Thursday, July 20, 2006

Forecast - Is Sony or the Playstation brand doomed?

In the run in to the release of the Playstation 3, many articles have been written about the future of Sony. The majority of opinion from gaming and technology websites is that Sony is in strife, or at the least, facing a huge challenge. The factors have been - increasing brand reputation of the Xbox, Nintendo's strong revival and, more importantly, the PS3 itself. Basically, it is combination of the high $600 price tag, the troublesome Cell, the Blu-Ray, and the decreasing amounts of exclusive titles. I am not here to elaborate again on all the specific information. This can be sourced oneself thru the multitudes of blogs, websites, and forums. However, I do want to quickly mention the key factors and how they relate to the forecast for Sony. The analysts all agree that Sony is taking a big gamble on Blu-Ray. The Blu-Ray disc itself has been argued to be inferior or no different to the HD-DVD in many ways. The high costs, the poor yields, the cheaper yet equal alternative HD-DVD, the delays, the expected higher retail prices, the unnecessary 50 gb for games/movies, and the smaller library of releasing movies, are all major hurdles to the success of the Blu-Ray itself. If the Blu-Ray itself fails, many argue that the PS3 therefore will also fail. If one of the reasons why the PS3 is $600 is due to the Blu-Ray player, then should the Blu-Ray fail then it makes the $600 price tag unjustified, turning many gamers away. Even if the PS3 still sells very well, Sony is losing anything from $200-$400 on each console. If the Blu-Ray fails, and Sony is forced to reduce the price of the PS3, then even more hundreds of millions of dollars will be lost no matter how strongly the PS3 sells. The Cell has also been thru its share of headaches. Right from the start there have been many revelations, rumors, insider information, and top technological analyst reports that have all put a dark cloud over the Cell. While there are just as many glowing reports of the Cell, the problem is that there has also been just as many damning reports too. Meanwhile, the Xbox 360's architecture has never seen such a yo-yo of debate or questioning. This wide division of opinion about the Cell has also happened inside IBM, not forgetting Apple's Steve Job either. The whole problem with all this for Sony is that it only discourages games developers from wanting to support the PS3. Again, the PS3 has been reported to be far more costly and more difficult to develop for than the Wii or the Xbox 360. This will also only encourage developers towards supporting the Wii and Xbox360. The amount of previous Playstation exlusives moving towards the Xbox brand is always growing, further hampering the specialness of the PS3. Seemingly, only the very biggest games developers will likely to be able to afford and support the PS3. With the majority of smaller and less wealthier games developers, who are usually the most innovative, throwing their support behind the Xbox360 and the Wii, the PS3 may end up suffering from a lack of titles, which was perhaps the biggest reason why it succeeded with the PS1 and PS2 - the huge library of games. Another huge problem for Sony has been the amount of recent lawsuits and tax evasion penalties, among other things. Sony have reportedly taken out a $700 million loan. Have incurred tax evasion bills of $200 million and $100 million. They have also faced pay-outs for their rumble pack controller feature. All this in itself may or may not be a problem for Sony's overall global assets, but with all the projected PS3 losses that Sony may face, as well as the Cell and Blu-Ray potential losses and lack of consumer interest, the combined effect may bring Sony or the Playstation brand itself to its knees. One of the problems that Sony has is that, as a company, it is spread out into so many industries. Movies, Games, Music, TVs, Audio, Optical Media, DVD players, set-top boxes, Mobile phones, etc etc. It ultimately means that when things turn bad, and the company experiences financial losses, it spells doom for one or more of those arms. Like a domino effect, it can cut thru a company. Causing the company to lay-off thousands of employees, cease production in one or more of those arms, or even send them bankrupt. A company like Nintendo solely deals in Gaming. Despite poor sales of the N64 and Gamecube, Nintendo has always made a profit every year thru its overall Gaming franchizes. Being solely dedicated to ONE industry, it means that a company can excel, innovate, profit, solidify and grow beyond those multi-faceted companies who are weighing into the Gaming Industry as well. MS has already suffered a billion dollars or more of losses from last-generation gaming, and is expected to make losses this generation. The only reason they have been able to absorb all this, is because their other arms (Windows) has such an insurmountable market share of 95%. The $65+ billion dollar MS, which will always maintain that dominance and huge profits thru their OS, will enable them to make a focused investment into the Gaming Industry with the Xbox brand and Live Anywhere. However, there will come a time for MS when they become