Is There Still Hope for Sony?

Because of what I have written about Sony (SNE), I have been accused many times of being a Nintendo (NTDOY.PK) or a Microsoft (MSFT) fanboy. Nothing could be further from the truth. I only report what I see, and what I see is a Sony that has lost its way.

The facts are very, very simple. In the Playstation one generation Sony had massive global domination, nobody came anywhere near it. In the Playstation two generation Sony was hugely dominant again. Nintendo and Microsoft were minnows in comparison. Then we come to the Playstation three (PS3) generation and suddenly the wheels fall off. Sony is running third and it very much looks like it is going to stay that way. Analysts and fanboys continually promise or hope that a revival in fortunes is just around the corner, but it never comes. So what went wrong?

• The cell processor. This was a huge mistake in many ways. Firstly it cost a fortune in development and putting into production, which is money that needs to be recovered. Secondly it delayed getting the PS3 to market, giving away huge competitive advantage. Thirdly, whilst very powerful, it is a very long way from being optimised for the job of running a console. Overall the company would have been better buying an off the shelf generalised processor as it did for previous models and as its competitors did.
• The graphics processor is a lot less powerful than the one in its main competitors machine. This effectively limits what the PS3 can do, no matter what the CPU and memory are doing. Fanboys blame the developers for being lazy and not putting enough work into PS3 games when the reality is that it is the machine itself that is holding the games back.
• BluRay. The Playstation 3 was used as a Trojan horse to get this technology standard accepted by the world. And at this it has succeeded, but at a terrible cost. It forced the price of the PS3 up sufficiently to stifle consumer demand whilst forcing Sony to absorb massive losses. It is strange that Sony nearly bet the company on this at a time when physical delivery of content is in steep decline. A phyrric victory indeed. If this were not enough, difficulties in putting BluRay into production contributed to the delays in getting PS3 to market.
• The complex architecture of the PS3 makes it very difficult to develop content for. A lot more difficult than for its main competitors. This wasn’t helped by Sony releasing development tools that were also greatly weaker than those from its competitors. A double whammy that caused huge problems for games developers worldwide. Many games were delayed because the problems were so great, costing the game developers a fortune and depriving the marketplace of product.
• Sony totally misread the way the market was going. It has clung to its hardcore gamer base and squandered the lead in casual gaming that it had with EyeToy and SingStar. Nintendo has come along with a simpler machine that has massively outsold the Sony PS3 with the simple tactic of providing entertainment that is accessible to a lot more people. With hindsight it looks so obvious, but Sony missed it completely. As a result Nintendo made a fortune and Sony lost a fortune.
• Sony have been stretched for cash. It has made losses. The technology in the PS3 has cost a fortune and it is almost certainly still making a loss on every machine sold. The company has been forced to raise new capital and to sell off bits of the company. So it has little room to manoeuvre. It cannot throw money at the PS3 problem. This whilst its two main competitors are rolling in money which they are both using to reinforce their positions.
• Lack of exclusive content. Both competing machines have a lot more exclusive AAA content. This is a massive USP when the reason for buying these machines is to play content on them. Microsoft have invested heavily into a very impressive catalogue of exclusives and have managed to seduce some former major Sony exclusives into becoming cross platform. This alone has caused an immense shift in competitive advantage.
• Sony has messed up very badly with online. This is a real killer and comes from it being a hardware company whilst Microsoft is a software company. So Microsoft understood the importance of online and invested massively in Live, and that investment is paying it back enormously. So it continues to invest and Live is becoming one of the biggest phenomenons ever in gaming. Giving customers a massive USP whilst generating a lot of revenue for Microsoft. And it is growing with almost unbelievable impetus, both in content and in users. The Sony competitor, Home, is still not released after multiple delays and is now several years behind. It will be nearly impossible for Sony to pull back such a huge lead.
• Sony has huge, world class, divisions in many areas. Telephones, Film making, Portable Music (it invented this) and Console Gaming. Yet these divisions appear not to talk to each other. So a potential huge strength has become a weakness. The film division isn’t used to place all its unique IP on the consoles for instance. And outsiders who are less constrained can enter Sony’s markets and win. Hence the iPhone which could and should have been a Sony product yet instead has come from a company, Apple (AAPL), that just a few years earlier had no stake whatsoever in consumer electronics.

