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HANDHELD
Anthony Perez
The Fall of Sony: From #1 to (Barely) #2
Tags: Sound Off
August 21,2008 - The PlayStation 3 is an odd animal. On the one hand it has impressive hardware that over time will likely prove to have greater maximum potential than the Xbox 360, but on the other hand, it has a hard time outselling the Xbox 360 versions of multiplatform games. And in a day and age in which Sony and Microsoft own a fairly equal percentage of the market and development costs force publishers into reaching as many consumers as possible, multiplatform releases rule the day. Hell, it’s even infected once PlayStation-first franchises like Grand Theft Auto and Playstation-only stalwarts like Devil May Cry and Final Fantasy.
With the PlayStation 2, Sony had built a fairly powerful system at the time of its release and sold it at a reasonable price that eventually was re-released with an even more affordable and slimmer model. How did it fair by comparison to the Xbox? The PlayStation 2 has sold over 140 million units worldwide as of July 2008. By contrast, the Xbox sold just 24 million units worldwide as of May 2006. To put it simply, Sony massacred Microsoft.

Despite all of the hubbub about the speed with which the Wii is selling, the PS2 was the first mainstream game console. If you knew someone that played games at the time, odds are they did so on the PlayStation 2.

Acclaim's David Perry believes that Sony made a mistake with the PlayStation 3, making a console that costs so much to produce that it has killed its profit potential.
But Sony is cave diving into an unknown cavern, and I’m not sure if there’s a pleasant way out, if there is even one at all.

What’s ironic is that it was Microsoft who trumpeted the strategy with the original Xbox that inspired the strategy of the PlayStation 3. Rather than release slightly worse hardware at a lower price, Sony invested millions into its Cell processor technology and all of the other components that caused the PS3 to retail as high as $599 at one point. Sadly, even with the high price Sony was still selling them at a loss.

During his keynote address at the GC Developer’s Conference in Leipzig, Germany, two days ago, Acclaim boss David Perry uttered these ominous words:

"Because of the cost of making the PlayStation 3 and because they sold it at a loss, Sony basically has pretty much no chance of making money on the PS3, because it's lost more money than they made during the entire peak of the PlayStation 2 - it's not going to happen again for Sony.”

What’s unfortunate for Sony from a business perspective is that it got so caught up in a graphical penis-measuring contest with Microsoft, that it lost sight of the fact that it didn’t need a multi-core, 8 SPE pixel generating doomsday device. That’s not how it won the last console war and it’s why that even in the event they stay on course to take the #2 position behind Nintendo, they will still have lost this generation.

Now it’s reasonable to assume that at least a fair percentage of the 140 million PS2 owners were “light” owners, buying the occasional game here and there, but in this generation have opted for the Wii to fulfill those gaming needs. What Sony did, however, was totally alienate that consumer, and now it’s feeling the pain.

It released a console that was and still is more expensive than the “hardcore gamers” console, the Xbox 360. Meanwhile, Microsoft has done all it can to court those “fringe” gamers, the ones who play often enough to want a little more than what the Wii has to offer and can justify a PS3 or Xbox 360 purchase. It isn’t inconceivable that the Xbox 360 could take their hard earned dollars either, with the strongest online network and simultaneous releases of previously Playstation-only franchises like the aforementioned Grand Theft Auto and Final Fantasy.

The failure of the PlayStation 3 isn’t that it created a great console – because despite my criticisms, Sony did accomplish that – but that it created too great of a console, one that is so technologically advanced that it alienated a following of a massive 140 million PS2 owners. Because of this single move, Sony completely changed the appeal of the PlayStation brand and turned it from what could have been a dominant second place finisher to what will likely be a narrow victory over the Xbox 360. Sony has turned this war into a photo finish – all while losing money in the process.
8/21/08 - 12:48 PM
Joined:
5/16/05
I love how this story got buried on N4G by people who didn't even bother to read it.
8/21/08 - 3:04 PM
Joined:
1/7/08
Hmm, interesting take on Sony's position in the war. I do think there are some positives to what they've done though. I think it's really key for Sony as a whole that they solidified Blu-ray and PS3 did help with that. That will rake in money for them. I do agree but I wonder how many people they'll draw in about 2 years at a low price with that kind of hardware and features like Blu-ray, Home, etc. It could be huge.

Then again, if they never make their money back it would all be for naught huh?
8/21/08 - 4:56 PM
Joined:
12/2/07
I don't think that Sony have failed so much, they haven't even tried to keep the old IP's, they have gotten new once. And thats what I like. And the new once are great, and we have a lot to look forward to. And to put statistics from my friends, 5% of my friends own a PS3 at this time, but around 70% of my friends are going to buy it. Of course only around 50% will buy before next summer, but then later so many more are buying it. And I this will show in general to the sales of the PS3, it will have a big boost in a year or two, something I don't think the X360 will have, and the hype around Wii is as good as dead here in Norway.

The reason why I don't think the X360 to have that big boost in the sales is becuase it dosen't have that a big fanbase. But the PS3 do, people do in general don't care about the X360. It's just not that big outside NA.
8/23/08 - 2:50 AM
Joined:
5/11/05
Even if the PS3 picks up, it costs more to produce, so unless they keep dishing out crazy and exclusive content, there's just no way to profit.
8/23/08 - 5:23 PM
Joined:
12/2/07
Quote:
Originally posted by Danreb V.
Even if the PS3 picks up, it costs more to produce, so unless they keep dishing out crazy and exclusive content, there's just no way to profit.
I guess they won't make that much money this time around, but I don't think they will end up with to much shortfall (No idea if it's the right word).

But they have made a console that can live for many years to come. More and more Dev's are saying that they are ready to try too unlock the power behind the PS3.
8/24/08 - 12:36 AM
Joined:
12/2/07
Yeah 360 w0000000t
8/24/08 - 4:16 PM
Joined:
12/2/07
Quote:
Originally posted by Themilkman418
Yeah 360 w0000000t
You little Lemming!
I kill you!
8/31/08 - 2:55 PM
Joined:
8/27/08
The only way I can see Sony recouping their loss is if they really amp their online exclusives and gameplay. Until that happens, they will be in a war with Microsoft and right now Xbox is killin' them online.
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