PS3 Strategy/Confidence Retrospective

[Cheezdoodles]

I am sure some one will say but PS2 was a major factor in adding adoption of DVD as a format.

But they are just missinformed.

The DVD was unchallenged, there was no real opposition media format that could win. The only thing that determined the DVD player sales where how expensive they where.

There was allready aprox 15 million DVD players sold in the USA by the PS2 launch.

In 2001 the DVD players (standalone players, not including ps2s) sales where reaching 30 million.

In 2002 - 50 million.

In the same time frame, the playstation sales where barely closing in to 10 million.

DVD was allready here, tested, proven and unchallenged.

The reason you didn't see many DVD movies back in 97,98 and 99 was because it takes time to get enough releases and a big enough userbase to justify using up shelfspace. Just like video gaming stores don't throw out all the old generation games and restock them with next-gen games just because a new plattform is out.

 

[avaya]

INVESTMENT BANK Relationships
Here’s a list of the banks which Sony has used over the last decade (1998 – 2007). UBS would also feature heavily on this list but their transactions have been as co-managers so Thomson Financial will not include them.

M&A Advisory | Total Volume (Deals)

Merrill Lynch   $3,324.87mn (6)
Morgan Stanley     $47.27mn (2) 
Credit Suisse      $27.50mn (1) 
Nomura              $9.54mn (3) 
JP Morgan           $3.29mn (1)

Capital Markets Bookrunners | Total Volume (Issues)

Nomura                         $6,596.48mn (22) 
Citi                             $512.27mn  (5) 
Merrill Lynch                  $1,893.86mn  (4) 
Goldman Sachs                  $2,163.97mn  (4) 
Credit Suisse                    $419.58mn  (3)

Source: Thomson Financial Datastream

Sony tend to prefer Merrill and Nomura, research reports from these two banks are likely to be more reliable due to closer links. The best reports would be from Blackstone who are Sony's chief financial advisors since the mid 1980's. However Blackstone will never release such reports to the market.

Sony has completed $379mn of M&A deals in 2007 so far. The main acquisition was the $370mn Famous Music LLC buyout by Sony/ATV Music Publishing - UBS were the target's advisor, Morgan Stanley were Sony's.

RAISING CAPITAL

Equity
Sony raised $3bn from one IPO, the publicised Sony Financial Holdings Inc issue - Nomura and JP Morgan were the bookrunners on the deal. Some of the proceeds would have gone into working capital but I believe the prime motive behind the deal was to create value for the unit. As a separate entity it would not be clouded by Sony Group's operations and would have a higher valuation. Main reason for this is the fact that shareholders and the market expect conglomerates to spin-off more often, diversification is not the mandate of the company.

Debt
Sony have raised no new debt since 2006. They secured a $1.1bn(Y130,000mn) syndicated loan from Sumitomo Mitsui Banking Corp in December 2006, with Bank of Tokyo-Mitsubishi UFJ the agent and Mizuho Corporate Bank Ltd the arranger. The proceeds were for working capital - almost certainly SCEI/Blu-ray related.

The issue was heavily oversubscribed even though Sony's debt ratings (Moody's : A2, S&P : A-, Fitch : BBB+) are skirting close to the junk boundary.

Sony Pictures is still managing a $2.71bn highly leveraged financing package from Credit Suisse. The deal has not yet closed.

Interesting to note that Sony issued $1.94bn of bonds from August 2005 to February 2006. This could simply be an attempt to realign the capital structure of the group but I believe it was for infrastructure and R&D investment related to SCEI and Blu-ray - including the NEC Optiarc controlling stake they acquired. Sony has spent quite a bit of money in recent years! Their investments have been huge, as evidenced by their capital markets transactions.

OUTLOOK

Consensus Estimates
Thomson Financial First Call, predict sales of $78.4bn for FY2008, a 4% improvement over FY2007. Strong profit margin in FY2008 even with additional SCEI costs. Analysts worry about the Yen more than anything though. As the financing currency of choice for the carry trade significant movement by the BoJ will tear the floor out of that house of cards and rapidly appreciate the Yen. With a weak dollar this has potential to cause a lot of damage to Japanese corporations.

