Sony's (SNE) strategy has perplexed me for some time. The company has long-time hardware and engineering excellence but it's progressively getting farther and farther away from the customer. Net result: the company is having problems creating products that enough people actually want, given the costs of producing them.
Further, I've been tremendously cynical about the whole "window into the living room" strategy as an explanation for a high price point, where a gaming console is being positioned as a multimedia player. Do gamers really want to pay for multimedia? I'm not so sure.
Anyway, a few things have prompted me to re-assess my thinking. Firstly, it looks like Sony might be willing to scale down and focus, as illustrated by its considering the sale of a part of its animation studio and digital effects company. Companies like Sony usually collect properties like these as trophies, regardless of whether or not they make sense from an ROI perspective. Because vertical integration has always been favored, as well as having a broad, horizontal set of product offerings. So Sony's willingness to reduce its commitment to these ancillary businesses is both very unexpected and extremely encouraging from an investor perspective, at least to me.
Another point I'd like to raise was tabled by my friend Tristan. We have both been watching the console wars unfold for some time, and our thinking has evolved along somewhat different paths. His angle is that Sony's PS3 strategy is all about the Blu-ray player, and that its economic model will ultimately be built around licensing revenue from the studios, not gaming revenue or console sales, as Blu-ray wins the format war against HD-DVD.
My perspective is more that if someone wants to buy a Blu-ray player they'll buy a Blu-ray player, and if Sony wants that Blu-ray player to be the PS3 then they need to seriously revamp their messaging. The pitch I get is that PS3 is a powerful, leading-edge gaming console with killer graphics, and, oh, by the way, it is also a Blu-ray player. This just isn't going to move the metal, as currently weak PS3 sales attest.
Now I'm not disputing the fact that PS3 may well be a cost-effective Blu-ray player right now, but just how many people want this player today? And if, in fact, Blu-ray does turn out to be the dominant nextgen digital video format, is PS3 going to be well-positioned to garner these sales? I'm not that confident.
Though I'm not a marketing guru, the mixed messages Sony is sending towards the PS3 can't be good. It's confusing. And further, if Blu-ray is the winner, won't lower-cost Blu-ray players come to the fore simply because they won't incorporate the components necessary for a high-end gaming console? I'm just not buying this angle. Maybe I'm just too wedded to my bearish view on PS3 as a platform, but I don't think so.
Gaming consoles are sold to gamers. Video players are sold to those who want to watch videos. And until Sony (and Microsoft (MSFT), for that matter) figure this out, there is going to be a lot of shattered dreams and unrealized expectations. And it's just not fair. Especially to those working in the gaming business and doing great stuff.
