10 billion investment across gaming, film, and music assets since 2018—the gaming division's operational approach reflects growing awareness of structural market shifts.
As the largest console maker, Sony faces unique challenges. The consolidation under Nishino tells you that the firm recognizes the need for clear, more agile decision-making to navigate the coming period. Nishino was already in charge of the majority of PlayStation's business. It makes for a natural fit as it expands beyond the living room with Portal, pushes into new markets like India and China, faces the threat of international trade tensions, and addresses challenges in PlayStation’s mid-tier development ecosystem.
Meanwhile, I interpret Hulst’s continued leadership of content development and IP expansion as a way for PlayStation to ensure a creative edge. His expanded mandate through PlayStation Productions serves as a vital bridge between gaming’s interactive storytelling expertise and traditional media channels. This alignment with Sony’s broader entertainment strategy, as articulated at CES earlier this month, positions gaming IP as a foundational asset for multi-channel content deployment across live-action adaptations, anime productions, and emerging media formats.
It is part of the strategy the firm laid out in 2024 which it called a “Creation Shift.” Sony is leveraging its strength in gaming as cornerstone intellectual property for the entire Sony entertainment ecosystem. To accomplish that, it needs a creative lead who is native to gaming.
More broadly, changes in leadership at the top are not unique to Sony. Since it acquired Activision Blizzard, for instance, Microsoft Xbox has seen a lot of executive shuffling as well. Several key leaders have taken roles elsewhere in the gaming group, or have left to lead interactive entertainment initiatives elsewhere. Especially non-gaming firms have been keen to recruit experienced decision-makers with a background in gaming. It is an increasingly common approach for IP holders and brands to cement interactive entertainment as a way to engage audiences and remain culturally relevant.
Drawing from my recent executive meetings in New York, the organizational dynamics between Nishino and Hulst suggest an alignment of strategic vision rather than internal competition. This cohesion provides empirical support for interpreting the restructuring as a calculated response to market evolution rather than corporate politics. The bifurcation of responsibilities—technical infrastructure under Nishino and creative development under Hulst—is designed to address two critical vectors in PlayStation's expansion trajectory: the increasing complexity of platform operations and the strategic challenges of content leadership in cross-media entertainment.
PlayStation's decision to consolidate leadership under Nishino, while maintaining Hulst’s creative autonomy, reflects a company preparing for a more complex future despite operating at peak performance. The timing and structure of this change suggest PlayStation sees gaming evolving beyond traditional console experiences into a broader entertainment technology business, requiring clearer decision-making to navigate expansion into new markets, support its developer ecosystem, and transform its franchises into cross-media entertainment.
Matt Ball redux
Since several of you asked, I will provide a bit more commentary on a few of Matt Ball’s spicier takes.
The first is his “potential growth engine” for the industry that the base game Grand Theft Auto 6 may very well cost up to $100 (slide 215). His argument is two-fold: first, the cost of entertainment in every other category (music, film, video) has increased consistently over the decades, and, second, at $70 a blockbuster title like GTA6 would be the cheapest in the series’ history.
My take: I see a $70 to $80 price point for the base game. It is the biggest release of 2025, hands down. I’ve argued here that a higher price—meaning: $80 and up for the base games—would be a mistake, and that’s because there’s no historical precedent for it. Take-Two’s success with GTA5 came partly from its pricing strategy--launching at a standard price point late in the console cycle, then selling another copy to those same players when they upgraded to new consoles. Adjusting for inflation is a reasonable decision.
Another reason I expect a higher price point is more qualitative, namely that in the past every GTA release offered a critical read on society at large. Part of the appeal of playing GTA, and its ability to command a premium, is its counter-cultural narrative. Seeing the current culture shift swoop through the US, I’m now less convinced that GTA6 will be able to deliver a similar shock as American life itself has shifted from parody to tragedy. But I don’t yet know how to enter that into my spreadsheet and update my forecasts.
So, no, I don’t think that we’ll see it go all the way up to $100 without offering some substantial extras. But yes, GTA6 is going to break the existing $70 barrier. And, truthfully, given the zeal of its fanbase (me included), I would not be surprised if the launch saw a $150 version with a bunch of bells and whistles for the die-hard fans. If a Star Wars movie premiere commands premium prices and an army of fans shows up dressed up as their favorite character, why wouldn’t that be the case with games?
A second take was Ball’s observation that Fortnite retains best on the Nintendo Switch. It’s a surprising observation, even to Ball himself, who argues that “You basically choose between awful textures at 30 FPS, or just pretty bad textures at 20 FPS.” Punchy.
In an exchange with a16z’s speedrun, he provides four more reasons why this may be the case. In short order: there are no other battle royales on the platform (agreed), to younger players the Switch is likely to be the only device (disagree), the Switch over-indexes to younger players (ok, fine), and Switch ranked fourth by lifetime players acquired (sure). That all sounds reasonable, but it’s probably wrong.
My take: The reason why Fortnite does so well on the Switch despite the poor graphics is that younger audiences don’t care about high tech. One of the hills I will gladly die on is that the games industry tends to overemphasize technology as a selling point. It is so baked into the industry’s identity that it has forgotten how little it matters. The same can be said for Roblox and Minecraft, which also offer a low-def experience, suggesting that this younger audience cares little for graphics and instead focuses on fun.
Finally, several people commented on Ball’s bleak image of the future. Is there any hope?
I personally always appreciate Matt’s ability to draft a vision of the future because he always manages to point out or combine a data point that literally every other salaried analyst in the industry missed completely. It’s part of the reason why analyst firms sound so saltless. They can’t bring bad news to their clients without also losing business. Everything always goes up and to the right, right?
No. The progression of the games industry—its growth, its evolution—is not a straight line but, at least historically, a series of waves that gradually swell in size. In describing its trajectory, Ball tends to build these delicate abstract structures which are both beautiful in their ability to provoke ideas (e.g., the Metaverse), and, to many, too academic. I’ve previously offered a critique of some of his other writing. Ball shouldn’t be taken literally, because he deals in abstractions and examples. He merely provides a counter-argument to the habits of thoughts that guide much of the decision-makers in gaming which are based on a simplified version of reality. Headlines do not a strategy make. The business of games, like its artistry, is much more complex.
It is only possible to imagine the games industry’s demise if you’re willing to accept that after centuries, people will cease to play. I don’t think so either.
PLAY/PASS
Pass. Ubisoft lays off 185 employees across Europe as part of a cost-cutting exercise.
Play. School has started again, and this semester I managed to snag Hasbro CEO Chris Cocks for a fireside. Details to follow.
UP NEXT
Earnings are here. A lot was going on with Microsoft’s call last night (PC-based Game Pass subscriptions are up 30%, overall gaming revenue is down 7%, and hardware sales are down 29%. Oof). The first publisher to report, as always, is EA. It’ll be a doozy.