Sony's Estimates
Stan Glasgow COO of Sony Electronics America commented this week that the Group is on target to achieve 5% profit margin for FY2008, inline with Sir Howard Stringer's goal. He states that electronics are "ahead of target".

I could post the final research reports from October on the 40GB revision and revised targets but unfortunately they are all embargoed for 30days by Datastream.

I'll conclude by saying that although PS3 seems to be burining a massive whole in the accounts and SCEI continues to underperform, the Group is actually turning itself around. However if some major gambles don't payoff, Blu-ray specifically then the financing they have arranged will come back to bite them in the ass big-time! Not to a loss-maker result, but certainly eroding away that 5% margin that they have worked so well towards.

 

[thatdude90210]

Not sure if this relates to the above post, but Sony is said to be exploring selling part (or more) of the movie division.
NYTimes

 

[Heinrich4]

Sorry all if my post is off topic,but in my opinion ps3 sku 40GB with SOI 65nm(cell,south bridge,RSX etc),MOBO with less size,much less cost overall (in march with ps3 euro reduced each console cost/BOM something like US$150/200 over the old sku 60GB USA/jap with EE+GS+rambus=US$840) etc i think sony could be more agressive with price consumer,US$399 is to high for perception consumer with competitors like x360 US$349 and Wii US$249.

(the focus of this 40GB sku could be more "videogame machine" for gamers than console Blu-ray player + hub multimedia,etc,etc etc ...and price at least same of x360 premium )

 

[Arwin]

Here's another one for my collection on BluRay relevance to gaming, from B3D's very own article on Megatextures in QuakeWars:

Although compressed, each MegaTexture remains fairly large. John Carmack has already admitted that their next game, Rage, using a 2nd generation MegaTexture will require two DVDs. This is a problem for the Xbox 360 if the gameplay can not easily be broken into separate parts. For example, a game like Oblivion would be very hard to make work with two DVDs.

MegaTexture is not perfect however. Firstly, the storage media will prevent using this type of technique in certain games. The Xbox 360 is too important to neglect so games still have to deal with no hard drive and the aging DVD media size. Secondly, this first generation MegaTexture used in ETQW has a couple of artefacts like the zoom problem and being mapped on a 2D grid. Both of these are solved by the new version of the MegaTexture coming in id Tech 5 engine.

 

[Johnny Awesome]

Once again: more storage is prefered, but not necessary.

 

[thatdude90210]

Sorry all if my post is off topic,but in my opinion ps3 sku 40GB with SOI 65nm(cell,south bridge,RSX etc),MOBO with less size,much less cost overall (in march with ps3 euro reduced each console cost/BOM something like US$150/200 over the old sku 60GB USA/jap with EE+GS+rambus=US$840) etc i think sony could be more agressive with price consumer,US$399 is to high for perception consumer with competitors like x360 US$349 and Wii US$249.

Sony says the 40GB is still 90nm. Supposedly, the power reduction is done in other areas of the console.
link

 

[patsu]

Once again: more storage is prefered, but not necessary.

As long as the developers put it to good use (whether to store more game data, or to save development time, or to stream more at the same time), it will be worthwhile.

 

[Acert93]

As long as the developers put it to good use (whether to store more game data, or to save development time, or to stream more at the same time), it will be worthwhile.

To who? If developers filled a 200GB HVD with quality content, would a $10,000 console price tag be worthwhile? I will answer that question with a resounding NO!

From a gaming market perspective I think the goal is meeting the storage desires of as many developers/games as possible while falling within the pricing requirements of the majority consumers. Paying $200 more at retail for 4x as much potential space is steep, especially when 95% of titles aren't visually impacted by the lower cieling of DVD.

Worthwhile is very subjective, but from a market perspective (and not an individual's personal tastes) the affect of additional game storage (or the side effect of manditory HDD) or the availability of HD video content haven't generated the consensus that the tradeoff was worthwhile.

