...Which brings us to Sony.
Recently, Sony launched the Playstation 3 console.
The launch - to put it mildly - didn't go well. The console itself is buggy; developer support is scarce, with Valve software (the makers of Half-Life and Half-Life 2,) head Gabe Newell going so far as to say Sony should give it up and start over from scratch; there are very few titles currently available for the PS3 itself, and it has compatibility issues with many of the older titles; and a bottleneck in production ensured that quantities of the system available on the street at launch were ridiculous, to say the least.
All that notwithstanding, Sony had an agenda with the specific design of the PS3. See, Sony is one of the companies heading the push for Blu-Ray, and their plan is to put a PS3 into as many homes as possible, thus giving themselves market penetration without selling people multiple products. The idea is, if you buy a PS3, you not only have a next-generation gaming platform, but a Blu-Ray DVD player as well, at a time when the typical Blu-Ray disc player is around $1000.
Sony didn't plan on point five being such a problem for them. The hardware for the PS3 costs them approximately $800 to manufacture for the "basic" model, and nearly $875 for the premium model, and even taking a $300 per console loss, the industry literally reeled at the impact of the base model's $500 price tag.
So did consumers. They looked at the price tag and decided - in huge numbers - "I think I'll buy a Wii." When the PlayStation 2, and the XBOX, were released, their $300 to $350 price tags were seen as staggeringly high, and industry analysts opined at the time that such price tags might prevent widespread adoption of those systems. Thankfully, the prices dropped nearly immediately, and disaster was averted.
Sadly, thus far there is no indication that costs to produce the systems will fall this time; there has been no associated technological breakthrough allowing the systems to be made much more cheaply. And, also sadly, it is a fact that Sony cannot continue to lose money on the systems forever.
There is another flaw, inherent in both the Playstation 3 and the XBOX 360, which has thus far apparently escaped attention. Both systems are not only HDTV "ready," but are also players for their chosen HD disc format, the PS3 for Blu-Ray, and the XBOX 360 for HD-DVD. In this regard, the XBOX 360 has a significant advantage in that their player is an external attachment; I will talk more about what makes it a risk as well in a minute.
The external player gives the XBOX 360 a huge advantage over the PS3 in that HDTV copy protection IS still changing. With a PS3, if the industry settles finally - as seems highly likely - on a content standard that the PS3's hardware cannot support, early adopters, in other words all of their customers to date, will be screwed. With the XBOX 360, on the other hand, the external drive allows for the final product to be upgraded on-the-fly, so that customers won't be out the cost of the whole system, but only out the cost of replacing the player.
That's the part that makes it a risk. Microsoft made a big publicity campaign out of the fact that their system costs less than the PS3; in fact, it does not, because their system as it comes out of the box does not possess the same capabilities as does the PS3. In fact, only the addition of the HD player "accessory" raises it to the same playing field - but it also raises the cost an equivalent amount. The real cost of the XBOX 360 thus becomes equivalent to the cost of the PS3, making the risk of customer refusal equally high. The lucky purchaser of an XBOX 360 might well - and in fact I expect a large percentage of them to - believe that their system ought to work out of the box, and see it as a failing that it requires additional components; even to the extent of refusing to buy the additional components.
See the trap? Microsoft hides the costs, and reduces the risk of obsolescence, by making the player external, but they also raise the risk of failure to achieve market penetration. Sony, with Blu-Ray, on the other hand, guarantees market penetration of each home that buys a PS3 - and guarantees, with the price tag, that there won't be many.
Nintendo has taken a wiser route.
This might be because they are strictly a gaming company; Nintendo doesn't have its fingers in the laundry list of industries that either of its competitors do, and because they haven't forgotten that their system's ultimate purpose is to serve as a game, they might just succeed where the others fail.
The Wii requires no other components to work; it can plug in and go.
It features 100% backwards compatibility with every title ever published by Nintendo, something neither of the competitors have accomplished in this iteration. (The PS3 claims it does, but in fact has problems with hundreds of titles; XBOX 360 has about 30% compatibility "based on popularity of the title.") But that wasn't enough for Nintendo. The Wii can play all the titles from the Sega Genesis and the NEC TurboGrafx-16 as well. Downloads of any game you want are purchased with a points system - $20 gets you 2000 points, and then you use the points to buy games. According to Wii.com, the pricing is as follows:
- NES: 500 pt.
- SNES: 800 pt.
- N64: 1000 pt.
- Genesis: 800 pt.
- TG-16: 600 pt.
It features an innovative controller; direct play capability of the games for the previous system; better graphics, but nothing requiring you to buy a new TV; and best of all, it costs literally half the price of either of the other two systems, at $250.
Now, here's my difficulty with the entire concept behind the Playstation 3.
Sony has literally, according to analysts, put its neck on the chopping block with the PS3. So much of their financial assets are tied up in its success that its failure may literally sink the company.
Which leads me to ask why they hired morons for every level of their management structure.
I'll tell you why I make such a claim.
Sony owns Columbia Records; they own half of BMG; they own Columbia Pictures; they own MGM. Vast chunks of the entertainment industry function as Sony's subsidiaries, to a point where music and movies account for nearly 15% of Sony's total business. (Gaming accounts for 12%.) In fact their list of subsidiaries outside Japan is quite startling.
You'd think with all that media clout, prior to launching, or even seriously developing, their latest and greatest flagship product, they might have gone to the MPAA and said "You chumps sort out this content protection issue, right now."
A conglomerate with Sony's clout coming to the table with an ultimatum would virtually certainly have eliminated debate, allowing Sony to come to the market with a product which virtually guaranteed enormous sales and, therefore, revenue.
This did not happen.
Sony let the HDTV issues pass unnoticed, they let the content protection issues pass unnoticed; they let the notion of a do-it-all system seduce them; they ignored the impact of such a gigantic price tag, and they blew it.
But wait, there's more™!
Not only did they make that laundry list of catastrophic errors, they made the console's development kit quirky and hard to use, and they didn't compensate for the system's gigantic price tag by offering much in the way of peripherals or service. Not only does the system come with NO bundled game titles, but it comes with only a single controller, requiring a $40 purchase before players with families can do more than take turns. In addition to which, before you can even use it, you have to run right out and buy an HDMI cable to hook the system to your HDTV - the PS3 does not ship with one.
Lest I forget, it MUST be a Sony brand cable - despite the fact that the cables are virtually indistinguishable in terms of product quality, use of any brand of cable but Sony's voids your warranty.
Now, imagine a universe in which Sony went bankrupt.
The largest corporate bankruptcy in the history of the world.
It would have staggering impact on markets not only in Japan, but in the U.S. as well. Not to mention its impact on the entertainment industry; imagine if a quarter of the industry were suddenly liquidated, tomorrow.
Sony has staked its - and by the association, the entertainment industry's - survival in its present form on the success of a console which cannot perform as advertised, is perceived by the industry itself as buggy and difficult, contains DRM timebombs that will render early adopters' consoles obsolete if a decision on DRM is ever reached, and most of all, costs so much that almost no-one can afford it.
Instead of supporting it in every way possible, in an effort to stave off disaster, the entertainment industry seems to be trying its damnedest to torpedo it.
I hope when they succeed that they get fired, in boxcar lots. The current generation of executives is staggeringly stupid, and they deserve to reap the rewards of their actions, but I doubt that they personally ever will; they will no doubt go to retirement - or worse, a different boardroom - with golden parachutes worth millions upon millions of dollars.
In the meantime, the only people really getting screwed are the customers.
I'm not one of them, though. Want to know why?
I'm buying Nintendo.
