Microsoft goes to price war on the console market
The momentum is high for the PlayStation 3. Price reductions brought the console quite close to Xbox 360, the game line-up is constantly improving and the Linux capabilities makes it a versatile platform with many uses. The most important factor however is the ending of the Blu-ray vs. HD DVD format war. The Blu-ray is now de facto disc format for high definition video, which makes the overall offering of the PS3 simply better than the Xbox has. The home AV media and consumers have also recognized the fact that the PlayStation 3 is an excellent video source - many people have bought it just for the video capabilities, not for gaming.
Microsoft and Xbox 360 fans have been bragging with the better game line-up, lower price and that the Blu-ray would be a mistake by Sony for the PlayStation 3. Now that Microsoft has more or less lost the edge on these areas, and Blu-ray is proving to be a valuable addition, they once again go for their war fund. While Sony is mostly operating on the consumer electronics market, Microsoft gains huge revenue streams by selling air, namely Windows licenses, for the PC vendors. They have all the money in the world, and while they have done multi billion losses with the Xbox, they are not afraid to do some more damage for their bank balance in hopes of gaining market share on the console market.
The announced price reductions are significant. The 20GB model prices is slashed down by another €80 and the low-end non-hard drive model is reduced by £40 in the UK market. The console market has often been noted as being a very price sensitive business. It remains to be seen how the consumers respond to these changes. Sony has better overall offering with PlayStation 3 at a higher price point, while Xbox with the new prices goes moves closer to the Wii price range. It is speculated that Sony would not respond to the price reductions, at least not immediately. Their focus seems to be on delivering more value with interesting game bundles, like the GT5 Prologue.
I find it astounding how everyone (especially journalists and bloggers who might be expected to know better) is rushing to declare the PS3 the winner in the console battle… despite the undeniable fact that the Xbox 360 currently has about **3 times** the installed base… a small matter of some **10 million** extra users. (We won’t even discuss the Wii.) Never, ever, in the entire history of gaming, has any console come back against that kind of lead.
In fact, if you’ve been paying attention, you’ll have seen multiple news releases from major game publishers, canceling PS3 projects. With budgets topping $20 million, who in their right mind is going to develop a great exclusive game for an audience of 6 million, when they could be developing for an audience of 18 million?
User stats show quite clearly that only an insignificant minority of consumers buy game consoles to play movies; they buy them to play games. And when it comes to games, Microsoft has a huge and growing lead. The Xbox 360 (for which I am anything but a cheerleader, by the way) has a huge library of games, and an excellent online service that Sony has not even come close to matching.
Yes, Sony ‘won’ the battle for HD disc formats. (We’ve yet to see what that means.) But they **sacrificed** the PS3 to do it, delaying release by a vital year, and then putting an untenable early price on it, while Xbox 360 was happily building its user base. For Sony to make a comeback now would be far from the slam-dunk your story implies… it would be little short of a miracle.
fungo,
Thanks for the great commentary and I definitely need to respond to few of your points made.
The matter of declaring “PlayStation 3 a winner” - Well, I am not saying that PS3 will be a winner, but also do beleive that the market has expanded so much that there will not be a monopoly anymore. There should be enough cake to share for multiple vendors.
Nintendo Wii managed to exapand the market to new areas. Rather than a hardcore gamers machine, the Wii is more like a toy. It appeals to families/parents with smaller children, due to low price point, different gaming experience and a lineup of family games. Reminds me of SNES in the 80’s which had these jump mats and light guns.
Sony had a bold strategy as well - they are trying to expand towards the home AV segment with Blu-ray and overall very good multimedia playback features. You are talking about the blogger & press bias, well they were certainly againts Sony, PS3 and Blu-ray but have started to turn around recently. The overall concept of PS3 with all it’s capabilities is better and has more uses than the Xbox360 has - there is no way around it. But it comes with the higher cost, and the fact that Sony can’t burn money by selling with huge losses. As gaming goes, you are right that “content is king”, and there still a lot of catching up to do in the game lineup, and that is actually a rather complex matter with many variables (markets, development cost, development platform, portability…).
But regarding the statistics what the consoles are bought for, I am pretty sure that things are changing. I follow the home AV field closely, and PS3 seems to be number 1 choice as the hart of every higher end home theater at the moment. Home AV discussion boards are full of PS3 talk, as people are buying them for DVD, Blu-ray and AVC/AC3 HD video playback. The PS3 Blu-ray remote control appears to be selling like pancakes. I know several friends and colleagues who have bought the PS3, and they all bought it for video playback too, not just for games - infact they most likely use it much more for video than games. I will too. However, I have no idea how the gaming industry and home AV industry volumes compare on the global scale.
I appreciate your very well-reasoned rebuttal. However, I think you’re still letting your personal views get in the way of hard market facts.
