PS3 Strategy/Confidence Retrospective

[Carl B]

I've changed the thread title to something that hopefully provides a better context for discussion, and takes us back a little in terms of the various aspects that have led Sony/PS3 up to this point. I think Shifty was a little emotional when he created the original thread & title.

Anyway I tend to agree (and disagree) with certain aspects of both 'sides' positions. Sony was arrogant/confident, but at the same time they had every technical reason to be. Their fault at the time was in actively choosing to exercise that arrogance in public. As development of the system went on, various hurdles arose that kept them from meeting their original goals, and put them in the position of needing to backpeddle - thus making their previous statements look all the more foolish/arrogant.

It's a PR position Sony put themselves in with their bravado, but ultimately it was development-related issues that took the wind out of their sails.

 

[patsu]

Sure, if you ignore the laundry list of arrogant statements Sony has made over the last two years...

I have already addressed that point above.

And actions speak louder than words anyways. They thought they could sell 6million consoles, at $600, with hardly any exclsuive software? Well, to me that paints a pretty clear picture of where their heads were at.

Sure... is that arrogant ? Apple has to revise their iPhone plans too. I repeat, pricing a new innovative product is very very difficult. Companies pay millions to do it right and they still can't. Sony is not alone here.

 

[Lycan]

Sure, if you ignore the laundry list of arrogant statements Sony has made over the last two years...

And actions speak louder than words anyways. They thought they could sell 6million consoles, at $600, with hardly any exclsuive software? Well, to me that paints a pretty clear picture of where their heads were at.

That's a bad decision. Full stop. You're acting as if you're charging an old ennemy, spitting on his grave, taking it...may I say personnally. Had they succeeded selling them, none would havve brought arrogance, other than some fanboys. Yep, they are not doing that well from a selling point, and I think they committed some mistakes they're paying. But I also think they had to cope with a lot of constraints : A financillay more agressive Microsoft, a technological vision from Kutaragi...
As for the Kutaragi quotes, they're more amusing (childich) than anything, just as every other PR out there, but not a single objective person would take them to prove the WHOLE company is arrogant. Proof : Kutaragi responded to a journalist who brought the ergonomy problem of the PSP : " his is a great piece of architecture, and as such, it shouldn't be criticized"...Ok, but that DIDN'T stop the company (obviously) from adressing the problem.

 

[Carl B]

Sure... is that arrogant ? Apple has to revise their iPhone plans too. I repeat, pricing a new innovative product is very very difficult. Companies pay millions to do it right and they still can't. Sony is not alone here.

Yes, but I would say Apple was arrogant.

That just speaks to that singular example though - the truth is that for what Sony was doing at the time they did it, they essentially had no choice but to price at $600.

For me personally, examples of their arrogance stem from elsewhere, but *not* the price itself. The price is a result of the fact that BD was made a requirement of the console, and development of Blu-ray was running behind schedule (as crystalized by Kutaragi's famous railing against Sony Electronics).

Now, whether the BD inclusion was a mistake or not - that's something that I think can merit a lot of discussion. But so deep into the development of the system, they could they price it cheaper, and nor did it make sense to remove the feature after so much delay, because ironically the very purpose of its inclusion had only increased in importance to the parent company. It's a true rock vs a hard place for them at that point.

 

[scooby_dooby]

I've changed the thread title to something that hopefully provides a better context for discussion, and takes us back a little in terms of the various aspects that have led Sony/PS3 up to this point. I think Shifty was a little emotional when he created the original thread & title.

Anyway I tend to agree (and disagree) with certain aspects of both 'sides' positions. Sony was arrogant/confident, but at the same time they had every technical reason to be. Their fault at the time was in actively choosing to exercise that arrogance in public. As development of the system went on, various hurdles arose that kept them from meeting their original goals, and put them in the position of needing to backpeddle - thus making their previous statements look all the more foolish/arrogant.

It's a PR position Sony put themselves in with their bravado, but ultimately it was development-related issues that took the wind out of their sails.

Well, more than that I think it was a marketing problem.

They certainly had no historical evidence to beleive their console could be successful at a $600 pricepoint, yet they went ahead and launched at that price anyways.

So, while they may have had strong reasons to be optimistic about the success, and power of their new console, they had no logical reason to believe they would be able to be succesful at such a high pricepoint.

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.

 

[patsu]

Yes, but I would say Apple was arrogant.

Okay... Steve Jobs is arrogant but Apple is doing well ;-)
I still can't believe he walked away in the middle of a live interview on TV.

Agree in principle with your other points.