With all that against the company, it is amazing that Sony has sold as many PS3s as it has. The reason it has done so is because of the impetus of the brand and the loyalty of a large section of its user base. The majority of console users have yet to upgrade to this generation, there is still a huge untapped market of non console households and we have yet to reach the $199 sweet spot when the bulk of sales occur.

So there is still hope for Sony, which is what the analysts are grasping for. The problem for Sony now is that the sheer weight of USPs is against them. A gulf that further widened this E3 where Nintendo and Microsoft forged ahead, whilst Sony were distinctly lacklustre.

Disclosure: None

Comments

[Grawlix]

I also think a lot of people are turned off by the form-factor of the PS3 console. It's too big, has a strange and unattractive shape, and it doesn't stack with other components in a home theatre system.

It's triumph of style over function. Sony decided to force the console to "stand out" in people's living rooms, without thinking about whether its customers actually want it to be a feature.

Regards,
%$#@!

[Dontagree]

One has to wonder how sound Nintendo's judgment is considering the graphics are so underpowered they look like crap on a high-def television, which the majority of households will end up having in the very near future. Interactivity only goes so far when you're wondering why the graphics look muddy.

As far as Sony screwing up online, I contest this by saying that they are bringing online gaming to the masses, versus Microsoft, where you have to pay to be a member of an exclusive club. $50 membership only benefits the hardcore online gamer.

I absolutely disagree with this article and it's slant. The fact of the matter is the games are getting better on PS3, and people are no longer porting from 360, which was the major reason why the ports sucked in the first place. This article does not touch on that at all.

In short, you do not have good arguments as to why PS3 should be dead last. If everybody thought like you, the 360 would be near the top in Japan and Europe, where it is struggling. And no, it's not corporate brainwashing that got those people to purchase the PS3 in the first place. I bought mine simply because it offered Bluray technology, as well as the free online service, which you clearly claim is a failure.

[CluelessWonder]

Home video sites have long said that the PS3 was the best Blu-Ray player, as it was subsidized by Sony and it was fully upgradeable via wireless network so as new codecs and features were added, the PS3 could adapt... especially since none of the other Blu-Ray players on the market at the time fully implemented the 2.0 specification. When HD-DVD died, I bought two PS3's for movie watching, not intending to buy any games, although I have picked up 4 or 5 games since then.

I have no idea how much Sony makes from every Blu-Ray license, but other analysts have indicated that in the long run, this could be what makes the PS3 profitible... especially now that HD-DVD is dead.

[dj64]

So how much does Microsoft pay you a month??? Your article is so slanted it verges on being utterly pathetic. I just talk about PS3 and 360 since the author tends to compare PS3 to 360 the most.

First off, the cell requires a new way of programming so if the developer is not willing to put in the time and effort to learn they won't get a quality product. And If it's a crap processor then why is Toshiba using it in thier new line of high powered laptops??? Second, contrary to your article the RSX is not that far behind the 360's graphics chip in processing power (ask any GOOD multiplatform developer since they work on both), but it doesn't need to a goliath because of what the SPEs can be programmed to do. (again ask any GOOD developer)

While I agree the first year for Sony and the PS3 was tuff (due to supply problems, price and game quality) the games are getting better, and the GOOD developers are no longer porting from 360, which was the main reason why the early ports sucked.

Next on to Blu Ray, was it a trojan horse to get the technology into homes??? of course it was...but it paid off. HD-DVD is dead and Sony makes money on every Blu Ray sold. The big thing about Blu-Ray, from a gaming standpoint, is you don't have to worry about compression. Compression causes performance loss and while it may not be completely evident now as games get larger and more complex you will eventually see dvds start to have problems without going to multiple discs.

And I don't know if you do much reasearch (obviously not based on how your article was written) but the PS3 had been outselling the 360 worldwide for about the last 5 months...not by hugh amounts (with the exception of June because of MGS4) but outselling none the less so its slowly gaining ground.

Now of course all the xbots will call me a Sony Fanboy but first let me say...I have a 360 and PS3 (Wii does nothing for me) and I use to defend the 360 left and right...even after I bought my PS3. But right now my 360 is only used for exclusives since I'm starting to buy more of the new multi platform games on the PS3. It runs cooler and quieter than my 360 plus online is free. As far as hardware quality goes its a slam dunk for Sony. I'm on my 4th 360 (from RROD) while my PS3 60 GIG launch unit has had no problems.