And from the multiplatform developer sector we aren't hearing the same clamourous praise for the additional space as we are from Sony-centric developers. But we do hear them complaining a lot about other issues that appear to have a much higher priority in game development and are more difficult to resolve than optical storage space. Delays and product pricing related to the storage media only complicate the issue of its value.

To reach back into 2005, I didn't like MS's move to remove the standard HDD from a gaming perspective. But from a market perspective it was an excellent move. The HDD hadn't found a killer app on the Xbox in 4 years, at least none generate significant consumer demand and shift game design practices. It also inflated the cost of the minimum price of entry. A standard HDD is superior to memory cards and offers a number of technical advantages. But the cost was high and the impact on games low. It wasn't a major differentiator.

I think there is a valuable lesson in that experience. Interestingly the Wii's "differentiator" avoids the cost issue (the wiimote is relatively cheap) and its presence has a significant impact on games. Any feature that is (a) expensive and (b) perephrial to experiencing and enjoying a majority of games should be carefully rethought.

On paper Blu-ray was a slam dunk homerun if all went well. Availability much earlier than 2006 and cheaper, fast cost reduction, BDR market dominance via the waves of the PS3, a perephrial killer app for the PS3, etc all make for a huge win for Sony. But in a worst case scenario it would inflate the price of the PS3, making it inaccessible to the majority of PlayStation owners, and offer little difference in most early products that would define market status for the generation.

Right now we are seeing the issue leaning distinctly toward the worst case scenario. Ugly format war, delays, inflated prices, Blu-ray movies not generating mass consumer interest as a killer app, and little difference in the end product of games.

At this point in time I am struggling to see how it was worthwhile to Sony or the market.

 

[patsu]

To who? If developers filled a 200GB HVD with quality content, would a $10,000 console price tag be worthwhile? I will answer that question with a resounding NO!

To PS3 owners ultimately. Why so dramatic ? A 40Gb PS3 is $399 today compared to the $349 Xbox 360. Sure there is an even lower cost Xbox 360 for entry level folks, but it has no HDD. There is no need to bring up a fictitious $10,000 console.

 

[PARANOiA]

To PS3 owners ultimately. Why so dramatic ? A 40Gb PS3 is $399 today compared to the $349 Xbox 360. There is no need to bring up a fictitious $10,000 console.

I thought the Arcade 360 was $279? And yes, you have everything you need in the box to play games - including 5 arcade games :smile:

When I first read your post stating the decision was "worthwhile", my immediate question was also, "to who?" Because in retrospect it's taken Sony from 1st place for 2 generations in a row to last place. So... unless the HD war is a clean sweep and DD, HD-DVD and DVD all die and leave BR as the majority format, then it may be worth it for Sony. Otherwise... it's basically a complete washout for Sony - at least, unless they can save the ship from sinking.

 

[patsu]

That's the entry level Xbox (no HDD, but with 256Mb memory card) I mentioned above. It sells to a different audience though. Looking at MS's Xbox site, the main SKU is still the $349 one.

I am sure we can find 360 and PS3 bundles (e.g., 5-7 free Blu-ray movies, free remote) but still as long as the developers make good use of Blu-ray, the PS3 owners will benefit. Whether Sony invest too much initially is not really my concern.

 

[Acert93]

The dramatic contrast was to demonstrate how a "worthwhile" feature doesn't resonate if it makes the device inaccessible or if the advantage is nominal and most consumers are either ambivalent or, worse, unaware of such.

And retrospectively as the thread is titled, the PS3 was $499/$599. And even if "today" it is $399, that is after delays and the inflated launch price that was out of reach of most PS2 consumers' reach... and the competition now offering products at $249 and $279, respectively.

You are looking at this in general from the perspective of a PS3 owner (i.e. it is worthwhile to PS3 owners ultimately); I am looking at it from the perspective of why tens of millions of PS2 owners haven't adopted the new platform in the same way PS1 owners adopted the PS2 platform. Put another way, if Sony sells 40M PS3s...