In my mind, I just think it's just sad that few Sony execs have the charisma and EQ to say the right thing to the press (Phil and Howard are not bad. I like their sincerity).

It would also be interesting to see if they can lower the production cost further. And what other revenue stream they can get from PS3 (if at all).

Well, more than that I think it was a marketing problem.

Yes, marketing can be seen as a way to manage complexity. They are related issues.

 

[Carl B]

Well, more than that I think it was a marketing problem.

Very much agreed, but I don't want to go down that path right now (understandably). Suffice to say that press relations were not where Sony would have liked them to be, no doubt.

They certainly had no historical evidence to beleive their console could be successful at a $600 pricepoint, yet they went ahead and launched at that price anyways.

So, while they may have had strong reasons to be optimistic about the success, and power of their new console, they had no logical reason to believe they would be able to be succesful at such a high pricepoint.

No but the truth is, maybe they were worried about how they would perform at that pricepoint? Truth be told a lot of their talk at the time reflected exactly that in my opinion; questions as to whether the price made sense, and answers of essentially: it'll be fine. Because what else could they say if they were with their backs against the wall in terms of the cost? They obviously were not in a position where a price cut was an option, and yet they were clearly cognizant of the public trepidation - shown perfectly by Kutaragi's unilateral move to slash the price pre-launch in Japan, and the economic (and political) blowback within Sony from just that one single territory.

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.

The problem is the corner they had painted themselves into by promising March 06 w/Blu-ray, something I think they did originally hope to meet, but premised on factors they couldn't control (always a mistake). And so after the dev tools alone would have premised a delay to Fall 06, they would have faced considerable embarrassment if in addition they took out the BD, something the press at the time were very much waiting to have happen (like Cell downgrades). And the truth is that again, by that point PS3's role for Blu-ray had only increased in importance rather than decreased, with the entire ecosystem delay earlier in the year. Sony had to make a decision one way or the other, and at that point *any* decision would have been a gamble. So, they made a choice. The problem is that for Sony in the year 2006, there may not have been any "right" choice available to them.

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.

The PS3 and Sony were hit by a perfect storm, partly of their own creation. But, perfect storms happen.

 

[TrungGap]

As Shifty mentioned, MS already has decade of experiences deploying and integrating OS, applications, game APIs and SDKs. The IPs was ported to Xbox 360. Even the HD-DVD layer has its roots on Windows.

And Sony didn't have any experiences in software and console? They had been working with console since the beginning of time. If anything, Sony should have been better at creating a game SDK than MS from their wealth of experiences.

You have to give MS credit that they managed to come together to deliver a total package, that everyone knows where it's going, even if it's not totally there.

A wild guess at what could potentially went wrong in Sony. No one with a commanding vision took the lead and painted a complete picture for everyone to follow. What you get is fragment of leadership in different areas.

It feels like this gen, Sony wasn't taking the leadership role. They just follow along with what everyone else is doing (not saying that's a bad thing). But it shows that Sony doesn't have a strong management/leadership at the helm.

Doesn't have to be incompetent or arrogant to be slow and passive (Why only 2 discrete variables). As I mentioned, complexity could be another reason. Even the best OS players, MS and Apple, have their own fair share of slippage (think "Longhorn" and "Pink").

Eh, that's why there's a backlash against Windows Vista pricing. MS was too sure that people would be willing to pay their demands. Sure, MS tried to spin it by presenting the a new math (just like when Sony announced 40GB PS3 without BC -- $400 PS3 + $129 PS2 is cheaper than $600 60GB PS3), but in no way did they acted like Sony during the launching the PS3. MS got flak for other reasons, but that's for another thread.

 

[-tkf-]

Well, more than that I think it was a marketing problem.

They certainly had no historical evidence to beleive their console could be successful at a $600 pricepoint, yet they went ahead and launched at that price anyways.

So, while they may have had strong reasons to be optimistic about the success, and power of their new console, they had no logical reason to believe they would be able to be succesful at such a high pricepoint.

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 retrospect, this was a horrible decision, and was born completely out of their illogical 'faith' that Playstation could sell at an extremely high price point when no other console ever has.

How many consoles Sony expected to sell at $500 (yes this was the cheaper version that was on sale.. remember?) is pure guess work. I hope they were more intelligent than their actions tend to portray them as. If the console had been cheaper they would have lost more money than needed at that point, they would still not have sold alot because the games (yes GAMES) wasn´t there to support it. They would have out competed "friends" from the Blu-Ray camp. And worst of all, if the lack of "must have" titles would have caused the PS3 to stay on the shelves even though it was priced similar to the 360 it would have been a true PR disaster that would have been incredible hard to fix.

