Well, there's been no end of hand ringing over Sony's price for the PS3 on the internet. Let's face it, on its own, $600 is a big chunk of change. Sony has stated repeatedly the $600 is a deal for what's in the box, which is true, but the grumbling of the gaming community indicates they would rather not have so much in the box.You all lucked out, I was compiling a list of articles to link to that support my points, but they're all at home, so it'll have to wait until the next rant. They mostly cover why the system is so expensive (blu-ray, cell) and why Sony put them in there. In truly poor style, I'm going to flat out tell you the main argument of my article, which is why Sony had to put both technologies into the PS3 and why they might lose the leadership, but they are still going to do fairly well this round.
The Cell processor was a part of PS3 design for a long time, and the boost Cell will eventually give to Sony is huge. Having one processor design that can be put into almost any device Sony makes is a brilliant idea. No more separate chip designers for each project, designers just need to figure out what type of Cell they need for their device, and the rest is software. The cost savings on manufacturing one set of chips rather than many different ones are incredible. Unfortunately for the PS3, it is the first big device running on Cell, so the production costs for the chips are at their highest. The PS3 is the big demo of Cell's abilities, and if Cell takes off, it means big money for Sony.
Blu-ray is very similar to Cell in that it is a new technology whose success means big bucks for Sony. Anyone who sees a HD movie on an HD screen can see the improvement over the old television standard. The question is, do we need better picture than HD? This is an important question, because the winner of the format war between HD-DVD and Blu-ray may win for a long time. Think about CDs. There have been a number of newer formats put forth to replace CDs, but the problem is, people need a super fancy setup to even hear a difference. Who sits in their audio room and listens to classical music? Not many people. Do we need the extra length on the new music formats when most bands can't even fill one CD with music? People are happy with CDs, and the only growing segment in music is online sales. Video may be facing that in 10 years. If the HD formats let us tell the difference between cheap and fancy silverware in a scene, how much more detail do we need?
Sorry for the rambling, my point is if Sony wins with Blu-ray, they'll be collecting on it for a long long time. If Sony wins this round of video games, it collects for a few years. And those movie royalties will include everyone buying all those great movies they had on DVD on Blu-ray. The sales of re-packaged items is easy money for the studios. (Maybe the reason music label's sales keep dropping is because everyone already owns all the old albums they had on records as CDs, so they don't have to buy so much music)
The PS3 is the front line soldier for both these technologies. That I've seen many places, and everybody seems to think Sony will sell out the initial units. Even at $500-600 there are those into Sony or into having the newest thing that will buy them. But what does that mean? It means Blu-ray wins. The launch titles may be fun, but they won't be great. And what will people do when they tire of the launch games? Buy Blu-ray movies. They paid for it, and even without a fancy-fancy screen, they'll march out and buy the Blu-ray movies. That level of installed base is in the millions. What will HD-DVD have at that point? I should look up how sales are for HD-DVD right now, it would strengthen my point.
With the big installed base, Blu-ray starts to catch on, and prices on drives drop fast. I predict that drops in the cost of the Blu-ray drive could allow Sony to cut the PS3 price by $150-200 in just two years. Right when all those Japanese developers start putting out must have PS3 games that could have been made for the Xbox 360, but the developers know how Xenophobic the Japanese are about Microsoft, so they stick with Sony. Even if Xbox 360 runs away with the US and Europe, PS3 owns Japan. (Wii will not affect sales of Xbox 360 and PS3 much, it sells well in its own private market where it has no competitors.)
Sony is betting on Blu-ray movies and not Games. (Microsoft was smart enough to realize that the games were more important than fitting some version of windows onto the 360.) And it's not a bad bet. Sony seems to think they can trick gamers buy offering them a deal on a movie player. The thing is, not many people are itching for a Blu-ray player right now, so it doesn't matter how good of a deal it is. You can offer someone a million dollar car for $300,000 they still won't buy it. They want the $60,000 car that does 80% of what the million dollar car does and gets you from point A to point B just as well.
Sony's play may actually be more brilliant than anyone realizes. See, Microsoft
makes big bucks on OS and Office software. It loses money on the game division.
Sony has made much of its money the past 10 years on its game division. If Cell
and Blu-ray come through, Sony can bank on money from more of its divisions. It
cannot afford to fight a war of attrition against Microsoft, who has enough money
to never lose. Sony needs to build up its other divisions to even survive in the
game business. It has to use the equity it built up in the Playstation brand to
fix its other parts or face defeat in the video game world.