Patsu can say 40M found PS3s to be a worthwhile investment.
Joshua can say why didn't 80M PS2 owners not find it a worthwhile investment.

If this scenario of 40M units ever played out, if I am a Sony investor I am asking the Joshua-question, not the Patsu-question. As the market leader to design to be the market leader. At this point all we know for certain is the PS3 isn't generating the consumer adoption the PS1-to-PS2 transition did.

We should be asking why.

I cannot disprove or prove the value/worth of a product to an individual and that is far outside the realm of discussion. The industry is vast with a huge array of demographics with various tastes, from general consensus to niche. The best metric we have is consumer desire based on consume adoption.

As for PS3 owners ultimately finding BDR worthwhile, that all depends on if the PS3 lives up to its potential. We have heard a lot about people purchasing a platform based on potential. A features value isn't merely dependant upon whether it offers results in select cases, but if it helps the entire platform meet its fullest potential. Delays and cost of entry impact this directly.

Obviously, to some, the PS3 has already found itself to be worthwhile. You cannot argue individual taste and value. But pulling back to a market perspective the choices Sony made with the PS3 have been found lacking, in one way or another, by consumers.

Which draws us back to: were these design choices worthwhile and of value to the broader market, specifically PS2 owners. But enough of my armchair quarterbacking.

Tell me why the PS3 isn't selling to PS2 owners.

Tell me why/how the PS3 is going to reverse course and drive PS2 owners to be converted into PS3 and not Wii/360 owners.

From my armchair position, the impact of including Blu-ray is a partial answer to the first question and Blu-ray doesn't appear to be in a position to cause the second (and partially remains an obstical of such).

 

[patsu]

The dramatic contrast was to demonstrate how a "worthwhile" feature doesn't resonate if it makes the device inaccessible or if the advantage is nominal and most consumers are either ambivalent or, worse, unaware of such.

The "dramatic contrast" is superfluous because we already have real prices to work with to answer the worthwhile question.

And retrospectively as the thread is titled, the PS3 was $499/$599. And even if "today" it is $399, that is after delays and the inflated launch price that was out of reach of most PS2 consumers' reach... and the competition now offering products at $249 and $279, respectively.

Pricing is only part of the formula. Value is the other part (e.g., Blu-ray still outsell HD-DVD despite a higher player price).

On hindsight, I actually think Sony's software and SDK delay may be a bigger risk than the Blu-ray delay. Even if Blu-ray was ready by early 2006, Sony would not be able to launch with any decent games and SDK anyway (although the price would be lower). They would have a different bomb to defuse.

Today, PS3 is $399 with Blu-ray and I hope they have improved the SDK further with the rumored 2.0 update.

You are looking at this in general from the perspective of a PS3 owner (i.e. it is worthwhile to PS3 owners ultimately); I am looking at it from the perspective of why tens of millions of PS2 owners haven't adopted the new platform in the same way PS1 owners adopted the PS2 platform. Put another way, if Sony sells 40M PS3s...

Patsu can say 40M found PS3s to be a worthwhile investment.
Joshua can say why didn't 80M PS2 owners not find it a worthwhile investment.

It also depends on the overall quality of PS3 games, how far Blu-ray movies penetrate the market (i.e., how many people buy PS3 for Blu-ray), and whatever apps Sony eventually deploys on PS3. As long as Sony continues their momentum, more will come because of the total package.

Some of these people may not even be PS2 gamers.

Which draws us back to: were these design choices worthwhile and of value to the broader market, specifically PS2 owners. But enough of my armchair quarterbacking.

Tell me why the PS3 isn't selling to PS2 owners.

Content and assorted PS3 marketing issues (including pricing). Plus PS2 continues to satisfy existing owners and they may not see a need to switch out. There is even a rumor on a $99 PS2 early next year.

Tell me why/how the PS3 is going to reverse course and drive PS2 owners to be converted into PS3 and not Wii/360 owners.