With a lack of blue lasers and a high price point for the BR drive at launch few AAA games i think Sony did the right thing. With quality games backing the PS3 now they can start the fight.

The BR drive is not and was never an option that could be dropped, it´s one of the 3 centerpieces in the PS3. Harddrive, Cell and BR. DVD is NOT enough.

 

[TrungGap]

Is $600 really too much for a console launch? I'm not sure. I'm sure Sony expected the price will go down over time. However if everything comes together at the right time, I'm sure hardcore fans and general masses would be more willing to either put up with the higher price or just wait it out.

If games were available during launch period. If the feature set were complete. If the product visions were concise for different market segments. If they talked about their product rather than xbox 1.5. Then maybe they'll in a different position.

1) What caused software delayed?

2) Why didn't Sony have better online support.

3) Why mgmt sucks?

 

[Crossbar]

Read a comment by a MS executive last fall that he predicted to have sold 15 million consoles by June this year.

Was that overconfidence, was he arrogant or was that just common PR speech?

I would like to see Scooby start a thread on that topic, but I know it will never happen.

Edit: Yes I think the original thread topic was pretty childish.

 

[scooby_dooby]

Read a comment by a MS executive last fall that he predicted to have sold 15 million consoles by June this year.

Was that overconfidence, was he arrogant or was that just common PR speech?

I would like to see Scooby start a thread on that topic, but I know it will never happen.

Edit: Yes I think the original thread topic was pretty childish.

I didn't start this thread, nor did I name it.

Edit - And your comparison is ridiculous.

 

[DuckThor Evil]

DVD is NOT enough.

Yes it's not enough if you need to win a next gen movie format war, for games it's ok. I think Sony would be in much better position if they had reached an agreement with Toshiba to make just one disc format, it would have sped up the adoption rate of HD movies, thus making the cabability to play those movies much more important, now in all honesty the whole thing is a big mess and the war could go on for ages. I'm enjoying my Blu-ray movies and ordered few more yesterday, but it really sucks major a holio to wonder whether this or that movie is actually going to be released on it or not.

Toshiba and the HD-DVD has plenty of power behind them to fight against Sony, PS3 and the whole Blu-ray side, even a realistic chance to win the whole thing. The unified format would have probably ended up to be a better deal for Sony when all things considered. Sonys strategy may still prevail and create nice profits in the end, but in my opinion waging such a risky war in multiple fronts is not the smartest business strategy. On the other hand, if there was only one HD-format MS probably would have also included it in their skus already, atleast in the Elite, but PS3 would still have a small edge due to its possible usage in games also.

 

[TheChefO]

As Shifty mentioned, MS already has decade of experiences deploying and integrating OS, applications, game APIs and SDKs. The IPs was ported to Xbox 360. Even the HD-DVD layer has its roots on Windows.

Of course, and in that light, Sony should have been on this thing since they launched ps2. They heard the many cries from devs on what a pain it was to dev for ps2 and knew they could not afford to repeat that mistake ... or should have known.

arrogant?

... or they could be optimistic. Kutaragi is an engineer at heart. It seems that he simply wants to realize his distributed entertainment platform vision (The same way he wanted to realize the original Playstation vision).

Optimistic is fine. There's absolutely nothing wrong with it, but when they opt to not have a plan b for when things go wrong, that's when optimism turns to arrogance.

Doesn't have to be incompetent or arrogant to be slow and passive (Why only 2 discrete variables). As I mentioned, complexity could be another reason. Even the best OS players, MS and Apple, have their own fair share of slippage (think "Longhorn" and "Pink").

again, this wasn't news to Sony. ps2 was a PITA, and in stark contrast to ps1. They knew it was an issue and should have been all over it like stink on poop.

Sure, if they truly believe in the value they can bring, perhaps they genuinely think that it's worth US$599 ? Apple priced its iPhone at $599 too. Are they arrogant too ? Pricing a new product is a multi-million dollar business. It's not that simple.

When you think you can do something nobody else has done before, that's bold. When you don't enable yourself for success to achieve this goal and still think you'll succeed, that's arrogant.

The BOM cost and price could be estimated early, but the software delay may be the one that pull the rug under their feet.

If lack of (some) software were their only slipup, I'd agree. Problem is these arrogant actions were compounded by statements of arrogance echoing these same slipups not as faults, but as flippantly planned. "Who cares if we have no games!! They'll buy it anyway! Who are we kidding here?!? We're SONY! We make the Playstation!" /Samuel_Jackson //Chappel

Sony also went through a management shakeout. It is unclear how much of the original plan stayed intact (e.g., PSP launched at a very reasonable price).

