PS3 Strategy/Confidence Retrospective

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Shifty Geezer said:
Or are Sony uniquely positioned as a totally infallible company who only get things wrong when they get too full of themselves?
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Well Sony is first and foremost a hardware company, this is what we were told time and time again in debates on this forum, and this is where they *should* perform alot better than MS.

But that's not even it, that's missing the point.

PS3 had the slam dunk ready and waiting, the open net yawning waiting for the goal to be scored, all they had to do was release a decent console, in 2005, and $300-400. They didn't need anything fancy, they didn't need any grand featureset, hd-media or innovative ideas like Home.

So the fact they made all these mistakes does stand out more. Because they were all so unnecessary, and above and beyond what they needed to do.

At the same time, the tech geeks in all of us have to commend them for pushing forward, for taking the losses, for not taking the easy road. I can't imagine for the life of me, that MS would do anything so bold if they had an iron grip on the market like Sony did.

I think Sony's implementation of the PS3 was just fundamentally flawed, but the idea was good. Maybe arrogance led them to it, or maybe it was internal pressure from other divisions of the company, or even KK himself, who knows.

In the end I really hope Sony does see strong success with the PS3, as we definately need a strong competitor to MS in the market in order to keep things fresh and moving forward.
 
scooby_dooby said:
That's why I say, the entire basis of their strategy, and unltimately the major flaw in it, was born from this over confidence.

I think it's pretty clear, that if sony hadn't have been so over-confident, they would've realized no console would sell at $600, and they would've either:
A) Dropped BR from the console and launch in 05/06
B) Pushed back the launch to Fall 2007 when BR could be included for a reasonable cost.

Instead, they choose the worst route of them all, which was to launch later than the competition, and also at an extreme pricepoint. In restrospect, this was a horrible decision, and was born completely out of their illogical 'faith' that Playstation could sell at an extremely high pricepoint when no other console ever has.
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I don't think its pretty clear at all. Dropping BR was not an option at any point imo and would've made zero sense to do so. You don't launch a console that you want to last ten years with yesterday's storage medium, not to mention sony's designs on the hidef movie market.

Pushing back to the fall 2007 would've been utter stupidity. Your cost structure on bluray would've been hindered, you're not going to achieve economies of scale unless you're actually producing units in mass quantities. Not to mention that numerous third parties might choose to bypass the ps3 altogether reasoning that such a late entry into the console market was doomed to failure. Instead of having the 360 ahead by 7 million units worldwide, the 360 would be ahead by 12 miilion units worlwide. How that could possibly aid sony's cause is beyond me.

Sony chose the only route available to them, launch as soon as possible and tough it out. The high price point was a result of not only just bluray but launching a console with a plethora of standard features and a very high cost structure that simply couldn't be ignored. Also, sony's plan for the ps3 is to sell ps3s while at the same time maintaining a viable and profitable ps2 business. Pricing a ps3 too aggressively could decimate ps2 sales which make them money and increase sales of a console, the ps3, where they lose money.

I don't think anyone at Sony suffered from "illogical" faith or overconfidence. They've attempted from a very early point to differentiate the ps3 from being a games console. The problem becomes how to successfully separate the playstation brand name from its videogame heritage. Sony's entire approach with the ps3 has been to find a marekting strategy that works without having the ps3s cost structure sending them rocketing to the poor house.

I think sony firmly believed and still believes that despite the high price of the ps3, it represents great hardware value for the money, far exceeding the competition. The chief problem is the videogame crowd is used to playing on systems that consist of a PCB sandwiched between two cheap hunks of plastic and calling that a system. To a large extent, sony has thrown their pearl before swine. They're looking to market to the wrong crowd. This crowd isn't going to pay any kind of premium for the build quailty of a unit, something that the AV crowd would pay a premium for. That's just how it is, so sony will have to cost reduce and adjust their sku offerings to find the right mix.
 