It really depends on how Sony sees the world (Is it willing to give up PS2 right now ?). I have listed the larger areas above and have a few specific suggestions in my posts 1-2 weeks ago. I don't think it's apt to bring them up again because Sony seems to be on top of it right now (and has its own ideas). They will need to keep up the momentum though.

 

[Shifty Geezer]

To reach back into 2005, I didn't like MS's move to remove the standard HDD from a gaming perspective. But from a market perspective it was an excellent move. The HDD hadn't found a killer app on the Xbox in 4 years, at least none generate significant consumer demand and shift game design practices. It also inflated the cost of the minimum price of entry. A standard HDD is superior to memory cards and offers a number of technical advantages. But the cost was high and the impact on games low. It wasn't a major differentiator.

I agree with much of that post, Joshua, except this bit. Including an HDD would add all of $30 to the XB360 and it's use is far more prominent now than XB because of the sudden growth in download content. You only need look at the uptake of HDD enabled XB360 SKUs to see the primary gamers buying it value the HDD, and MS, due to their price-point positioning of the SKUs, clearly wanted the HDD in there. If we see a note-worthy adoption of HDD-less SKUs where that $30 makes a difference, then I'll concede that it was an okay choice, but at the moment, the retrospective back to the systems' launches, the HDD-less SKU did MS no favours. It hasn't netted them sales, has added an extra bump for developers, and offers a lower income potential due to lack of storage, where including the HDD and attracting owners onto Live! would be beneficial. The choice being made on the outcome of last gen was a little short sighted IMO. XB's HDD wasn't taken advantage of principally because the lead console PS2 didn't have one so developers didn't bother to leverage XB's. Of the XB's exclusives, some couldn't have happened without the HDD, which were the major product differentiation points with PS2. I think the HDD-less SKU was just to get a $300 launch price, but expectations that that would attract custom have been proven false, and the result is a system where they no longer have the option to go HDD only, limiting HDD use to XB like functions and giving developers an unnecessary headache where 90% of the market (PS3 and XB360) has HDDs but developers still have to develop around its absence.

The "dramatic contrast" is superfluous because we already have real prices to work with to answer the worthwhile question.

It was a rhetorical point to highlight the flaw in the premise, that use will always justify price. Developers will make use of it, obviously, and PS3 owners will benefit. But if they had left the BRD out and charged PS3 buyers $200 less, would owners prefer that situation? You have to weigh the advantage of having BRD that PS3 owners will experience with the cost of BRD and the alternative situation - would PS3 owners have been better off overall if Sony had charged less and stuck with DVD? Is/was the benefit of BRD in games worth $200?

 

[patsu]

It was a rhetorical point to highlight the flaw in the premise, that use will always justify price. Developers will make use of it, obviously, and PS3 owners will benefit. But if they had left the BRD out and charged PS3 buyers $200 less, would owners prefer that situation? You have to weigh the advantage of having BRD that PS3 owners will experience with the cost of BRD and the alternative situation - would PS3 owners have been better off overall if Sony had charged less and stuck with DVD? Is/was the benefit of BRD in games worth $200?

Sure but are we saying at this time, without Blu-ray, PS3 will be selling at $199 while PS2 is $149 ? We most likely won't get a $200 saving. If it's PS3 @ US$299, wouldn't that still cannibalize PS2 ?

Perhaps they should have launched at a cheaper price($399/$499 like right now) and it will save them a lot of the negative press and money to recapture the momentum. At this point, it's still too early to judge the impact of Blu-ray (on the movie side and on the game side). There are also other factors in play (e.g., PS2 business, software delay).

So for now, I can only hope developers make good use of Blu-ray.

 

[Shifty Geezer]

Sure but are we saying at this time, without Blu-ray, PS3 will be selling at $199 while PS2 is $149 ? We most likely won't get a $200 saving.

More like $250-300. BRD would cost $200 say, so the launch price would have been single SKU 60 GB $400. The first price drop due to economies would be $100 off that. The next price drop would be perhpas $100, down to $200, when PS2 is $99 in a refactored model (there's rumours of this at the moment - PS2 >> PS2Slim >> PS2Squished!)