the next "Sony". They will be extending their arms to incorporate a portable 'xbox', they will incorporate an 'ipod-like' mp3 player, within the next year, and most likely will invest in more industries the more they grow. The portable xbox and the ipod killer will face uphill battles trying to eat into the market share that the Nintendo DS, the Sony PSP, and the Apple Ipod, already have. Further losses are projected for MS before they can even begin to establish a successful brand in those industries. All great empires rise and fall. Sony and MS are two gunslinging giants facing off in a town that's not big enough for the both of them, so to speak. While Nintendo's future seemingly is secure simply because their focus is purely on Gaming. The name Nintendo is in fact synonymous with the whole Video Gaming concept. The bottom line is that the whole Video Games industry is a seasonal thing. Companies come and go all the time. Sony had a wonderful 10 year period of massive sales and increased brand identity. However, the company itself is no better off shape for it all. They have, in fact, fallen quite behind the technological innovations that Nintendo and MS have shown. Sony's E3 2005 to E3 2006 highlighted the perception that Sony is lacking ideas of their own, lacking a genuine love for gaming as anything more than dollar signs. The whole philosophy of Sony with their PS3 has in fact been to differentiate from being a gaming machine to being a supercomputer, a multimedia device. Shame-facedly using the past brand success of the PS3 purely to hype up and convince the world to buy their Blu-Ray product and their HD-TVs in order to drive up their flagging profits. Rumors like the software licensing on games, etc, also shows that Sony's main concern is to stop the financial bleeding that the overall company has been suffering thru piracy etc and re-establish profit-making. Sony has often made mistakes in the past, pushing the wrong media format, or backing the wrong horse, so to speak. They have taken another huge gamble with Blu-Ray and the Cell and the likelihood of success is just as high as the likelihood of failure, compared to other companies in other industries with all their new product ranges. What Sony is attempting now with the Cell/PS3/Blu-Ray combination, is almost like a Poker gambler down to his underwear throwing in the keys to his house and his car for one last desperate attempt at regaining all the money it has lost. In life, as in Poker, the usual outcome at that point is failure. One would be a brave man indeed to actually forecast Sony's or the Playstation's sure-fire doom, considering the past successes and the established global assets. However, a strong argument can be built that such a failure is imminent....and THAT in itself is the most worrying thing for Sony. That there could even BE a nearby doorway to failure in front of them is most disconcerting. If the PS3 does succeed, and maintains a fairly dominant market share, and the Blu-Ray too succeeds, then I as well as many others will stand and applaud Sony's survival abilities. If they should fail, however, I won't necessarily be shedding any tears either. As a consumer, I exercise the privilege to purchase whatever I like or feel offers the best developer support and games experience. While there is always a soft-spot for Nintendo, like everyone else, having grown up on them, I am not a fanboy of any system or any company. In this next-generation, as an objective consumer, there is much about the PS3 that's not to like, to avoid, to see an away turning tide of games development/support for, to see lack of usefulness in Blu-Ray. With the modern world growing more expensive each year to live in, the ever-rising costs and charges for Video Games and Video Game consoles that are pushing the hi-tech envelope sometimes beyond a reasonable point, a case can be made that millions of gamers out there may also exercise their privilege to buy an alternative console. Sony's market share is expected to drop, chipped away at by the increasing brand identity of the Xbox and the innovative Wii, as well as Sony shooting itself in the foot on many fronts. If the PS3 still does take market share lead, it won't be by much at all. I can only forecast a massive failure of the PS3 or a roughly equal market share with the others. There is a chance that the PS3 will dominate as strongly as they have before.....but it would require the Wii to totally fail with their Wii-mote technology, ends up too glitchy with bad response times and too gimmicky, with a lack of 3rd party support, and it would require the Xbox360 to totally drop the ball and experience major problems all of a sudden. Considering that PS3 manufacturing has only just recently begun, and the amount of delays, DOA's, shortage of consoles, and overheating and other problems that the PS3 is likely to experience during their launch window, and the amount of great titles that the Xbox360 will have available over the Holiday season, and the continued surge in anticipation for the Wii, and perhaps some Wii secrets (like Visors etc) to be revealed....the chance of the PS3 ever experiencing its past market share dominance during this cycle of consoles is remote.