I just wanted to respond with my opinion since the author clearly didn't bother to do any research on the current status of the PS3 and has a little M$ bug talking in his ear as he writes his articles. If that makes me a (converted to Sony) fanboy then so be it.

[Partners inGrime]

A pyrrhic victory indeed. For now at least. Maybe it will pay off in the future?

My kids have PS and PS2. They alternate between PS2 and Wii. On a waiting list to get a Wii Fit. Nintendo has tapped a new market.

[gaucho420]

You are 100% correct Bruce, clearly the rest are fanboys, you are analyzing it as is.

For those who respond about the PS3 vs. the 360, the real market is with the Wii. And its a WORLD MARKET. Most people in the US don't have HD-TVs and in the world outside of Japan, nobody has HD-TV. The buying power of those consumers simply isn't big enough to buy an HD-TV, espeically with high gas prices. And hence...in every single market, who sells at levels higher than the PS3 & 360 combined? The wii...month after month. Not only that, most people I know who have an 360 or PS3...don't even own an HD-TV as they consider them too expensive. Also, I'd like to know why the PS2 continues to outsell the PS3 on most months...isn't this further proof Sony has a big issue on its hands?

By the way, I have a Wii and an HDTV and to say the graphics look muddled is being dishonest. They're not as good, but to say they are muddled is ridiculous.

The 360 & PS3 will continue to fight for the same piece of the pie of the hardcore gamers, while the Wii will create a whole new pie and a much bigger one at that.

I have a Wii and a 360 and both are excellent. However, I have zero interest in the PS3 as it barely has any exclusive games, Blue Ray is an intermittent technology that will soon be passed by with downloadable movies (Netflix on 360 anyone?), Xbox Live runs circles around the Sony offering online offering and $50 a year ($4/month) really isn't too much to ask if you offer a superior product.

And yes, the panini-press look of the PS3 does it no favor either. In the end, consumers speak volumes and they continue to do so. If graphics were so important, than the Wii , PS2, DS and I might add World of Warcraft would not sell at all. But they do, now don't they?

The arguments of the pro-PS3 crowd are ridiculous as the market, the world-wide market, clearly shows otherwise.

[gaucho420]

And i will add I've been looking for a reason to buy a PS3, simply because I have the money to owe them all for the first time in my life, being a life long gamer. And Sony had given me no reasons to step up to the plate what-so-ever.

I'm not hating, I'm not a fan boy, just being honest. And I know many who feel the same way. I could care less if GE, Intel or P&G made a console...if it was good, I'd buy it. Its not about being a fanboy, its about realizing the product Sony is offering in the PS3, for most consumers, simply isn't a great product and it does not have much appeal with consumers.

Sales don't lie and getting excitted that the PS3 is outselling the 360, while both combined are being outsold by the Wii in every single market worldwide, is a very shallow victory. Especially as the 360 has been out one year longer...shouldn't the PS3 at some point outsell the 360?

[jaysea]

the majority of the people i know own a PS3 with some owning an xbox360 and very few owning a Wii.
Having played all 3 i do believe PS3 has the best look to it, yet it is just so pricey.

[JimmyGoodwin]

This article belongs on gaming news or blog, not financial boards.

OK, first of all, your title "Is There Still Hope for Sony?", then you go on to talk only about the Playstation 3, which is a small part of Sony's business, less than 15% of it in fact.

Second, your title is misleading, you point out Sony are failing to reach their potential, this doesn't translate into a company failing. Having great potential is a plus in my books. Their balance sheet shows Sony has had a turnaround, back on track and looking better than it has done in years.

You take Sony's strength's and potential strength's and turn them into negative's. Some how you make out that its a bad thing for a company to have the ability to leverage media to boost sales, have a monopoly over the increasing popular high definition disk, etc.

BTW, if you want to talk about the PS3.. Its looking better than ever, so why the negativeness? Production costs have come right down, slim version already in works, 'Home' on its way, Movies on demand just arrived, monthly sales overtaken Xbox and quality of games ever increasing.