Perhaps they should have launched at a cheaper price and it will save them a lot of the negative press (and money to recapture the momentum). At this point, it's still too early to judge the impact of Blu-ray (on the movie side and on the game side).

Well you get no complaints from me there! I'm the poster child for the Wait-and-See Brigade! A 1 year retrospective is kinda silly when Sony's intentions are clearly long-term gains. If we want a consensus on what should Sony have done to be #1 at this point in the life-cycle, yes, no BRD and a cheaper console is the way to go, though they couldn't beat Wii at that price. This is bit like judging the outcome of a middle-distance race from the first lap though. If you looked at Steve Cram at the tail of the pack, you could fairly state 'if he wanted to be in front of the pack, he should have run faster' but that doesn't answer the question of if he could win the race. Clearly Sony weren't planning on being last in the pack, but it's not absolute that from that position now they're doomed to remain at the back. Neither of the rivals have managed to maintain unassailable positions with their headstarts, and besides the goal of Sony is, as ever, profits, which doesn't necessitate being the number one selling console if they feel a smaller used base more willing to spend money is better for them.

 

[Arwin]

To who? If developers filled a 200GB HVD with quality content, would a $10,000 console price tag be worthwhile? I will answer that question with a resounding NO!

But the combination of having a BluRay and a HD standard on a console in a generation that is showing the limitations of the DVD medium in its second year doesn't work well either. So far the HD-less Core isn't selling a lot, so was that worth forcing developers to deal with non-HD SKUs? Sure, this won't bite them in the first year of the console war, but it is something that will become ugly in the second year.

And as for BluRay, I'm still waiting for counterarguments for a lot of my questions on how a 16x increase in RAM (from the PS2->PS3 perspective) is not going to require a significant growth in assets requirements (where you could question if a 5x - taking the 9GB that PS2 DVDs could hold - increase won't even be a limitation). The only solution that Microsoft has for the future is basically to have HD installed games.

In a sense, Microsoft's decision of not requiring HD is similar to Sony's decision to include BluRay. Microsoft is taking the value of HD in the last generation to have the same value this generation (i.e. HD was too much of a burden last generation). Sony thinks that in this generation, the HD is in fact something you can't do without. Sony is taking the benefits of DVD over CD to continue in the same fashion in this generation. Microsoft thinks that this generation you can do without an increase in game distribution media.

From a gaming market perspective I think the goal is meeting the storage desires of as many developers/games as possible while falling within the pricing requirements of the majority consumers. Paying $200 more at retail for 4x as much potential space is steep, especially when 95% of titles aren't visually impacted by the lower cieling of DVD.[/qoute]

As you correct below, this doesn't hold today. Did the price difference matter during the first year? That depends on the importance of sales in that first year in the long term. I've discussed that previously also.

Worthwhile is very subjective, but from a market perspective (and not an individual's personal tastes) the affect of additional game storage (or the side effect of manditory HDD) or the availability of HD video content haven't generated the consensus that the tradeoff was worthwhile.

Microsoft has basically sacrificed the long term for the short term. It is not unlikely that this was essential for them - their strategy was to have a console out there first, make a platform that will see the multiplatform games first, and then be able to compete agressively on price. The longer they can show they did not have to make significant sacrifices, the better it is for them.

And from the multiplatform developer sector we aren't hearing the same clamourous praise for the additional space as we are from Sony-centric developers. But we do hear them complaining a lot about other issues that appear to have a much higher priority in game development and are more difficult to resolve than optical storage space. Delays and product pricing related to the storage media only complicate the issue of its value.

Yes, because at this point in time, that is the priority - getting the game engine running on all platform, transferring existing code bases, and so on. And because they are used to targetting the limitations of DVD as well as content generation being expensive in the early phase of the process, that's all fine. But in the second iteration, I cannot believe the same will hold. I do believe however that PGR4 ran out of space, and their developers were required to shut up about it.

MS's move to remove the standard HDD ... wasn't a major differentiator.

