PS3 discussion update

So now there is new press about PS3:

http://biz.gamedaily.com/industry/feature/?id=12701

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ABI: Sony Pricing Strategy "Fraught with Risk"

There's already been a good deal of backlash towards Sony's expensive dual-pricing strategy for the PS3, and now some analysts are saying that the high price could put their market dominance at risk. ABI Research says Sony has "hamstrung itself."

In a recent GameDaily BIZ poll only 4 percent of our readers said they would buy the $500 PS3 this fall while 24 percent said they'd pony up the $600 for the premium version. The remaining 72 percent said they'd either forgo a PS3 purchase entirely or wait until there's a price drop. For a company that's become synonymous with gaming ever since the original PlayStation, that's a little alarming.

Is Sony's pricing strategy going to hurt their market leadership position? According to research firm ABI Research, there's a good chance that it will. "Sony is placing a serious bet that its inclusion of a Blu-ray drive in the PlayStation 3 will entice consumers to pay a premium price for the new console, despite lower cost alternatives from both Nintendo and Microsoft... Sony's console pricing strategy is fraught with risk, and may ultimately jeopardize its market leadership position," the firm explained.

"Asking consumers to pay $500 to $600 for a game console, when most have yet to purchase an HDTV, will give many current PlayStation 2 owners reason to consider the competition," said Michael Wolf, principal analyst with ABI Research's broadband and multimedia research practice. "Sony has clearly hamstrung itself with a box that is expensive to manufacture, and these costs are driving a retail pricing strategy that places a high financial burden on the consumer."

Of course, Sony doesn't feel this way at all. Recently SCE head Ken Kutaragi said that if anything the console is "too cheap" and that the price is easily justified because the PS3 offers an "amazing experience."

While ABI was concerned about PS3's prospects, the firm was quite high on Nintendo and Microsoft. "... Nintendo is the best positioned of the three to expand into the casual gamer and new gamer audiences with creative titles such as Wii Sports and WarioWare: Smooth Moves," said ABI.

As for MS, ABI believes that its new "Live Anywhere" service will have a big impact over the long run "...the ability for PC and mobile phone users to access the same online gaming community is a huge strategic maneuver with important long term implications," the firm continued.

"The ability for gamers to be continuously connected across three screens is incredibly important," added Wolf. "While we believe buy-once-play-anywhere will be hard to implement due to intellectual property and technology restrictions, the initial benefits of Live Anywhere--such as mobile scheduling and game asset purchases--will give Microsoft something that the other two competitors will be hard-pressed to counter."

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And...

http://biz.gamedaily.com/industry/feature/?id=12699

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Bloomberg: PS3 Launch Hampered by Lack of Dev Kits

With another 6 months to go before Sony launches its PlayStation 3, reports have surfaced that publishers have not gained access to final hardware, making it difficult to create games that utilize the console's power or to support the system at all this holiday.

Financial news publication Bloomberg.com is reporting that when the PlayStation 3 launches this November there will be "fewer and less-powerful games because the company hasn't given final technical details of the new console."

"A lot of developers have not gotten the kits,'' said Sega of America president Simon Jeffrey while attending E3 last week. "There certainly will not be a lot of titles available."

The result is that publishers that do want to take part in the PS3 launch will have to release games that don't fully take advantage of the power of the Cell processor, added Jeffrey. A number of other publishers, however, will likely decide to delay the release of their titles so that they have more time to perfect them. In fact, THQ chief executive Brian Farrell said that THQ opted not to release a version of The Sopranos for PS3 simply because the publisher didn't have enough information about Sony's next-gen console. "It was too risky to do it,'' said Farrell. "It made no sense.''

While THQ is waiting, other publishers don't seem too concerned. Both Activision and Electronic Arts have been working with the development kits as is. "While we may not have the final, final hardware, we know what the processor's capacity is,'' explained Activision CEO Robert Kotick. "We have active development under way.'' Added EA president Paul Lee: "We're happy with the development kits."

Yves Guillemot, Ubisoft's chief executive, noted that not having final hardware is a new trend that developers and publishers will simply have to adapt to. