PS3's Path to Success

[GunnyMo]

Three Speech (http://threespeech.com/blog/index.php) has a great piece up about the road Sony and the PS3 have to travel to keep their #1 market share spot. (scroll down to the 2nd headline)

When a brand new console is released onto the gaming market, it is typically a very big occasion. People cheer or sneer, lines form, eBay makes a nice profit and the console sells like mad. This was no different with the release of the PS3 this past holiday season.

What occurs afterwards is what will determine the console’s place in history.Will it go on to sell record numbers and entertain million and millions around the world? Will it sell a decent amount only to be forgotten in years gone by and after newer and better systems are released? Will it live up to its promises, surpass them, or wallow in guilt and grief?

Make no mistake, even coming off a record number of sales with the PS2, Sony has a very hard road ahead of it. No company in the history of gaming has won three generations in a row. Usual paths to downfall include pride and arrogance. Nintendo at one point had over 90% market share, only to drop to just 60% the following generation and lose the lead to Sony the next at roughly 30%. The gaming industry is one of the toughest to compete in. What may seem obvious years later could have been a great idea at the time.
This is a great, honest article. The brief bio of Kazunori Yamauchi, Gran Turismo creator, in front of it is also an excellent read.

[Johan]

How soon will we be able to tell? Realistically, not until early 2008. But, we should start getting an idea shortly. If Japanese weekly sales show less than 50,000 systems sold per week consistently through the first 3 months of 2007, Sony is in trouble. If the US shows less than 200,000 systems sold per month for the first three months of 2007, Sony is in trouble. Europe is all but impossible to track externally, so we unfortunately will be unable to determine results based on Europe at this time.

The one thing I have said across a number of threads over the past several months is how I look forward to early '08 to see how things shake out between the big three.

Sony has some hard work ahead for it, but they very well could pull it off. Unfortunately, they'll do it without my money, as I am quite happy with my gaming options as is and have no time or need for another system to put on my pile of systems. :)

[Captain Awesome]

Heres the direct link to the article, if you care anyway...

http://threespeech.com/blog/?p=241

[GunnyMo]

Heres the direct link to the article, if you care anyway...

http://threespeech.com/blog/?p=241

Heh, thanks. Three Speech always throws me off for direct links. IE: my simple brain doesn't see them. I'll leave the news post the same as the GT bio is a good read. :D

[rein]

I think it could be even later than early 2008 before we know. This is most likely going to be a very tight race between all three consoles. I just hope it doesn't muddle up game development anymore than it already is.

[Serapth]

You missed perhaps the key quote:


nfortunately history does not currently take into account Sony’s price point on the PS3. Will consumers be able to afford or choose to afford the high price, or will they opt instead for the Xbox360 and/or Wii. On this point history does provide a limited amount of guidance.

Back in April of 2004 Microsoft dropped the price of the Original Xbox by $50 to $150. This put them at a $30 price advantage to Sony’s $180 for the PS2. In the US, Microsoft capitalised on this by having their first month ever to beat Sony in monthly sales in the US. The following month Microsoft all but equaled Sony’s sales in the US. It wasn’t until the month after that when Sony reduced the PS2 price to $150 that they briefly took back the lead. For the rest of that year they were neck and neck on sales. All of this while it is clear that Sony was leading overall in quantity and quality of game releases on its platform and had not yet hit the saturation point.

If a $30 price difference can even the playing field between the definitive leader and a distant second place, what will a $100 price difference do? What will happen if Microsoft drops the price of the Xbox360 by an additional $50 and Sony is unable to match them?



If the PS3 and Xbox 360 were at the same price point, it would be a much different ballgame today. Regardless to Sonys recent arrogance and rather major fuckups ( rootkit, batteries, etc... ), in the end, most consumers just wouldnt care.

Now... 100$. Consumers care about that. Alot.

[GunnyMo]

lol Serapth if I'd quoted that this would turn into another "EvAv hates Sony" thread. I was trying to keep it on the level.

[Serapth]

lol Serapth if I'd quoted that this would turn into another "EvAv hates Sony" thread. I was trying to keep it on the level.


I dont really see how, the guy is a Sony fan, and of all the articles ive ever read, this one is about as unbiased as they come.


... that said, I know what you mean.

[Schnoogs]

1) Make PS3s

2) ????

3) Outsell Wii and 360

That's a good start at a path

[Captain Awesome]

1) Make PS3s

2) ????

3) Outsell Wii and 360

That's a good start at a path


Actually, that's what their problem was from the start. They we're thinking this exact same thing.

[Siraris]

Maybe Sony priced it at $600 so that they could induce an early price drop furor in the US. They sell it at $600, they sit on shelves for a month or two, they bring out some great games in March, drop the price $50 or $100 and there's an absolute fury.

It's a possibility, who knows? It would be an unbelievable feat.

[RandomViolence]

Maybe Sony priced it at $600 so that they could induce an early price drop furor in the US. They sell it at $600, they sit on shelves for a month or two, they bring out some great games in March, drop the price $50 or $100 and there's an absolute fury.

It's a possibility, who knows? It would be an unbelievable feat.

If they made the 20 gig system $400, given Lair, Motorstorm, and Heavenly Sword, and eventually White Knight I'd seriously consider picking one up. I care nothing for PSP connectivity, but that's getting closer to reasonable.

[Phades]

Maybe Sony priced it at $600 so that they could induce an early price drop furor in the US. They sell it at $600, they sit on shelves for a month or two, they bring out some great games in March, drop the price $50 or $100 and there's an absolute fury.

It's a possibility, who knows? It would be an unbelievable feat.

It sounds silly on the surface, but considering that's the price in Japan I don't think that's too far fetched. The problem though would be perception. When the price drops on a product that's only a few months old it sends a very different message than if it it had been out for a while. People will likely think either a) The PS3 is tanking and Sony is getting desperate or b) It was priced too high in the first place to take advantage of early adopters. The other result may not be seen until the next generation when the PS4 comes out and those same early adopters are wary of buying it right off and prefer to wait a bit in case Sony once again does an early price drop.

[Siraris]

It sounds silly on the surface, but considering that's the price in Japan I don't think that's too far fetched. The problem though would be perception. When the price drops on a product that's only a few months old it sends a very different message than if it it had been out for a while. People will likely think either a) The PS3 is tanking and Sony is getting desperate or b) It was priced too high in the first place to take advantage of early adopters. The other result may not be seen until the next generation when the PS4 comes out and those same early adopters are wary of buying it right off and prefer to wait a bit in case Sony once again does an early price drop.

All are legitimate statements, but I think when it comes down to it, they need to sell PS3's for games and to make money. I have always felt that Sony rushed the PS3 out just to have it on the market, and it should have come out this Spring or even next fall. Hopefully this is the case, and they have some big plans to swing the market back in their direction.

[Deadend]

Wow, those are some big numbers to sell without that many games coming up. But if any company can do the hype machine, it's Sony. Not sure if the PS3 SHOULD be #1, as I think the 360 is really the best system right now. The Wii is cute and all, but I would see it sitting in the corner next to Guitar Hero only to be busted out when there are some people over, while the 360 is always up for some action.

Yeah, good article and sets some high hoops for Sony to jump.

[BlackPete]

Maybe Sony priced it at $600 so that they could induce an early price drop furor in the US. They sell it at $600, they sit on shelves for a month or two, they bring out some great games in March, drop the price $50 or $100 and there's an absolute fury.

It's a possibility, who knows? It would be an unbelievable feat.

Problem is that they're already taking over $200 loss on each unit sold, so they need a minimum of 4 games attach rate to break even at this point. (I'm actually being generous)

If they drop the price, then the attach rate would need to be even higher for them to break even, much less make a profit.

Considering that most people buy maybe 10 games maximum for a platform, that's not much of a profit margin for the near future. Maybe in 5 years when they actually start making a profit on each unit sold.

So.. Don't expect a price drop anytime soon. :(

[Phades]

Problem is that they're already taking over $200 loss on each unit sold, so they need a minimum of 4 games attach rate to break even at this point. (I'm actually being generous)

If they drop the price, then the attach rate would need to be even higher for them to break even, much less make a profit.

Considering that most people buy maybe 10 games maximum for a platform, that's not much of a profit margin for the near future. Maybe in 5 years when they actually start making a profit on each unit sold.

So.. Don't expect a price drop anytime soon. :(

Well, the whole profit thing on a console is pretty complex. They need to build the user base so the system takes off. This helps drive down prices on the system itself so they can charge less and hopefully eventually make a profit. For example, they're likely making money on every PS2 now. Sure, if the early adopters only buy a couple games over the course of the console's lifetime Sony won't make back their money on that person. But if you consider that's an average, it may work out. If Sony makes money off of everything that later adopters purchase but they only buy a game or two, they're fine. It brings down the overall attach rate, but Sony has still made money. Those early adopters are more likely to be the ones who buy 20-30+ games in which case once again, Sony is fine.

When you add in the fact that the PS3 is also a Blu-Ray player and Sony will make money on those movies also, it doesn't look too bad as far as the initial loss goes. They just need to be successful in getting that base going and not letting sales sputter out before they can turn a profit.

[Deadend]

Sony needs a slightly lower attach rate, as they get a larger cut per game sold. As they hit companies up 2 times, once for PS3 and once for Blu-ray.

Really, what it comes down to, to make the PS3 good... games, lots and lots of games. That is pretty much it, make lots of good games, and your system will probably sell.

[Siraris]

Problem is that they're already taking over $200 loss on each unit sold, so they need a minimum of 4 games attach rate to break even at this point. (I'm actually being generous)

If they drop the price, then the attach rate would need to be even higher for them to break even, much less make a profit.

Considering that most people buy maybe 10 games maximum for a platform, that's not much of a profit margin for the near future. Maybe in 5 years when they actually start making a profit on each unit sold.

So.. Don't expect a price drop anytime soon. :(

You don't know exactly how much they are losing per console, or how much it's being offset by other things such as Blu-Ray. On top of that, it's necessary for them to take a loss to get more consoles out there to eventually turn a profit.

At the end of the day, Sony has planned for all this. As arrogant as they can be, they aren't stupid, and they have planned for this scenario, as it was either sell tons of systems or don't sell tons of systems. It's not like they have 20 different things to plan for.

On top of that, Stringer said that they would break even by the end of the year, which is actually along the lines of what an analyst firms report said a few months back (I actually have the PDF). Augment the fact that Blu-Ray is selling better than HD-DVD right now, and receiving a lot more support, that could mean Sony could afford to take a loss.

At the end of the day, my friend put it the best: "Sony isn't stupid, if they aren't selling, they will lower the price or do what they have to do to sell systems."

[Jack B]

"Sony isn't stupid, if they aren't selling, they will lower the price or do what they have to do to sell systems."

Here are a few companies, that also "weren't stupid" at one point. Lotus, Word Perfect, Ashton Tate, Worldcom, Enron, Osborne, Digital Research, Wang, and others like them.

Anyway, I'm not saying Sony is stupid, but at the end of the day, it's a lot more complicated, than just lowering the price to sell more widgets. See the companies above. There are hundreds more examples of companies who've reached an inflection point and met their Waterloo.

[IrishWhiskey]

Here are a few companies, that also "weren't stupid" at one point. Lotus, Word Perfect, Ashton Tate, Worldcom, Enron, Osborne, Digital Research, Wang, and others like them.
This is legitimate point, however Sony worldwide is a more diverse company than just their PS3 department and even if the system fails in the sense of dropping to third place, it could still end up pushing BluRay, Cell processors and HDTVs and making eventually a profit.


Also, Wang. He he.

[Siraris]

Here are a few companies, that also "weren't stupid" at one point. Lotus, Word Perfect, Ashton Tate, Worldcom, Enron, Osborne, Digital Research, Wang, and others like them.

Anyway, I'm not saying Sony is stupid, but at the end of the day, it's a lot more complicated, than just lowering the price to sell more widgets. See the companies above. There are hundreds more examples of companies who've reached an inflection point and met their Waterloo.

I'm sorry but that's an asinine comment. ALL companies weren't stupid at some time or another, why not list every company in existence?

[GunnyMo]

Also, Wang. He he.

damn you! beat me to it.

You said "wang" hehe :D

[Loganrapp]

I think the PS3 will get by, but becoming #1? Not this cycle.

Well, another problem in determining all this is that really - these cycles don't happen all at once. First 360, then Wii and PS3 came along later.

I don't think that comparing PS3 to 360 is really what should be done; it should simply be, "How is Sony faring on the market?" Are they making money? Are they losing money? Are they going to make money? How much? Is their stock going up?

And obviously the same is applied to Microsoft. If they're both making money, they're both going to stay in the market. The one who makes more money than the other will be able to get more exclusive deals and do more the next go-around to attract developers that aren't exclusive to a competing company.

[mister_slim]

Nice article. Well written, no blinders. Hopefully ThreeSpeech can continue to post similar stuff and maybe develop as an actual channel of information.

[Jack B]

I'm sorry but that's an asinine comment. ALL companies weren't stupid at some time or another, why not list every company in existence?

I can't agree. Why is my statement asinine?

You claim "Sony isn't stupid..". How can anyone say they know if they are stupid or not? I didn't say they were or weren't, so how am I wrong or being asinine? You claimed to know for sure they "weren't stupid". That comment is open for debate. Mine is not.

I gave examples of companies who "weren't stupid", but eventually "became stupid" and you call my comment asinine.

A simple, "well, true we don't know for sure if they are being stupid or not, but my guess is Sony knows what they are doing..." would have sufficed.

[Jack B]

I'm sorry but that's an asinine comment. ALL companies weren't stupid at some time or another, why not list every company in existence?

You do know, that those companies all made disastrous mistakes at one point in their existance. That's one thing they have in common. I'm challenging your crystal ball, that Sony couldn't possibly be making a stupid mistake.

They've certainly made a ton of stupid mistakes lately and those companies did too. I challenge your insider knowledge.

[KingGorilla]

Do not read into this that it is indeed the path of truth and honesty, however It appears to be the Path Less Traveled:
Bramble covered, crooked, dark, and trecherous.

[Siraris]

You do know, that those companies all made disastrous mistakes at one point in their existance. That's one thing they have in common. I'm challenging your crystal ball, that Sony couldn't possibly be making a stupid mistake.

They've certainly made a ton of stupid mistakes lately and those companies did too. I challenge your insider knowledge.

I don't know if Sony is stupid or not when it comes to their business decisions, all I was saying was that they aren't stupid enough to not know that at $600, their console could either sell really well (because it's Playstation) or not sell well (because it's $600 and there are no games right now). That's all I was saying.

If you want to bring up companies like Enron, who knew they were breaking uncountable laws, or Lotus, who just made bad business decisions and didn't keep up with the market, that's fine, but NO company is stupid enough to not realize that their product could either sell or not sell and have one or more plans for both scenarios.

[Jack B]

I don't know if Sony is stupid or not when it comes to their business decisions, all I was saying was that they aren't stupid enough to not know that at $600, their console could either sell really well (because it's Playstation) or not sell well (because it's $600 and there are no games right now). That's all I was saying.

If you want to bring up companies like Enron, who knew they were breaking uncountable laws, or Lotus, who just made bad business decisions and didn't keep up with the market, that's fine, but NO company is stupid enough to not realize that their product could either sell or not sell and have one or more plans for both scenarios.

I'd agree, that all companies have contingency plans, but often those contingency plans are losing plans. That's the plan. We'll cut our losses by doing XY and Z. They'll take a chance and if it fails, they'll get out of the business, sell off a division, do a 20% RIF (reduction in force, ie layoffs) etc. The margin for error is often smaller than many people think.

It doesn't mean Sony would go out of business if they made a (or a few) stupid decsions, but their entertainment division or others could suffer a lot.

Companies make stupid decisions everyday. I think Sony has made some very stupid decisions already. There is no way, they should be in their current position. Being in this position is stupid.

They can still recover, but at this point it's they'll need their brand, fanbase and and a bit of luck to right their ship... I hope it happens, but I can tell you in business, "Hope is not a strategy".

You bought a 360, because you love games. I'll do the same with the PS3, especially if GT5 or Formula 1 have incredible physics.

I prefer the 360, because I enjoy, shooters, sports, racing games and a robust online community. I'm tailor made for Microsoft, but that doesn't mean I wouldn't enjoy a PS3. I absolutely would. You are enjoying your 360, but seem to favor Sony, which is perfectly fine. It's an honest opinion. You're likely more suited to what Sony offers.

I just post my thoughts and predictions like a football fan predicts this years Superbowl Winner. Next year it could be completely different. I'll predict something different, when I see the facts change.

[Majster Wichajster]

The problem with the PS3 is that there aren't any system-sellers on the market. Would you seriously plunk down $600 just for a goddamn FIFA title? We need to wait for the big games like MGS4 or FFXIII or something else that interests you and then Sony's bad start might just become a thing of the past. I think it was a bit like with the Xbox 360 when they released it, except there was also the novelty factor of HD-Gaming (yeah, I know).

Remember when Microsoft did the Blue Dragon bundle in Japan? That is when the Japanese were interested in buying the console because of the software. Sony needs the same thing here - software. Until we see it, the jury is still out.

(Damn, probably a few typos sneaked through, but whatever)

[Exodus]

It's a good year for gaming for us within the next 2 years my friends, first one to win our hearts wins, of course we can love both systems, but it doesn't mean we won't play one more than the other

[bapenguin]

On top of that, Stringer said that they would break even by the end of the year, which is actually along the lines of what an analyst firms report said a few months back (I actually have the PDF). Augment the fact that Blu-Ray is selling better than HD-DVD right now, and receiving a lot more support, that could mean Sony could afford to take a loss.


Blu-Ray only recently outsold HD-DVD for the first time since it's launch. In fact, if it wasn't for the PS3 there would be more HD-DVD players than Blu-Ray players. I would say though you can't claim that every single PS3 will be used to play a Blu-Ray disc, even though that's how the Blu-Ray group is counting it.

Check out this article (http://www.highdefdigest.com/tags/show/Disc_Sales) from CES2007.

[Gorvi]

Blu-Ray only recently outsold HD-DVD for the first time since it's launch. In fact, if it wasn't for the PS3 there would be more HD-DVD players than Blu-Ray players. I would say though you can't claim that every single PS3 will be used to play a Blu-Ray disc, even though that's how the Blu-Ray group is counting it.

Check out this article (http://www.highdefdigest.com/tags/show/Disc_Sales) from CES2007.

True, but if even only 1/3 of PS3's already sold are used as Blu-Ray players, they'll still have a very substatial lead over HD-DVD players. Right now every PS3 sale may be a loss for Sony, but it also builds a potential market for Blu-Ray, which in the end could have a pretty large payout for them. It's an interesting gamble they've made, but if it pans out, they'll be sitting in a pretty enviable position.

[Yeti2005]

Good article. I was surprised how relatively unbiased that article was considering Three Speech is "owned" by Sony. Now that their secret is out I believe they have to be more honest (unbiased) or they'd lose any kind of credibility they have.