As President of Sony Computer Entertainment Worldwide Studios, Phil Harrison is responsible for setting the global product strategy for Sony's video game efforts. Currently he manages Sony's development operations in 14 studios spread across five countries. He has been at Sony since before the launch of the original PlayStation. We discussed the dizzying pace of the games industry, the giant wads of cash being thrown around, and tried to handicap the death of disc-based games.

Playboy: Currently the games industry is very hit-driven, with a large chunk of a given year's revenue driven by a relatively small number of titles. Given how costly and how risky it is to develop games, does that tend to stifle the more independent end of the market?

Harrison: It's been that way forever. Typically, 20 percent of the titles generates 80 percent of the revenue. That changes as the platform matures, as you get into the later part of the cycle where you have different price points. But at the beginning of a platform's life cycle, it's not unusual to see that kind of hit-driven business.

Playboy: But if you go back 10 years or certainly 15 years, in the era where teams of one or two people were creating entire games and the money equation wasn't as crazy, everyone was playing at a lower stakes table. People were able to sit for much less money.

Harrison: The dynamic range was very different, but the ratios were the same. You're absolutely right that the cost of entry has gone up, but thankfully the business is growing and the industry reaches more consumers more effectively than it ever did before, both in terms of demographics and in terms of age and geography. We reach more markets and more committed gamers than our industry has ever experienced. It costs more to play, but there's more money to be made.

If you look at the point at which PlayStation became very successful, we launched in '95, but the real fire started to catch in '96 and '97, worldwide. It changed the publishing economics and the retail industry as well. You saw a massive expansion of the video games category in terms of linear shelf space at retail. You saw new developers coming in, new publishers coming in and new approaches to the business, and that grew for everybody. The PlayStation technology jump resulted in games that appealed more widely than what people had seen before on the eight- or 16-bit systems. Today, those PlayStation One games may look crude or basic, but compared to what had come before, they were revolutionary.

The closer that games get to photorealism, the less imagination is required on the part of the user to enjoy them. The games in the eight- and 16-bit era with low-resolution graphics, simple animation and simple AI required an enormous amount of imagination on the part of the player to maintain the suspension of disbelief that they really were controlling a Formula One racing car or that they really were Arnold Schwarzenegger in an action movie. But as we got more realistic and higher resolution, as we got more sophisticated character performances and more emotion, games required less work on the part of the user to fill in the gaps. And that allowed us to expand the market. We were able to appeal to 20-somethings and 30-somethings rather than 12-year-olds, who were the target market in prior generations.

The publishing risk was also reduced in the move from cartridge to CD. Not only did the CD format bring technical advances -- you could store more stuff on it, you could have video, music, more sophisticated scenarios -- but from the publisher's point of view, it significantly reduced the risk of the minimum order required to make games and ship them into retail. You could manage your inventory much more effectively. The problem with the cartridge business in the '80s and '90s was that as a third party publisher you could never get it right. You were either oversupplying the market with very expensive bits of plastic, or the game sold out and it took 12 weeks for you to re-supply. CDs completely changed that dynamic. We were able to use CD plants distributed all around the country, and suddenly time from factory to retailer was measured in days rather than months. As a result, all of that cash got unlocked from inventory and was allowed to be invested in marketing and more importantly, in development. That completely changed the creative dynamic of the industry and, more importantly, allowed us to take some risks.

Playboy: It seems like the financial realities are constantly shifting. You had high-risk cartridges, and then a period with CDs where people were able to take more risks. Now you guys are dealing with the challenges of next-gen and the creation of these games in high-res with heavy physics engines or building giant worlds. Because of those factors would you say we're moving again into a more risk-averse period?

Harrison: That concern comes up every time we have a generation cycle change, every five or six years or so. When games started to cost $1 million to make, I remember there was much wailing and gnashing of teeth and people saying the economics were broken. Now we regularly spend $20 to $30 million on games. And it can be more if you include cost of marketing or cost of service and management for online games. It's something that the continuing growth of the industry has supported, because we've got bigger platforms and people are buying more games. But of course there is real concern about managing risks. But that may be mitigated by new distribution methods like the PlayStation network, or Xbox Live Arcade, where games can be distributed directly to consumers. Those games don't have to cost $20 million to make, and the lower investment scale allows for more risk-taking.

Playboy: Do feel that innovation will concentrate in the digital distribution areas because the risk level is easier to stomach?

Harrison: Certainly we're seeing a great deal of innovation there. I don't think the two markets are necessarily mutually exclusive. I think gamers will look to big epic games as something they'll buy five, six times a year. And then there will be a number of games that they will purchase by the PlayStation Network, perhaps every month, with a low cost of entry. I also think we'll start to see digitally delivered games generate a fan base, a following, some awareness, and then be developed up to full Blu-ray disc games and sold at retail.

Playboy: Is there a tension between how much you lead and how much you follow in terms of giving the public what they're comfortable with, game-wise, versus giving them something new and different?

Harrison: There is a tension there. But as a big studio that's aligned to a specific piece of hardware, I think we don't just have the opportunity to innovate and take risks, we have the responsibility to innovate and take risks. We don't just exist to profitably support the platforms, but to profitably expand the platforms, to create games that stimulate both gamers and non-gamers to go and buy the hardware in the first place. I think within a balanced portfolio you certainly want established successful franchises that can be successful over a number of iterations over the life of a platform. We also want to have those disrupters, those rockets that we launch up, that explode and make everybody stand up and take notice of the platform and go and buy a PlayStation 3 as a result.

Playboy: In the 20 years you've been in the industry, what has been the most significant change in terms of what the games deliver now versus then?