PS3 should be dominating by now, but its not due to the mistakes you point out. I think everyone knows this by now, most of the weakness you point out are either solved or Sony have stumbled through and survived. Yes, they need to keep the ball rolling in this game of catchup and E3 was a worrying sign they are underestimating the continuous effort needed. That's what this article is mainly about, a little worry and living in the past. But don't worry, tense competition makes everyone, even the winners worry and feel a little nervous for the future. Its all good, PS3 is playing catchup and doing excellent, sales improving, everything improving, its turned into a wonder box, something we always doubted it could be. Its fantastic, but try not to get too emotionally involved, this will only lead you to sell at the slightest dip in the progression chart on its pathway to glory.

[JimmyGoodwin]

O yes, this is early days, Playstation 3 is a baby, developing fast, its part of a 10 year plan. PS2 has huge user base, many of which will migrate to PS3 in future, the PS2 is still selling well considering its age. 360 and Wii are really being pushed by the more natural progression of the PS3, every six months they are forced to innovate heavily, but credit where due, they are and look competitive for the next six months. Fact is, all three consoles are sitting pretty at the moment, its all good. 08/02/08

[jham]

I just can't understand why people always defend PS3 as being "the best Blu-ray player". Is it a Blu-ray player or a video games console ?

One of the huuuuge mistakes about the PS3 it's the speed of the Blu-ray, it's only 2x when in comparison to the 12x DVD on the Xbox 360 it's slower, that's the reason the PS3 needs to "install" games, to be able to access some information faster enough so it doesn't die. The PS3 needs a 4x Blu-ray player in order to surpass the speed of the Xbox 360 DVD. I think good games are coming for PS3, but I also think: Why PS3 year is always next year?

Some stuff in the article may not be entirely true, but I do think that Sony wanted the huge piece of cake from the movies industrie that Toshiba had with DVD so they rushed their format, they paid for exclusives with film studios (something they didn't do with games), so they could get royalties for every Blu-ray disc sold. I really like Sony electronics, Actually I have a Sony Bravia 40" LCD and it's really great, but with the PS3 I think they have done some awful decisions and I believe it's because of the Blu-Ray.

[Stephen D.]

I recently bought a PS3 mostly for Blu ray, but the great thing is, if I was in a mood for a game, the option was there. This is where Sony succeeded with the PS3. ^^^And to the person above who said that about the speed being 2X on Blu ray and 12X on DVD for Xbox. That's incorrect. Data transfer rate on Blu ray is higher than DVD, not spin rate. 4X on Blu ray would be as fast as 12X on DVD. Blu ray isn't slow at all, in fact, it's faster than the original Xbox 8X DVD.

[D-Man]

BUT, you are focusing on only one (1) aspect of Sony's business - the PlayStation product! What about all others - camera, camcorders, PC, etc?? Sony has been a consistent long-time leader in consumer electronics related R&D. And, as such, product flops (Betamax comes to mind), are a necessity for innovation.

[CE]

Sony didn't invent anything, let alone "portable music"....come on already. They took a PHILIPS compact cassette and put it in a smaller cae. Philips invented teh audio cassette in teh 60's, they already had a portable cassette player/recorder..Sony took that idea, like they did with teh CD which PHILIPS brought to them and went with it. Philips didn't market it like Sony does on everything. Sony is a marketing company, they have not much going for it besides spending more on advertising than anyone. They didn't "invent" teh single gun CRT either, which they tagged Trinitron" and marketed it. do some reserach, Sony is a big marketing company, that they can't do that anymore either. They BUY LCD from Samsung, they had to have phones saved by Erricson, music by BMG, tv's by Samsung, they now even buy from even cheaper suppliers...The CD was brought to them as a working system by PHILIPS, becasue Matsushita turned it down, as being a partner on it.

[jham]

@Stephen D:

I was talking actually about the transfer rate on both cases. I know the Blu-ray is faster, but not faster enough compared to the DVD on the Xbox 360. Here is what I've read:
www.gamespot.com/pages....

And for other things aside PS3, I think Sony is and always be a great consumer electronics manufacturer. Actually every time i want to buy some electronics is Sony what I look for.