6 Comments:

Blogger Zucas said...

Great article. I do believe that if Blu-Ray fails then Sony's PS3 will fail cause then you'll be demanded to lower the price or all together take the Blu-Ray player out of the future makings of consoles which will cost even more money and lose support for lack of confidence. Blu-Ray has to go perfectly for the PS3 to succed. I just don't understand why Sony would put their console's sucess rate in the hands of a new product that isn't mainstream to the public. Just don't understand that.

Well for Sony's sake let's hope everything they states goes as planned or the PS3 will bomb cause of lack of popularity for Blu-Ray and high costs for something that failed. If that happens PS3 will be the GC of next gen. Possibly start to fade like Sega. But it'll take more than one generation to take them out. They can fail this generation and still be in it. Only really MS is in trouble this generation in my eyes. If they fail I don't see them really returning. I mean Nintendo is a gaming only company so they won't go until they lose money and they don't plan on doing that soon. And Sony with such a strong hold on the market would take at least 2 generations. But MS is the only one who can leave this market and for one not lose anything. I just dont' see MS coming back if they endure strong losses and not enough sales. If MS takes a far behind 3rd then I'd say it'll be just Sony and Nintendo again. But hey that's just me.

7/20/2006 12:23:00 PM  
Blogger gg said...

While the Xbox360 can certainly fail again to make an impression in the market share, or bomb out totally, especially in Japan, I'm not sure that this would be reason or cause enough to make MS back out of the gaming industry. With a portable to come, live anywhere, and pc gaming dominated by MS built Windows/Vista, tied into with live anywhere too, and obviously their enormous wealth, I don't see MS chickening out at all. MS, like any big corp, is greedy. They want that market share, they want an arm into the whole gaming industry, and they will probably keep at it for many more years to come.

7/20/2006 12:31:00 PM  
Blogger PS3 Fan said...

If Bluray were to fail(which I thil it won't).All Sony does then is use it as the PS3 media for games.Bring out an external HD-DVD problem solved.Least Sony inc Bluray gives the PS3 the option of make larger games,not suck with dated DVD9(that won't last nex gen life cycle).

7/20/2006 01:06:00 PM  
Blogger gg said...

It's not that easy PS3 Fan, to just "release external HD-DVD drive"....the PS3 and Sony would have major egg on their face, would cause the shareholders to slap Kutaragi across the head, and result in more games developers crossing sides.

In fact, all ps3 games would probably start coming on "crappy" DVD9 again, as that format can handle next-gen gaming for more years.

Or, Sony re-builds and re-ships PS3 to have a blu-ray/hd-dvd player in its drive, not just a blu-ray player. Meaning more losses, but at least the console itself wouldn't be useless then.

7/20/2006 01:10:00 PM  
Blogger gg said...

Why is it "no problem" suddenly if Sony releases an external hd-dvd TO SAVE ITS ASS in that scenario, but its just a "crappy" and stupid MS xbox360 that sells you an external hd-dvd drive???

7/20/2006 01:12:00 PM  
Blogger SUPRAMAN84 said...

I'm not sure if it is doomed yet, but Playstation is under the weather right now.

7/20/2006 02:13:00 PM  

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