Tuesday, July 04, 2006

More critical comments about PS3

Again, more critical comments about the PlayStation3. First of all, Game Daily has interviewed Scott A. Steinberg, Vice President of Marketing at SEGA of America. Here´s the relevant part:
BIZ: What is Sega's perspective on the PlayStation 3 pricing? Doesn't $499 and $599 seem like a bit too much?

SS: I think it's within expectations, quite frankly. (...) It's an expensive device, but it's a very powerful device. Their job is to convince the world that Blu-ray has a high utility and delivers on a promise, a value promise, and I'm sure they'll sell out. (...)

BIZ: It's one thing for the hardcore gamer to put down $600, but do you honestly feel that the average, more mainstream PS2 user will do so? Are you concerned that this price may slow the adoption rate?

SS: (...) It's definitely new territory, but again I look at on the arcade side, we're bringing Virtua Fighter 5 from the arcades to the PS3 in a relatively few number of months, and there is going to be very little if any noticeable degradation to the graphics. So, effectively you've got thousands of dollars worth of arcade tech in a machine that's 500 bucks, 600 bucks. So there's a lot of value in that machine.

It's a matter of how Sony can bring that to life with their games, and there are some pretty awesome games coming out. Definitely, the [price] is a concern, but globally the brand is so strong that when you think about the marketplace in Japan, North America and Europe, Sony has been the clear winner, so there's a lot of marketing momentum and sales momentum that they're going to absolutely carry into the PS3. To ignore that and sort of use price—I mean PS2 was $299 for a long, long time, so there's definitely a band of consumers who if they're fired up about a piece of software or multiple pieces of software, they'll pay it. Whether that's after the 5th million or 6th million unit is sold, that's super arguable and they're going to have to lifecycle price the hardware in a way that brings it to the masses, I would think relatively soon, because it is expensive. For a lot of families that's too expensive.
Also, we are starting to hear sceptical comments from analysts. DFC Intelligence has published an article entitled ´Could Sony Go From First to Worst?´ Here´s the rundown:
While it has always been clear that Sony’s dominant market share was destined to decline, there now appears to be the distinct possibility the PlayStation 3 could end up third in market share behind both the Xbox 360 and Nintendo Wii. (...)

Sony’s clear strength is (...) brand strength and current market position. The glaring weakness of the PlayStation 3 is price, especially when compared to the competition. However, it is more than just an issue of whether the PlayStation brand strength can justify a premium price. Of course, Sony would like to point to the hardware horsepower and extra features like Blu-ray. (...)

With the competition having features like Xbox Live and the Nintendo Wii controller, the PS3 may not have that much of an advantage in the elusive “Wow Factor.” That gets to the heart of the biggest concern with the PlayStation 3. Sony has done very little to justify why the system is worth a premium price for consumers that don’t care about raw hardware performance and are not hard-core audio/visual consumers. Unfortunately we believe that represents over 90% of the consumers in the marketplace. (...)

There is always that core group of consumers that will rush out to buy a new PlayStation system no matter what the price. So it would make sense for Sony to gain as much revenue as possible from those consumers before lowering the price. The vast majority of consumers will not be in the market for a new system until holiday 2007 or later. (...)

Right now both the Xbox 360 and Nintendo Wii are looking like much better alternatives than they did a year ago. Core PlayStation franchises like Grand Theft Auto, Final Fantasy, Dragon Quest and others are starting to appear on other systems. In short, we have seen absolutely nothing that would justify a $200 price difference. (...)

In forecasting the market we can say this with confidence: a $600 price point is okay for launch but it will not fly in holiday 2007. If Sony wants to drive unit volume 2007 needs to be not only the year of price cuts, but the year of drastic price cuts. There is going to be a shakeup in the video game industry and even if Sony executes perfectly there could be a new market leader in two years. (...) Sony could easily go from first to worst in the video game market.

So will the PS3 deliver? That´s the big question. Colleagues and friends have asked me more often about the PS3 recently and I hear a lot of resentment from such casual gamers when I tell them about the $500-$600 price tag. Over here in Europe, Blu Ray (or any HD format, for that matter) is nothing people know, let alone talk about.

Yet Blu Ray is crucial to the PS3. As soon as Blu Ray starts to lose ground to HD-DVD (which it still may, since HD-DVD is considerably cheaper to manufacture), the PS3 will die. Blu Ray is the single most expensive component in the console, estimated at $200-$300 in production costs (according to News.com). If the Blu Ray format fails, the PS3´s most expensive component becomes a dud - and the console fails. It´s as simple as that.

Yet even if Blu Ray succeeds to gain market share against HD-DVD, the PS3´s success is not guaranteed. Only few people might want to change from the current DVD standard. And even if they do, buying a Wii and a stand-alone Blu Ray player might turn out cheaper than buying a PS3. However, I don´t want to paint an unnecessarily gloomy picture for Sony. If Blu Ray is a success, the PS3 will probably do very well in the US, at least. The chances of that happening in all three territories are very slim indeed, though.

In Europe, for sure, the PS3 will enter the market as a ´PayStation´. And unless SCE can reduce that price tag significantly (or the Blu Ray miracle actually happens), Sony itself might end up paying a high price.

Source: Game Daily, DFC Intelligence, News.com
Thanks to: Kotaku, Joystiq


Colin said...

i really think the price alone is a huge factor with how the ps3 will do. people just don't have 600 dollars to buy a video game system! and thats not even including games! there has been talk that games for the ps3 might cost 70 or 80 dollars. way too much. even if people ask their parents for it for christmas, they probably won't get it. its too much money. they are really cutting down the number of people who might buy the system.

Anonymous said...

lets not forget that sony=drm nightmare (think rootkit)

GamingMyth said...

Sega was a big name in the days of Genesis. Yet in the generation after, when they brought out the Sega Saturn, they failed because they priced the system too high. This shows that name recognition alone can’t override the problem of an overpriced system.

Anonymous said...

exactly gamingmyth, and the same could be said about nintendo's "all powerful" n64...
nintendo: the biggest name in gaming.
not enough 3rd party support. why? unpopular proprietary media format, ridiculous developments costs, and very difficult to program.
sounds familiar?

-"superfan" tactics.

Anonymous said...

I have a question.

What does this have to do with Wii? I don't read this blog for PS3 news.

Morton-jn said...


If the PS3 doesn't do well and the Wii does then we get more third party support and more games.

Falafelkid said...


What does this have to do with Wii? I don't read this blog for PS3 news.

If you are surprised to read PS3 news here, then you haven´t read this blog. As to why it´s important, Morton already put you right. Thanks, Morton ;)

Moe said...
This comment has been removed by a blog administrator.
Moe said...

I always read your blog Falafelkid, but sometimes i wonder why you ''only'' posting bad news about the Ps3? I mean theres a plenty of good news about the Ps3, but i dont read those news at your blog, its like you have this motto .

''Are you searching after bad news about the ps3, visit falafelkids blog''!

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