Harrison: We are now a medium that matters. We are relevant to people's lives. We weren't in 1987. When I was 17 or 18 years old and hanging out in a bar, talking to girls and somebody would say, "What do you do for a living?" I would mutter something about working in computers. I wouldn't have said that I was in the computer game industry. It just wasn't cool. Wind the clock forward 20 years and say, "I work for PlayStation," and people are fascinated. It's a fashion brand, it's a technology brand, it's an entertainment brand that is very relevant to people's lives. We are now a part of popular culture. That is the most significant and, I hope, long-lasting change that we've seen.

Playboy: The fundamental mechanics of how you perform your job today must be entirely different now than they were in 1987.

Harrison: In 1987, while we had pretensions about being in business, we didn't really run it like a business. It was a bunch of guys, typically making games that they, themselves would find interesting to play. We didn't have the management issues, because we didn't have people to manage. Two or three people could sit down and design and make a game in six to nine months. I remember going and working on a contract with a company where there were 10 people working on one game and I thought it was just unfathomable that so many people would work on a single game.

Playboy: The pace of change in the industry is quite shocking. Will we see even greater shifts in the next 10 years?

Harrison: I think we will. I think as we move from being a largely packaged media-based business to a largely network-based business, that will introduce new challenges, different ways of working, different ways of relating to our audience and different ways of building and sustaining interest in our games. The shift to digital distribution is probably the biggest, most fundamental change our industry is going to go through in the next few years. At some point in the next 10 years or so, we'll see that tipping point where we move from being a package-based business to really, exclusively a network-based business.

Playboy: How does the Blu-ray group within Sony feel about that?

Harrison: Blu-ray is absolutely the most efficient way of delivering 50 gigabytes of content into somebody's home right now.

Playboy: But, as you say, things are moving to a network future. Speeds will increase, and 50 gigabytes will be a drop in the bucket. Is this the last generation of hardware that will have optical media?

Harrison: It's a question I'm asked from time to time. And I was more sure about it a few years ago than I am now. I'm unsure because, while you're absolutely right that network speeds are increasing, they are not increasing at the rate at which we're expanding what we want to put onto Blu-ray discs. Right now, the amount of data we want to deliver is increasing faster than network speeds are increasing.

Playboy: So you think there may be more life in optical media than others may predict?

Harrison: Yes, certainly for delivering movies or delivering the framework of a big game. We might see delivery of the basic game experience on Blu-ray disc, and then have the service of the game sustained over the long haul through network delivery.

Playboy: Much of that seems to already be happening.

Harrison: To quote William Gibson, "The future is already here, it's just unevenly distributed." There are people in the world who are on hundred-megabit fiber lines to the home and moving at the speed of light compared to people in the parts of the world where dial-up is still the norm.

I think the big evolution that's set to happen in entertainment will come in the form of a pervasive, global wireless network over the next 10 years or so that will connect our mobile devices and our TV-based devices in a completely seamless way. At that point things get really interesting because you won't be tethered to a particular device. You'll just have entertainment experiences. Not solely games, but music and linear programming like television, and you'll be able to seamlessly move from one device to another. You could start watching a movie on the way home from the office on the train and as you walk in the house, you could seamlessly finish it on the big screen. The same will happen with games. You'll start to see games as network experiences that are not tethered, necessarily, to a particular device.

Playboy: What is the hardest thing about making games?

Harrison: Making them relevant. It's so important to be really clear on who you're making the game for so that all of the design decisions that you make, all of the creative decisions you make, and the associated technical and production decisions you make yield a result that is relevant to the person that is going to be playing the game. In our industry we are often guilty of forgetting that at the very end of our process is a gamer who's been to a store either in the real world or online and bought your game and they want to be entertained by it. To make those experiences relevant to them in a way that they are excited by and will tell their friends about, that's the hardest thing to get right.

Playboy: People say that the media is where we tell stories to ourselves about what it is to be human. Do you think games are able to tell us things about ourselves in a way that other media cannot?

Harrison: You mean are there existential games? Yes, I think so. I mean, for the most part, in the 20, 30 years of our industry so far, games have had a fairly narrow emotional target which has typically adrenaline or excitement or some kind of active involvement on the part of the player, these kind of highly energized, highly adrenalized experiences. If I read a book or see a film, I'm moved through a much wider spectrum of emotional responses. I think as games mature as an art form, players mature as well. We can start touching different emotional high points in games that I think will make our medium so much more compelling. We're getting there slowly, and we haven't by any means maxed out what we can do. This is not a technical issue. This is not about making characters more realistic graphically. It's about making stories and situations and the journey that you take the player on much more meaningful to their emotional life.

Playboy: It seems like there was a time in the industry, like with text adventure games and the LucasArts adventure games, where there was really a focus on a more story-driven, more emotionally driven experience to the player. Why was that downplayed for so many years?

Harrison: Not to criticize those games, because I remember playing them very fondly, but they were very specialized experiences. It was really a tiny fragment of the entire population that could fathom what typing N to go north would mean. Go north, pick up shovel, dig hole. It's completely abstract. As I said before about making games relevant, you want to find games that have the broadest possible appeal so that the largest number of people can enjoy them.

Playboy: If you had a magic wand, and you could wave it at one part of the industry, what would you do?

Harrison: You can buy a Sunday newspaper in any city anywhere in the world and there will be a magazine insert in it called something like "Culture" or "Weekend Life." And in that supplement you will find excellent writing and reports about film and television and theater and radio and all kinds of print media like books and magazines, but you will very rarely see games considered as culture or art. That's what I would change. Most games are described in the technology pages, rather than in the arts and entertainment pages. Games are such a widely enjoyed entertainment pastime that it is completely appropriate that they be covered by the kind of high-level journalists you expect to get other cultural reporting from. Present company excepted, of course.