PlayStation 3: How Doomed Is It?

Yesterday, I posted some comments in response to a very interesting item over on BitBurners.com, which stated that “momentum is high for the PlayStation 3.” My contention is that the media’s sudden love-affair with the PS3 is way premature, and that in fact this console is doomed to play second fiddle to the Xbox 360 for the rest of its market life. (Probably third fiddle to the Xbox 360 and Wii.)

I’ve since had a very intelligent rebuttal from BitBurners. I’d recommend clicking over there if you want to follow our debate in detail. However, I’m going to reiterate at least my main points here.

A lot of journalists and bloggers lately have been rushing to declare the PS3 the winner in the console battle… despite the undeniable fact that the Xbox 360 currently has about 3 times the installed base… a small matter of some 10 million extra users. (Let’s not even discuss the Wii.) Never, ever, in the entire history of gaming, has any console come back against that kind of lead. [I have in fact seen various stats, some more favorable to the PS3 than others; the ones I’m talking about referred to worldwide installed base. On the other hand, all favorable predications regarding the PS3 seem to stem from a single rather incredible market study, which takes the product’s recent cost-cutting sales surge and projects it out to infinity.]

Meanwhile, we’re seeing news releases from major game publishers, canceling PS3 projects. [Again: I have seen at least two such announcements. I’ll try to dig them out and post them here.] With game budgets topping $20 million, who in their right mind is going to develop a great exclusive title for an audience of 6 million, when they could be developing for an audience of 18 million?

Some have suggested that the Blu-ray capability of the PS3 will be an increasingly important asset now that HD DVD is out of the picture. This logic seems flawed at best. Sony was able to use PS3 stats to bulk up its Blu-ray numbers, and thereby ‘win’ the race to dominate HD movie formats. But even if Blu-ray now starts to take off (a very big if, given its current sub-2% market share), the benefit of that Blu-ray drive in the PS3 will decline. Consumers will find many dedicated players to choose from, cheaper and simpler to use than the PS3. (How many DVD movies have you ever played in your Xbox or PS2?)

So far, Blu-ray movie sales stats show quite clearly that only an insignificant minority of PS3 owners use their consoles to play movies; as you’d expect, most bought them to play games. But when it comes to games, Microsoft has a huge and growing lead. The Xbox 360 (for which I am anything but a cheerleader, as you can see from my last few MS-bashing posts!) has a massive library of games, and an excellent online service that Sony has not even come close to matching.

Yes, Sony ‘won’ the battle for HD disc formats. (We’ve yet to see what that means.) But they sacrificed the PS3 to do it, delaying release by a vital year, and then putting an untenable early price on it, while Xbox 360 was happily building its user base. For Sony to make a comeback now would be far from the slam-dunk implied by BitBurner and other observers… It would be little short of a miracle.

My prediction: by the end of this year, or at latest early 2009, we’ll start to hear Sony dropping hints about the “PS4,” which will be the “killer console” that will really put the Xbox 360 in its place. Sony may wait to see how Christmas 2008 turns out first… but unless there’s some sort of vast and entirely unprecedented resurgence in PS3 demand, I don’t think they’ll have any cards left to play.

You read it here first. (Make a copy of this page; I’ll be re-editing it a year from now, if I turn out to be wrong.)

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