[Lugoves]

This article takes factual data and extropulates on it in biased and unintelligible ways. Sony has a 10 year plan, as it did with the PS2, and like any advanced technology, it's full capabilities will not be realized or marketed on day one. Without refuting every assumption, I just have to say, wait a year or two. I can purchase & download movies now, could not in 2006 with my PS3, I don't pay for PSN , wheras MS charges for 'live'. Home is an expansion of online tools available to me on the PS3, I already have worldwide 6 person video chat, a messaging/email system in and out of game, a web browser, and google search on my XMB. Media Center interoperability, Wireless capability {OOB} I have all my family photos, music, Home movies, etc on an external USB drive, and I push 7.1 channel surround on 1.3 HDMI to an OnkYo Tuner & 1080p Sony Bravia LCD. I can remotely connect to all this with a PSP...What is "hardcore" today will be expected tommorrow. I believe the superior machine [console] will be cost effective in the long run (Anyone ready for Direct X 11 from MS for PC?), Nintendo is a niche within a multi-billion dollar industry that continues to grow. Production costs will even out, and PS3's will continue to be the console of choice long after XBOX has tried to push ??? many more SKUs. MS Billions have come a long way for keeping XBOX alive, but the console is just NOT as capable, the cell processor is continuing to be further utilized, and developers have rec'd more tools as time has gone on ... (No real timeframes or sources in your 'article' to reference) I'm an armchair investor, and a casual gamer with 3 PS3 consoles, four HDTV's and 4 PC's running XP (Refuse Vista for now) I'm not going to put linux on a PS3 and thumb my nose at MS, but I'll be playing MAG with 264 players online (Haven't seen anything like that for Xbox or Games for Windows...You seem either ill informed, or 2 years behind on your source material.

[ContraGuy]

Sony is worth just about half of what Nintendo is worth in the stock market. Writing about how Sony is doing horrible and Nintendo is doing great is not very useful. Everyone already knows. Please write something more useful.

[EA-employee]

Why are you real gamers (unlike the author) getting yourselves worked up over more PS3 vs. 360 vs Wii articles by someone who is clearly biased and most importantly doesn't know what the hell he is talking about?!

If you look at this guys past articles, he has been a 360 supporter from the start and has doomed Sony from the beginning - never showing them support or any benefits of a doubt. He's funny, are you sure you want to listen to him? Take this quote from one of his past articles for example:

"The new premium console (Xbox 3) will feature a gesture interface and probably integration with a new handheld game console. Microsoft have a great incentive to go for this two model (plus handheld) strategy sooner rather than later because Sony are currently too weak to respond. So it would be a knockout blow that could give them market supremacy.

The new Microsoft handheld will be son of Zune, with iPhone and Nintendo (NTDOY.PK) DS features. This device looks pretty inevitable and will give access to Xbox Live anywhere and everywhere and with its integration to Xbox 3 it will bring a whole raft of new capabilities to the consumer. "

uhh...yeah buddy.

At EA, develop and publish for all consoles and platforms and we are very pleased with our approach and support for Sony as well as the other consoles too.

[Dontagree]

Gaucho420, if you ever saw Blu-ray movies on a PS3, you'd know what the term 'muddy' means, because that's exactly how Wii games look on high def televisions. I've played PS2 games through my HDTV, and I feel the same way about them as well.

Here's another word that you need to understand as well: 'cheap'. The Wii is the cheapest game console out there; matter of fact it's still almost half the price of a PS3. People don't care about whether it has great graphics, that's true. The populace out there doesn't care about anything but what's cheap. Don't use the interactive argument when bringing up the Wii. I point back at the graphics argument when it comes to the 'interactive and immersive' component. The Sixaxis has motion-sensing technology to go along with those snazzy graphics that the Wii lacks.

I've also talked with Wii users who are dismayed at the amount of accessories that need to be purchased in order to fully enjoy their console. One also has to wonder if Nintendo is building a house of cards with all these accessories that more often than not take up space and not much time.

To say that consumers don't want a PS3 is a little presumptuous, don't you think? People surveyed don't even know what a PS3 can do, and that's a fact. However, the word is starting to get out, and more people are starting to become aware. The sales increases that have occurred recently are in part because the console is cheaper (read above), and it offers a better games library than it did a year ago. Matter of fact, outside of Nintendo's own games, the games for the Wii are rather poor.

Just wanting to add balance to your 'unbiased' diatribe.