Could the Playstation 3 Kill Sony?

Discussion in 'DVD Video' started by Air Raid, Feb 10, 2006.

  1. Air Raid

    Air Raid Guest

    Could the Playstation 3 Kill Sony?
    February 09, 2006

    By David Walker

    As we quickly approach E3 in May, many people are eagerly anticipating
    more details on the Sony PS3. Since Sony burst onto the gaming scene
    with the original Playstation, they have been the company to beat in
    the console wars. As a matter of fact, while the rest of Sony has
    struggled, the Playstation division has been a cash cow that the rest
    of the company has relied on. With Microsoft having already launched
    the Xbox 360 to overwhelming demand, many are wondering what the
    counter from Sony will truly look like, hype set aside. It wouldn't be
    exaggerating to say that Sony is betting a large hand on the
    Playstation 3. It's not just the Playstation division that's making the
    bet, either. With the next-gen Hi-Def format war still raging, Sony is
    betting a substantial portion of it's future on Blu-Ray. While most
    analysts agree that HD-DVD will not likely win, some analysts are
    openly wondering whether Blu-Ray will as well. If it doesn't, Sony
    could be in serious trouble.

    Isn't This Thing Supposed to Play Games First?
    In order for Sony's Trojan Horse strategy with Blu-Ray to work, the
    Playstation 3 has to succeed as a gaming console. As a game console,
    the Playstation 3 has to deliver on several fronts. In pure horsepower
    and graphical ability, there's little doubt that the console will
    impress. There are serious reservations as to Sony's online strategy
    (compared to Xbox Live) and we'll cover that in a bit. However, one
    aspect of gaming that is often ignored, but can become a major issue is
    load times. Ask any Sony PSP owner what annoys them most about the
    portable console and you are sure to hear about it's dreadful load
    times. Gamers are an impatient breed and if Sony frustrates hardcore
    gamers - and developers, for that matter - it could greatly damage it's
    reputation with the group that will comprise PS3 early adopters.

    Until now, it's been widely assumed that the Blu-ray drive that will
    make it's way into the PS3 will be single-speed. If true, this choice
    could be disasterous. Blu-ray single speed transfers data at a constant
    rate of 36Mbps (Megabits per second) or 4.5 MBps (Megabytes per
    second). Sound impressive? Think again. DVD single speed is rated at a
    little over 1.32MBps max. A 12X DVD, such as the one in the Xbox 360,
    transfers data at rates between 8.2 and 16.5 MBps for an average of
    around 13MBps. This article from Gamespot provides all the details on
    transfer speeds, but simple math should show that there are some
    serious concerns looming with a single speed Blu-Ray drive. So, all
    things being equal, a 20 second load-time on the Xbox 360 would equate
    to just under 60 seconds on the PS3!

    In order for Sony to bring load times into the same range as the Xbox
    360, it would have to use at least a 2X drive (which would transfer a
    little faster than a 12X DVD's minimum speed) or a 3X drive (which
    would closely resemble a 12X DVD's average transfer rate). Since
    Blu-ray is a new technology, it's a certainty that the faster speeds
    will increase the base cost of the PS3, which leads into the next

    Money Doesn't Grow on Trees
    The Playstation 3 will lose money for at least a few years. How much
    and for how long is key, and recent projections from Merrill Lynch
    Japan suggest that the PS3 could lose a tremendous amount of money for
    Sony in the first few years. Merrill Lynch is projecting losses of 1.18
    billion in year 1, 730 million in year 2 and 457 million in year 3. By
    comparison, Sony's profits in the past three years has been about 1.86
    billion. If the PS3 doesn't start turning a serious profit in year 4,
    Sony's bank accounts could start drying up. There's no indication if
    these losses also anticipate the costs involved with setting up the
    massive infrastructure for an Xbox Live competitor, which most people
    think Sony will provide. If not, Sony's losses could skyrocket even
    more as it looks to create a brand-new online presense.

    Sony could try to offset these losses by launching the PS3 with a
    higher price point, but anything above $500 is considered too high for
    wide adoption. Will consumers agree with Ken Kutaragi's assessment that
    you will want to work an extra job to have one? Kutaragi has even
    lamented that "...the PS3 can't be offered at a price that's targeted
    towards households."

    Additionally, Sony is stil having to compete with HD-DVD, which is
    getting significant backing from Microsoft (and their 37 billion in
    cash). Whereas Microsoft has little to lose if HD-DVD fails, Sony has
    everything to lose. Additionally, recent announcements at CES in
    January indicate that the least expensive Blu-Ray drives will start at
    $1000 while HD-DVD is hitting the market with players starting at $500.
    Many analysts saw these changes as giving HD-DVD a second-wind that
    could ultimately hurt Sony more than it helps HD-DVD, which leads to
    another point.

    Tell Me Why I Need Blu-Ray More Than DVD?
    Unless you have an HDTV set, you'll never see the difference between
    Blu-Ray and DVD. And considering that Hi-Def adoption is currently at
    24% and more than half of consumers are waiting for price drops, the
    target market for Blu-Ray is not as lucrative as one might believe.
    When DVDs hit the market, there were several reasons to purchase them.
    For one, the quality far surpassed VHS. Additionally, menus and extra
    features made DVD content easier to access and gave it more value.
    Also, DVDs don't degrade in quality over time, making them a better
    long-term investment. The jump from DVD to Blu-Ray (or HD-DVD) is not
    as significant, unless you're an HDTV owner. Even then, the question
    remains: Is Blu-Ray content going to be compelling enough to make me
    say "I have to have it?"

    Recent announcements also suggest that Blu-Ray disc prices will come at
    a significant premium over existing DVD prices. With broadband adoption
    growing rapidly, one also has to ask if a physical format has a long
    life ahead of it. Bill Gates has publicly stated that he thinks the
    format war is the last we'll see, because hi-def content will be soon
    be delivered over the Internet instead. HD-DVD may not win the war, but
    it doesn't mean that Blu-ray will.

    Games, Games, Games
    The Playstation 3 has wide support right now. However, rumblings have
    been surfacing that the PS3 is hard to develop for, due to the
    complexity of a brand new processor with multiple cores. Similar
    criticisms arose with the PS2, and while Sony was able to overcome the
    same hurdles then, there is one major difference now that may keep
    history from repeating itself: the Xbox 360.

    Since the original Xbox came into the game a good bit later than the
    PS2, developers had to stick with Sony because it was the clear market
    leader. This afforded Sony liberties that it may not have had
    otherwise. Now, Microsoft has the head start. Additionally, the
    Microsoft unit has already been praised by the likes of John Carmack
    (creator of Doom, Quake, etc...) for it's great development
    environment, while Hideo Kojima of Metal Gear Solid fame has expressed
    some concerns that development for the PS3 could be more difficult than
    for the Xbox 360. Sony must have strong 3rd party support so that
    licensing fees will help recoup the costs of putting the PS3 into the
    market. Just being Sony may not be enough anymore.

    While I don't think we'll see Sony close it's doors for good, I have
    some concerns about the affect the PS3 could have on Sony's financials
    over the next few years and into the future. Microsoft has created an
    impressive console with the Xbox 360 and while Sony has a strong
    history in the Playstation line, there are key components for concern.
    Blu-Ray, an online service like Xbox Live and a hard development
    environment create additional areas for financial loss that may not be
    recouped. For the sake of competition and a strong market, let's hope
    Sony can address these concerns adequately and while there is still
    Air Raid, Feb 10, 2006
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