A deep and thoughtful analysis of the Console Wars, part I: SNOY = BUTTS LOL
Sony is in big trouble with the PS3.
Even with a $500/$600 price tag, Sony’s selling their console at around a $300 loss. Great for gamers, right? I mean, cool, you get a whole $900 console for $600. It even surfs the Internet and you can install Linux on it and play Blu-Ray HD movies and use it to stream pirated movies straight off your PC.
Yes, but: Sony, with a loss leader, is now expecting the purchaser to make them enough of a profit on other products to make up for the difference. So once you’ve loosed $500 from your wallet for a big shiny piece of plastic, you’re expected to buy thousands of dollars worth of other Sony stuff which make an actual profit. (Not just $300 worth, mind you, since Sony has to pay for manufacturing and advertising and shipping, which cuts into the profits.) This is why Sony is marketing Blu-Ray out the wazoo, since DVD discs have a very low overhead. Note that Blu-Ray hasn’t “won” the HD market by a long shot, any more than PSP-UMD discs have dominated handheld movie watching. If HD-DVD takes off instead, then Sony is absolutely 100% screwed.
Meanwhile, game developers are running around talking about how they need to sell buttloads of games to cover the development costs of their AAA titles. Sony, in their wisdom, has set the cost of entry really high. They’ve shut out the casual 2-hours-a-week sort of gamer by demanding lots of money and topping it off with the overt expectation that the consumer cough up lots more money for Sony HDTVs and Sony Blu-Ray discs and generally give all their disposable income to Sony right now. And the consumer pretty much has to capitulate, because honestly, who buys a $600 game system and then sits around playing one or two games?
ANECDOTAL EVIDENCE CORNER … My former girlfriend, now my wife, owned a Nintendo Entertainment System when we started dating. She owned four games (admittedly pretty good games, but still) and that was plenty for her. I wouldn’t be surprised if the peripheral game market was similar.
So here’s Sony’s dilemma. They have to sell a bunch of PS3s, and then sell mountains of other Sony products to make up for the loss they’re taking. Even then, Sony has set the price point to where only hardkore gamerz, indulgent parents, or trendwhores care enough to pony up the dough. Developers want to know they’re not going to get screwed by low sales before they decide to develop games for a system. Sales are already beginning to soften. Blu-Ray may end up the BetaMax of the HD video format.
My prediction: Sony, arrogantly convinced they’re still the best and their marketing plan is flawless, continues stumbling long enough for other companies to consume their entire audience. As the writing appears on the wall, Sony decides to cut the price on the PS3 and take even MORE of a loss, but by this time Microsoft is gearing up for a new console release and Sony is the old also-ran. They remain in the console market for another generation at most, attempting to Borgify all the good things of the other consoles, but their market will have evaporated. In the end, Sony releases a bunch of Greatest Hits collections for Nintendo and goes back to making TVs.