TheChefO said:
Fair points, but you didn't respond to the easiest and cheapest option of all which would have only required a crumb of humble pie on Sony's part:

DVD-only games for launch window.
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Did you miss it?

If they went with DVD only, they could have released a DVD only PS3 in November 2006, and then in introducing a BRD PS3 been left unable to take advantage of it for their software. The choice 'was we go with BluRay Disk at 5:1 when looking up form, we reckon he's got a 50:50 chance of coming in, or do we go with DeeVeeDee at 7:5?' Given the odds and chances of their evaluation of the situation, BRD looked a good bet.

It's not a matter of eating humble pie IMO. The choice to stick with BRD wasn't 'we can sell no matter what and we want BRD out there so we'll stick it in and still be on top in a year!' BRD is a long term, potential massive revenue-earning choice. Not including it as standard in PS3 meant potentially seriously impacting BRD install base and lose BRD its major advantage versus HD DVD. If BRD inclusion was only an option in a higher priced SKU, there was serious chance people would opt into not buying the BRD enabled PS3 when it came out, and would also prevent BRD only games - you wouldn't want a situation with both BRD and multiple-DVD game SKUs on shelves. Inventory management would be a real turn-off for stores. As I see it the choice was 'to BRD or not to BRD' and hoping for the returns on the format, Sony chose the latter.

In fact, looking at it rationally from a business perspective, it seems Sony was willing to sacrifice ps3 for BD profits and setting up ps4.
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Indeed, not just BRD profits but profits overall. eg. The decision to include HDD as standard was clearly with one eye on content sales, and the decision to enable Linux was to cultivate Cell development with a hope of big Cell adoption throughout the CE industry. Lots of opportunities being targeted, and it's not surprising if one area, number of sales of the console in the first year (and probably lifetime) was a sacrifice they were willing to make. The whole idea of this sales talk and Sony's decisions has been centred on short-term sales performance, not surprising as it was from the monthly NPD thread, but Sony's goal, like all these companies, is profits rather than sales. Sales is a means to an ends, but not the only path you can take.

Seems to me that Sony studied the markets they were gunning for sensibly and with regard for the competition, which isn't arrogance, as you would expect any successful multinational mega-corporation to do. I mean, they weren't arrogant that BRD would be a success because it was a Sony product. After BetaMax they knew they had to give it a good start, so looked to their console platform to help. I wouldn't be surprised if they were overconfident of the brand name's selling power. I mean, we all thought PS3 would be number one on brand alone until we heard that price! That could be a considered a fault of Sony's that led to losses in MP3 and TV market share too. Charging more for a Sony MP3 player didn't net them more profits as people bought it because it's a Sony, but lost them market as there were cheaper alternatives, or Apple! I don't think that overconfidence led them to not try their hardest though, certainly not in every area. If that affected anything, it ought to be marketing, with the attitude of 'we don't need to bother as everyone knows a a PlayStation is.' I seriously doubt the phrase 'we can sell 5 million units without software' was actually their gameplan! It was an expression of their faith in the brand-name, but that didn't stop them investing time and effort in developing software and services, even if they didn't get everything done on time as everyone would have liked. That's just the norm for big projects though, whether you are confident everything will go to plan or not.
 
scooby_dooby said:
PS3 had the slam dunk ready and waiting, the open net yawning waiting for the goal to be scored, all they had to do was release a decent console, in 2005, and $300-400. They didn't need anything fancy, they didn't need any grand featureset, hd-media or innovative ideas like Home.
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For a slam-dunk console victory I agree wholeheartedly. Another PlayStation, fancy graphics and a mainstream price, launched with PES and Madden exclusives, and..GTA or whatever. In the bag. End of story. But what Sony went for gives them much more potential earnings if it pans out. They have BRD royalties, which ought to eclipse game royalites if it becomes as established as DVD. They have Cell royalties to look forward to if they can get Cell to take of in CE products. They have a big content distribution platform to sell all that media, on both PSN and PC. Lots of a targets, and PS3 was the only viable platform to shoulder them. In that respect the poor thing got lumbered! "Hello PlayStation 3. You are commanded not only to win the console war of your older siblings, but also to establish BRD, and get Cell processors out there and mainstreamed so they get used for every CE device on the planet, and establish the launching point of a single unified content delivery platform. The cost of all those things is very high, so you'll cost a lot, but we expect you to still outsell everyone else in the first year! Even that cheapo Nintendo thing!"