Yet. It also so far had only a small impact on sales, as the HDD version was sold by far the most.

I think there is a valuable lesson in that experience. Interestingly the Wii's "differentiator" avoids the cost issue (the wiimote is relatively cheap) and its presence has a significant impact on games. Any feature that is (a) expensive and (b) perephrial to experiencing and enjoying a majority of games should be carefully rethought.

The wii-mote isn't relatively cheap - the console itself is the important differentiating factor here, plus the fact that engines and assets can be reused from last generation. The wii-mote is the only differentiating factor in all cost aspects, such as R&D costs from developers, hardware stuff, etc. But what the Wii does show is that by cleverly using hardware you can target a different console cycle and audience with a comparatively low-risk investment. And that was very clever and is obviously paying off. The 360 does a similar thing, in a way, and that is paying off so far, and it looks likely that the 360 will do better then last time. Let's not forget though that is partly due to the investment in the brand that was made last gen, not in the least towards developers. There are huge advantages to having Microsoft as a viable player besides Sony.

On paper Blu-ray was a slam dunk homerun if all went well. Availability much earlier than 2006 and cheaper, fast cost reduction, BDR market dominance via the waves of the PS3, a perephrial killer app for the PS3, etc all make for a huge win for Sony. But in a worst case scenario it would inflate the price of the PS3, making it inaccessible to the majority of PlayStation owners, and offer little difference in most early products that would define market status for the generation.

Right now we are seeing the issue leaning distinctly toward the worst case scenario. Ugly format war, delays, inflated prices, Blu-ray movies not generating mass consumer interest as a killer app, and little difference in the end product of games.

But we are also still in the PS3s first year, with the first games clearly starting to show the benefits of BluRay (I will leave a listing to another location, first have to do some chores here hopefully I get round to doing this). Also, with PS2 owners being a lot happier with their consoles than Xbox and GameCube owners for obvious reasons, a huge part of the market is still up for grabs. This has the effect that whatever value the Playstation brand holds among the average consumer, still has to play out.

At this point in time I am struggling to see how it was worthwhile to Sony or the market.

The advantages of BluRay didn't go away though. The question is how long the disadvantages are going to outweigh the advantages. I'm thinking that switch starting to happen right now. No way that the 360 is still around in 10 years time. The Playstation 3 is the only one that might be. The main question in that regard is how successful Microsoft is in shortening console lifespan and at the cost of which market that will be.

 

[patsu]

More like $250-300. BRD would cost $200 say, so the launch price would have been single SKU 60 GB $400. The first price drop due to economies would be $100 off that. The next price drop would be perhpas $100, down to $200, when PS2 is $99 in a refactored model (there's rumours of this at the moment - PS2 >> PS2Slim >> PS2Squished!)

It's unfair to them though. At $399, the competition was only offering 20Gb... so they should just do a 20Gb PS3 at $399 and 60Gb at $499 ($100 off all launch SKUs). Together with the robustness and quietness, the extra Blu-ray playback capability would become a weight on MS rather than on Sony itself. Even assuming the demand remains high, Sony can still control their losses by limiting their supply.

By leaving Blu-ray in, they will also be able to do the gaming industry a service -- draw non-gamers into the scene.

As opposed to right now, even when they are practically giving away Blu-ray for free (compared to $349 Xbox 360), people still think that Blu-ray is a burden to them. That's a perception that they will have to spend $$$ to overcome.

These are all very simplified scenarios, so we can't really take them seriously.

 

[woundingchaney]

But the combination of having a BluRay and a HD standard on a console in a generation that is showing the limitations of the DVD medium in its second year doesn't work well either. So far the HD-less Core isn't selling a lot, so was that worth forcing developers to deal with non-HD SKUs? Sure, this won't bite them in the first year of the console war, but it is something that will become ugly in the second year.


And as for BluRay, I'm still waiting for counterarguments for a lot of my questions on how a 16x increase in RAM (from the PS2->PS3 perspective) is not going to require a significant growth in assets requirements (where you could question if a 5x - taking the 9GB that PS2 DVDs could hold - increase won't even be a limitation). The only solution that Microsoft has for the future is basically to have HD installed games.