Indeed, and lately they do seem to be showing signs of coming back to reality. But it doesn't erase the fact that they were brought to this place by their own failed plans.

Not according to the original vision that was demoed.

Again, arrogant?

Historic examples are indicative but may not be always accurate. The rules have changed somewhat this gen. As I said, we shall see.

Indeed. I could be wrong, but history is on my side.

They simply bite off more than they can chew. Everyone can make that mistake. You don't have to be arrogant about it.

Indeed, and they didn't have to be arrogant about it, but every phase of their planning for ps3 points to an arrogant undertone of expected success without the necessary work to enable it.

I also think that you have misunderstood my post. Johnny Awesome mentioned that arrogance disrupted Sony's plans ("Their arrogance was their undoing"). I simply stated that complexity may be the main culprit (In a multi-headed conglomerate amidst management shuffle, there are plenty of room for complexity to creep in, who say it must be arrogance). This is a very different argument from whether Sony is arrogant or not.

Their arrogance/overconfidence is proven at every facet of their planning and execution and reflected again with their own words.

People want to label Sony as "arrogant" because they attach their emotion to the high price, and most importantly, some of the Sony execs mishandled PR when the ex-PR head left).

Not at all, I think price plays a major role, but it is only one piece to a much larger puzzle.

There could be tons of reasons...

Their could be, but when all of them point in one direction, it makes it a moot point looking for directions when the answer is staring you in the face.

 

[TheChefO]

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.

Even if it were just that (bad enough), and they supplied the console with ground breaking games nobody else was doing and a devkit which enabled other devs similar success, then at least the price could be justified over their competition.

Instead they not only did as you said by launching higher than any other successful console in history, they couple this with no software to show any perceived advantage, a limited library overall and a poor dev kit which limited near-future SW success.

 

[Carl B]

3) Why mgmt sucks?

I've got definite thoughts on this, and I think ultimately things would have been better if:

a) Kutaragi had become CEO of the entire group as previously expected

or

b) Stringer had let Kutaragi retire upon taking the CEO position, rather than pleading with him to stay on

A product so important should have been guided by a singular vision either way, but for those critical two years it was a tug of war between priorities.

 

[ArturNOW]

True.

They expected to sell 5 million without software. Either way, it's quite arrogant.

It's not arrogant, but true. Sell it as Blu-Ray player even for 1,000$ at the beginning. I think it would be no problem.

I don't think we should every call them arrogant. Ken as other Japanese are of course proud, hard working and I think they put a lot of effort in anything they do. They are also optimistic, but how can you run business if you are not optimistic and sure you're product is a success.

I doubt Sony was aiming with 600$ product. It's Sony that intoduced new business model in the console market that you sell console with loss. The same thing applies to PS3 even if it the most expensive. If Sony would be arrogand they would have set the price at 900-1000$ because there are so sure no matter the price people would buy it.

Sony postponed PS3 launch not because they were arrogant, but because of Blu-Ray diode production problem and I assume Cell production problem. I think they were aiming with 65nm in 2006 when they started designing PS3. It also raised the price, but Sony quickly adjusted the price when production problems were solved. Of course current situation have a lot to do with price drop.

 

[dobwal]

Sony sold a $600 console because they knew people would buy all they could make at that price, and they kept selling out for many months at that price. Since they started sitting on the shelves, Sony dropped their prices to attract a larger market. That isn't arrogance, it is just smart business.

They couldn't sell all the console they could make at that price they drop the 60Gb to $499.00 in the US in July due to increasing inventory.

Lack of demand show up way before that intial price cut happen as the PS3 was moving in the 80K range for two months and south of 130K since February of this year.

It was arrogance that lead to the $600 console. The PS3 price was dependent on Sony executing perfectly on two new technologies, BluRay and Cell. Perfect execution is something Sony thought they could execute but couldn't.

I don't even have to mention the diode issue.

You do know Sony and Toshiba is about two years behind on their transition to 45nm production. They announce in 2004 that would transition to 45nm in late 2005. They made this announcement with the knowledge that Intel wouldn't start transitioning to 65nm until late 2005. There talking about producing 45nm chips in two years time when not even producing 65nm chips. If this isn't a sign of arrogance then I don't know the definition of the word.

http://www.theregister.co.uk/2004/02/13/sony_pledges_to_move_chips/
http://www.itworld.com/Comp/1099/040212sony/

They made this announcement in the middle of Sony starting its investment into its 65nm facilities. In all likelihood, Sony planned (prior to 2005) for the initial Cells in the PS3 to be at 65nm not at 90nm and that 45nm Cells in PS3 would be a reality today.