I think Sony's implementation of the PS3 was just fundamentally flawed, but the idea was good. Maybe arrogance led them to it, or maybe it was internal pressure from other divisions of the company, or even KK himself, who knows.
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I expect it's lots of factors. Normally it is. I can only imagine the ordinary Joe Engineers involved though, who have to take whatever management chucks and them, all running around chasing impossible deadlines and reaching for unreachable targets, trying to supply the feedback reports that tell the bosses everything is going swimmingly so they keep their jobs when in fact there's a shed-load of problems and it'd be a miracle if anything is done in time... From my experiences and those of people I know, that's how real companies are run. Attributing all this on any one factor is a gross simplification IMO.
 
fastasleep said:
I don't think its pretty clear at all. Dropping BR was not an option at any point imo and would've made zero sense to do so. You don't launch a console that you want to last ten years with yesterday's storage medium, not to mention sony's designs on the hidef movie market.
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Of course it wasn't an option at that time. For them to launch in 2005 they would've had to make that decision in 2003/2004.

And the ten years crap is PR garbage. Any system with a huge install base, which is makign profit, will last 10 years, this is not some exclusive thing to Sony systems, despite what Sony PR will try and sell you.

And both Sony and MS will release a new console in 5-6 years, so that's your effective lifetime. After the launch of the next gen consoles, they will recieve first party support for maybe a year, and then ports after that.

Pushing back to the fall 2007 would've been utter stupidity. Your cost structure on bluray would've been hindered, you're not going to achieve economies of scale unless you're actually producing units in mass quantities. Not to mention that numerous third parties might choose to bypass the ps3 altogether reasoning that such a late entry into the console market was doomed to failure. Instead of having the 360 ahead by 7 million units worldwide, the 360 would be ahead by 12 miilion units worlwide. How that could possibly aid sony's cause is beyond me.
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How? Well in that scenario Sony would actually have a truly stronger system than 360. This would make the prospect of them outselling 360 in 2008, 2009, 2010 much much higher. As of now, they have nothing to offer your typical gamers.

Are the graphics noticeably better than 360? No.
Does it have a better game library? No.
Is it cheaper? No.
Is there any positive buzz at all? No.

At least if they had delayed launch, they would have a couple of those points going for them.

And I think having 4 million units in the wild is much less important than having a positive buzz and momentum on your side. Sony's biggest mistake was they never built any momentum, and the thing has just been floundering away since launch, this is probably the number one thing you want to avoid when launching a console like this.
 
Shifty Geezer said:
For a slam-dunk console victory I agree wholeheartedly. Another PlayStation, fancy graphics and a mainstream price, launched with PES and Madden exclusives, and..GTA or whatever. In the bag. End of story. But what Sony went for gives them much more potential earnings if it pans out. They have BRD royalties, which ought to eclipse game royalites if it becomes as established as DVD. They have Cell royalties to look forward to if they can get Cell to take of in CE products. They have a big content distribution platform to sell all that media, on both PSN and PC. Lots of a targets, and PS3 was the only viable platform to shoulder them. In that respect the poor thing got lumbered! "Hello PlayStation 3. You are commanded not only to win the console war of your older siblings, but also to establish BRD, and get Cell processors out there and mainstreamed so they get used for every CE device on the planet, and establish the launching point of a single unified content delivery platform. The cost of all those things is very high, so you'll cost a lot, but we expect you to still outsell everyone else in the first year! Even that cheapo Nintendo thing!"
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Yup, it sure did get saddled with alot of baggage, and the unfortunate thing for Sony is none of this seems to be panning out.