The limitations of the medium?? Showing how?? Because games may ship on 2 dvds or because of the rampant reassurance from Sony that we simply must have BD in a console. Do you think the average consumer is going to overly care if a game ships on more than one physical disk?? I dont doubt that many titles may run out of space on a dvd, much like they may run out of funding, much like they have suffered from Sony's architectural choices. Taking a game developed around the existence of BD and comparing the storage usage of that game with DVD9 is nonsensical. In reality there is little to suggest that dvd9 is going to be a limiting factor for games this generation, so far 2 years in and we only have 1 game that uses more than a disk. It sure isnt hampering the quality of Xbox 360 titles.

Assets dont scale in accordance with ram on a 1:1 ratio and compression technologies can remove the amount of space necessary for game aspects (sound for instance). Of course asset requirements are going to go up but so are the requirements to display these given assets. If anything space doesnt seem to be the limiting factor for games, it looks to be time and funding.

I cant help but feel that your primary stance is simply for defense of Sony/BD at all costs. You are making a very blanket assumption that in 2 years 360 games are going to suffer for being constrained to a lower storage medium and then concluding that in 2 years consumers are going to see the presence of BD in a console as a detrimental factor in there purchase.

In a sense, Microsoft's decision of not requiring HD is similar to Sony's decision to include BluRay. Microsoft is taking the value of HD in the last generation to have the same value this generation (i.e. HD was too much of a burden last generation). Sony thinks that in this generation, the HD is in fact something you can't do without. Sony is taking the benefits of DVD over CD to continue in the same fashion in this generation. Microsoft thinks that this generation you can do without an increase in game distribution media.

Perhaps its simply that Sony couldnt do without the presence of a hdd. In cross console comparisons its rather evident that titles need the hdd to install to in Sony's console where no such aspect is available for the 360 version (or apparently needed).

With the tie ratio of the hdd and the 360 I cant see "hdd only" games being an issue for publishers or MS.

As you correct below, this doesn't hold today. Did the price difference matter during the first year? That depends on the importance of sales in that first year in the long term. I've discussed that previously also.

So historically what console that was successful and sold well didnt sell well in its first year. I cant think of a more important factor than first year sales to gauge the acceptance of a console over a generation.

Microsoft has basically sacrificed the long term for the short term. It is not unlikely that this was essential for them - their strategy was to have a console out there first, make a platform that will see the multiplatform games first, and then be able to compete agressively on price. The longer they can show they did not have to make significant sacrifices, the better it is for them.

Im confusted. Are you suggesting that MS cannot continue to sell the 360 5 years from now because of its lack of a hdd and its use of dvd9 media. I cant see from a consumer perspective those issues hampering console sales, particularly with its large library of titles price and online appeal. I simply have a hard time believing that consumers are going to flock to the PS3 or away from the 360 in time because of the presence of BD.

What if in 2 years time HD DVD wins the format war and consumers have no inherent use for BD outside of its presence in the PS3.

Yes, because at this point in time, that is the priority - getting the game engine running on all platform, transferring existing code bases, and so on. And because they are used to targetting the limitations of DVD as well as content generation being expensive in the early phase of the process, that's all fine. But in the second iteration, I cannot believe the same will hold. I do believe however that PGR4 ran out of space, and their developers were required to shut up about it.

So in Sony's second generation game development is going to become drastically easier and asset creation is going to become almost automated?? Yet we also find that games simply cannot be done on dvd and that very obvious quality factors are going to arise to a point of the consumer choosing the PS3 over the 360.

The advantages of BluRay didn't go away though. The question is how long the disadvantages are going to outweigh the advantages. I'm thinking that switch starting to happen right now. No way that the 360 is still around in 10 years time. The Playstation 3 is the only one that might be. The main question in that regard is how successful Microsoft is in shortening console lifespan and at the cost of which market that will be.

So why is it impossible to comprehend why the 360 wont be sold 10 years down the future??