Basically, I'm struggling to see why Sony are going down this path. As a gamer I'm not going to complain about free online play and a lack of requirements for additional accessories... a system with little additional costs means more money for games. But I'm struggling to see how Sony will make as much profit from the PS3 as the competition. Unless it does a PS2 and trounces everyone else, they could be painting themselves into a corner.
Discuss!
While I agree that some of Sony's moves are confusing coming from the console market leader (i.e. total dominance, a ton of exclusives, and a lot of profits) I think the key to their strategy is they bet the whole house, namely on things like BluRay. They bailed on the DVD Consortium and have a HD optical format that could be very profitable for them. They have the movie studios now to get exclusive content, the only other key is to get it into homes to drown the competition. The perfect delivery platform is the PS3. So the perfect plan is to bail on $20DVD players and $8.88 DVD movies and move the "home theater experience" up a couple notches, cut out the Chinese manufacturers, and milk a premium for a premium experience (with a much more well thought out anti-piracy model). All the time getting larger licensing fees.
But it has been a big gamble. BluRay has been a major source of delays, and now limited units / losses. The original estimate of $900M in losses has nearly doubled to $1.7B in losses -- and that is with ~50% in consoles shipped in said timeframe.
I think Sony has put themselves in a position where they have to execute very well to maintain their 4:1 and 5:1 leads over their competitors. Shipping a year late (even later in the pivitol European and "Other" markets), coming in at an unprecidented price for a mainstream console product, and doing so in a time when multi-platform publishing is becoming very, very common and more reasonable due to the legitimate install base your competitors will have. A lot of this comes down to software (theirs and the competitions), how much are people willing to pay for a console, especially in a market when the also ran (MS) has many of the same games, but is cheaper and the different guy (Wii) could make inroads in your home turf (Japan) and create an atmosphere of, "Wii now... PS3 down the road".
A lot of risks. I am very inclined to believe Sony will execute well. Simple example: They have invested a lot in developers exploiting the PS3. I think MS has done a poor job with 1st parties in regards to having them work directly with the hardware (but MS's strategy is as many high quality games as possible, as soon as possible, to meet critical mass).
Personally, I think Sony could have crushed MS with a much simpler plan this time around. Release in 2005; remove the BluRay drive and go for "par" knowing DEVELOPERS will carry your flag; remove the HDD as standard (huge money pit and standard in some ways due to BluRay) but make it a requirement for Online Play; offer Memory Cards and other accessories.
So you take most of the great stuff about the PS3 (Cell; high performant PC GPU and solid tools from NV and OpenGL to facillitate PC interest and porting; Sixaxis; freem online gaming), you remove the headstart of MS and get in ahead of Nintendo (both key; give MS no leverage and Publishers no incentive to support MS and continue the DOMINANT trend of defacto exclusives; undercut the Wii hype), and remove the huge stumbling block of consumer cost (BluRay, HDD) while offering both in "media" editions and/or addons (e.g. online play).
Basically you get a PS3 minus BluRay. You come in price competitive Day 1, prevent a sales lead, and maintain the defacto exclusive status based on the fact you, at even launch dates, are going to outsell the competitor AND will sell to ALL 3 territories, not just 2 like MS.
Some get upset at the lack of BluRay; but the benefit is more people play your console, sooner, and you don't lose nearly $1.7B, have HUGE delays, and have HUGE production issues.
From the perspective of crushing MS's will to compete I think Sony made the wrong gambles. But Sony I think is looking at BluRay being huge for them, so the risk may be worth it. Time will tell. If we are at 2M units in March and less than 4M in June, well, I think Sony has a problem. If they are sitting at 12M units by the end of 2007 CY, then they made the right choice--especially of unit cost and retail price reduction ramps up quickly. I am not sure how persuasive a $450/$550 console will be when the competitor could be at $199/$299 and the other competitor drops to $150. Cost reduction is going to be something to keep an eye on: Split 128bit memory pools with heterogenous memory types, BluRay/Diode cost reduction, HDD cost control are all factors that Sony will have to fight that others won't. They are the king in this area, so we will see the black magic hopefully.
Big risks, possibly huge rewards. Give it to Sony to go the unorthodox route and play with all the houses money. VERY few companies would have had the balls to make moves like this.