- It looks as though BR will never be as well established as DVD. Consumers will continue to shift towards digital distribution, and overall adoption of HD media is just plain slow.

- CELL in CE products seems like a pipedream now. A year after Toshiba was suppsoed to use cell in their TV's, we still haven't seen a thing. If Toshiba's not going to bother using it, who is?
 
Carl B said:
The thing with DVD-only games for the launch window, is that a year down the line it starts to become a non-factor anyway, and two-years down the line the cost increase is nominal all-around. If you're going to have DVD games at launch, have a DVD-only SKU as well; a year later is not the time to introduce that particular SKU. If you're going to have a BD-only strategy in hardware, there's no point in putting games out on DVD. The greatest savings are right at the beginning afterall.

I certainly don't think that Sony was willing to sacrifice the gaming division for the sake of Blu-ray, but the decision was obviously set in stone that PS3 would be used to jumpstart the BD ecosystem. And it goes beyond movie sales. Diode yields/volumes, drive expertise, and disc replication have all received a massive boost due to PS3's incorporation of the technology. PS3 has taken it on the chin due to the move, to an extent Sony was likely not prepared for - and likely would have rethought if they though it would go down like this - but it is what it is. The rationale for Sony putting a BD drive in the PS3 was obvious on several levels; it's just a shame that the unpreparedness of the tech vs when they needed it to be ready ended up stinging them as hard as it did on the BOM.
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It wouldn't take long for them to guage actual demand at retail and get a dvd based system to market quickly afterward to pick up and maintain momentum. By Spring of this year they knew they were in deep doo doo.

Having a $300 dvd based "core" ps3 this summer would have been a major boost. Especially going into the holidays.
 
Shifty Geezer said:
That's just the norm for big projects though, whether you are confident everything will go to plan or not.
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But again, I'm seeing the excuse that "they were aiming for the sky, so it's ok that they screwed up".

My point is, if they were acting to win this generation and push things forward, they would have had more titles on the shelf by now. Their actions say "we want to make money at x, y and z", yet they don't enable these things to be successful by planning for them properly.

I'm all for pushing ahead, as long as it's done right!
 
Shifty Geezer said:
The cost of all those things is very high, so you'll cost a lot...
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If MS were to have included with xb360: a full copy of Windows, a monitor, kb, mouse, MS office, and a printer/copier/fax machine AIO, and said "hey we want to make money in these arenas and further establish our OS/computer agenda" all the while, charging $600 for it and saying things such as "hey, the first 5 million are going to buy it because we make windows", I think most here would call that arrogant with them trying to sell this thing into the games space.

Especially if Sony were still following their formula to success ($300 console on the shelf 1 year before the competition)


I'm not sure why Sony is viewed in such an admirable light when their agenda was just as ridiculous w/BD profits in mind.
 
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fastasleep said:
Also, sony's plan for the ps3 is to sell ps3s while at the same time maintaining a viable and profitable ps2 business. Pricing a ps3 too aggressively could decimate ps2 sales which make them money and increase sales of a console, the ps3, where they lose money.
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I don't think Sony would have had any issues pricing the PS3 at $400 at launch was that a viable option for them. ;) If we look back to PS2 launch vs the original Playstation's existing market position, obviously a ~$200 spread is large enough for differentiation.

TheChefO said:
Having a $300 dvd based "core" ps3 this summer would have been a major boost. Especially going into the holidays.
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In terms of the summer, when the 60GB went to $500, it's hard to know what was going on behind the scenes there. It may be that by that point, a DVD vs BD drive would only have allowed for ~$100 in savings, thus producing a $400 DVD 'core.' But whatever the case, a BD-enabled $400 SKU going into the holidays isn't so terrible.

But this thread is really less about what Sony is doing and has done since launch, and more what conditions and motives led them to the launch they had.
 
Carl B said:
I don't think Sony would have had any issues pricing the PS3 at $400 at launch was that a viable option for them. ;) If we look back to PS2 launch vs the original Playstation's existing market position, obviously a ~$200 spread is large enough for differentiation.