 

[Shifty Geezer]

Well someone created this thread for me, but I would certainly have titled it "How arrogant were sony", since I think think they've been humbled by now.

I agree with that. Some of their statements were outright stupid and they deserve any negative consequences of them, but...

I.e. Sony wasn't arrogant, they just had a lack of 'conservatism'!!

...I disagree that absolutely everything about PS3 is spawned of Sony arrogance, which is TheChefO's take. I think that's a criminal simplification of the process of designing and building a console with tools and software. Sony spent billions of dollars in making this thing, including a budget that had to take into consideration the rest of the company's products - they couldn't throw unlimited resources at the project. Does anyone seriously think that such a financial investment was for people sitting around in boardrooms laughing up how easy this console industry thing is and why didn't they get involved earlier, or could there perhaps have been real life people working proper jobs developing hardware, manufacturing systems, development tools, games, and so forth? I think that's disingenuous to all the Sony and other employees involved. It is very, very easy in the IT industry to underestimate demands, scheduling projects and costings that never pan out. Even with buckets of experience. I can't believe that in designing the PS3, the board were saying "let's chuck in every thing we can. It really doesn't matter what we price it at as the idiots will buy it anyway!" If they are in any way half decent business folk, they looked at cost estimates, product estimates, made guesses on what the rival's were up to, and came up with a plan. Maybe that plan was to launch at $600 because they thought the Sony brand could carry it, as some senior comments make out? Maybe instead they planned to launch at $400 but got scuppered by the technology not delivering, and with a year to go realized the thing that they couldn't redesign now was going to cost an arm and leg, at which point they went into a backward PR spin saying it was so great you'd want a second job to land it?

I don't know, and without a Takahashi insight maybe we'll never know, but what I take objection to is the polarized, black and white interpretation. People can dig up arrogant statements from Sony and I'll nod my head and agree 'yep, that was an arrogant thing to say', but that doesn't indicate every action surrounding PS3 was centred on an intrinsic sense of impunity that Sony could do whatever they wanted with PS3 and still come out on top. Hell, if that was really the case, wouldn't they have put in cheap hardware, overcharged, and looked to make a huge profit on the hardware, instead of large losses to try and drive their long term visions?

"Right, this meeting of the PS3 design committee is called to order. Our plan is to milk the chumps for all their worth. Any noteworthy points?"
"They're such suckers for PS3, we could sell an empty cardboard box for $500 and they'd stil buy it!"
"Right. But we also want BluRay in there."
"How's about a BRD player then, with a PS3 label stuck on it?"
"Someone might notice if there's no games."
"Okay, we put in whatever cheap components we can to make something passable as a next-gen games system, sell it at $500, and get BRDs everywhere."
"Champagne all round!"

There were lots of people involved, with lots of decisions, some good and some bad, different perspectives, different ideologies even, and a lot of people working to create the product and services. If anyone thinks Sony's inability to have all the intended software ready from day 1 is because they couldn't be arsed to make it, I can only assume they've never worked on any big, complicated projects. I myself have trouble recalling any project that's run smoothly to deadline and had everything exactly as intended when intended, in my own experiences, experiences of friends, and even just paying attention to the rest of the world (workplace has building work going on, 3 months overdue, but that's the norm for construction).

I'm sure DeanA can step in at some point and tell us how Sony told him to take it easy because people will buy the console whether there's any software for it or not. And I guess Heavenly Sword wasn't ready on Day 1 because everyone at Ninja Theory was spending their time playing Twister as Sony said there wasn't any need to rush. Home would actually have been ready for PS3's launch if it weren't for the fact Sony only put a couple of College undergrads on the job because they didn't think it important to get any worthwhile software for their machine. But then, we all know how lazy them devs are! It's a marvel we ever have any software at all, the way they bum about. And to think they keep trying to pass of this ridiculous idea of 'crunch time'!

 

[scooby_dooby]

Instead they not only did as you said by launching higher than any other successful console in history, they couple this with no software to show any perceived advantage, a limited library overall and a poor dev kit which limited near-future SW success.

Ya, as Carl said in his excellent post, it really was a perfect storm.

Sony could've avoided so much trouble by launching in 2007, at a lower price, with some extra RAM. But as Carl points out, they dug themselves a deep hole at E3 2005, by promising a 2006 release, and that was the beginning of the unraveling.