I agree, the console market won’t be a monopoly. That’s never really happened, at least since the very early days of Atari and NES. But I do expect that the PS3 will play runner-up to the other two competitors for the rest of its life. (I also agree that the Wii is largely creating its own market, which is why I’m talking mainly about PS3 vs Xbox 360.)
Even if the PS3’s recent sales surge holds up longer-term (and I don’t see how it can) it would be a very long while before game publishers could target the PS3 with the same degree of confidence as they can the Xbox 360 or Wii. Content is indeed king, and the way to attract content is with installed user base, not anecdotes about how much some users love their PS3.
I see even less hope for the PS3 in home theater. This audience will place little or no value (perhaps even negative value) on having one device that “has more uses.” For HD movies, there are already better Blu-ray players than the PS3, for less money. Assuming that Blu-ray itself starts to take off (still very uncertain, given its current sub-2% market share), families will have _less_ need for a PS3, since they’ll already have some other Blu-ray player. I have not seen the stats you refer to about PS3 being “number 1 choice” for higher end home theater; but I do recall seeing some that showed PS3 owners have so far bought very few Blu-ray movies, showing they were interested mainly in games.
The fact that “boards are full of PS3 talk” could only be misleading. There are so many boards… I’m sure you can find ones that are “full of 3DO talk.” Moreover, the PS3 appeals most strongly to exactly the type of hard-core gamer that frequents these boards. But the average consumer, the one you really need in order to build market share, is going to look not at the ability to run Linux, nor the option of a cheap hard drive upgrade, but almost exclusively at the selection of games.
My prediction (here’s where I stick my neck out!) is that by the end of this year, or at latest by early 2009, we’ll start to hear Sony dropping hints about the “PS4,” which will be the “killer console” that will put them back on top. I can’t see that they have any other cards left to play.
It’s going to be fun comparing notes in about twelve months’ time!
Fungo, thanks again for the reply.
However it is not my opinions vs. facts. We both have access to the same facts, but make different conclusions and opinions based on the available information.
Your opinion is against the megatrend of converging technologies. On just about every industry we see digital technologies converging into multi purpose products. Mobile phones are the easiest example, as they now incorporate cameras, GPS receivers, games, and a load personal computing features. Why would the gaming industry be any different?
In fact I think the gaming industry is not fitting anymore. It is more like “digital entertainment indsustry” as gaming has mainstreamed. Microsoft choose the old way and made primarily a gaming device, which is a strange decision as the versatility of Xbox 1 increased it’s popularity a lot, as it could be used as a decent media center at the time.
What is the cheaper & better Blu-ray player? Last review I saw (few months old) in a home AV magazine had PS3 as the clear winner.
In the last PlayStation generations Sony has achieved amazing life cycles. PS1 reached full 10 years and PS2 is stretching to 8-10 years as well. The configuration they have chosen suggests that PS3 designed for a long life cycle as well. The idea of PS4 in 2009 is absurd - what would be gained by releasing a new platform? That would certainly not help the content issue.
My prediction is that Microsoft will launch “Xbox 720″ sooner than Sony would like to see them to. The next Xbox will be a true next-gen product and with converged functionality and strong PC/Windows interoperability. When it comes out, then Sony may be in trouble, if the market reacts positively to the new platform. In the mean time PS3 will slowly catch up the lead Xbox has due to earlier launch.
[…] Games Yesterday, I posted some comments in response to a very interesting item over on BitBurners.com, which stated that “momentum is high for the PlayStation 3.” My contention is that the […]
I agree w/fungo
We are talking about videogame systems, and what I call “fanboys” focus on everything else but that.
Its absurd to say the ps3 is the future when they dont have the games to back such a statement up.
The ps3 has MGS4 to get people excited, but the rest of their exclusives are bad games, or sequels to bad games.
Meanwhile, the 360 is releasing AAA Bombshell after bombshell. And it gets ignored by what I like to call “fanboys” But not by the actual gamers themselves(which sales prove since the 360 outsells the ps3 & Wii combined in software)
Then you take into account the reliablity of xbox live, games being patched quicker, online play in all titles. And its a no brainer which system is better from a gamers standpoint.
Does that even matter anymore?
It does to real gamers, and the software sales and total hardware sales reflect that!
I recently had to choose between 360 and PS3. I ended up buying the PS3 for the following reasons:
1. Blu-ray
2. Gaming in general
3. PS3 Home
4. Free online play
But I’m not the typical gamer, I’m 30 years old, married, wanted a system that the wife and I could watch movies on and I could occasionally play the best games on… like GTA IV and a bunch of other open-world games that are coming out for both consoles. So far I am extremely pleased with the PS3, and as far as I can tell, it keeps getting better. But if you’ve got a 360, it’s a great system too. If anyone’s on the fence, I’d suggest trying out both consoles to see what’s more your style. To suggest that one is better than the other is kind of silly. It depends on the user.