In terms of the summer, when the 60GB went to $500, it's hard to know what was going on behind the scenes there. It may be that by that point, a DVD vs BD drive would only have allowed for ~$100 in savings, thus producing a $400 DVD 'core.' But whatever the case, a BD-enabled $400 SKU going into the holidays isn't so terrible.

But this thread is really less about what Sony is doing and has done since launch, and more what conditions and motives led them to the launch they had.
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You're forgetting other options which wouldn't be required for the value pack:

HDD
HDMI
2 usb
WIFI
Card reader
BC?

I'm sure they could have hit $300 with a DVD based "core" system.
 
Carl B said:
But this thread is really less about what Sony is doing and has done since launch, and more what conditions and motives led them to the launch they had.
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Part of it is pre-launch

They would have had to plan for a dvd based system (plan b) by having the launch window games fit onto dvds instead of BD.
 
TheChefO said:
You're forgetting other options which wouldn't be required for the value pack:

HDD
HDMI
2 usb
WIFI
Card reader

I'm sure they could have hit $300 with a DVD based "core" system.
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Wi-Fi, card reader, 2 usb ports... that collectively probably amounts to $10. The HDMI and the hard drive... well, ok, yes - we'll say $300-350. But to tell you the truth in the long run they're probably better off having gone BD all the way than having put out a contigency SKU with a useful life of about six months vs its BD-equipped counterpart. But I will say that there is merit to the idea in terms of a couple million more consoles sold and early-days dev perception.
 
Mintmaster said:
That's a tangential argument. If PS3 can theoretically launch with KZ2, then XB360 can theoretically launch with Gears and Bioshock.
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Exactly and same goes for any theoretical launch or strategy we are discussing.
The quality titles always need a decent userbase to take advantage of. I was just saying that with option A (one year headstart, no BR) you'd have to adapt your software strategy accordingly.
Maybe PD would have to develop a PS3 version of GT4 alongside the PS2 version.
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Maybe, but besides GT4 (since you believe GT4 HD would be almost as good as GT5), I fail to see how launching early would enable better software wrt 2006 PS3. I'm sure it would be even harder and more costly to develop for. Maybe relative lack of competition would help since the bar would be lower. But I haven't commented on relative success of a theoretical 2005 PS3 w/o BD, as it would probably destroy 360 at the time. The question is whether this would be enough of a success, as there is more than early adapters who are perfectly happy with incremental upgrades.
If MS was Sony I think it could have. If the original XBox didn't have technical superiority it probably wouldn't get off the ground.
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Didn't fly for long though and of course there is ...
When two products don't have much in the way of differentiation, the market leader wins. If XBox was too similar to PS2, what's the point in buying it?
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...Halo
The reasoning is similar in my option A). If PS3 was similar to XB360 and launched at a similar time, what would be the point in buying 360?
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True as I said, but still ignoring the possible long term advantages of BD.
By that reasoning there's no use in aiming for any technical superiority.
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There is no use in trying to maximize technical power ignoring other factors. It's part of an optimization problem which I think you give more weight than it does have.
I think a lot of 360 buyers would have chosen the PS3 instead or would at least switch over to the PS3 as their primary platform if it was visibly superior.
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Two years later, after 360 would have even bigger userbase, PS2 like developer support, and even higher PS3 production costs, I highly doubt that Sony would have a better chance besides in mass market.
As it is, that just isn't the case at all. The few times we do see something clearly better/unique on the PS3 (GT5, LBP) are almost entirely due to developer talent and nothing to do with hardware.
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Carl B said:
they're probably better off having gone BD all the way than having put out a contigency SKU...
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Time will tell ... ;)


So far, things don't look good. Granted they have no games to really draw people in, but price certainly helps that aspect and eventually, those sales WILL equate to available games.

In the meantime, here's to hoping Sony can convince dev's to hang on for the ride.
 
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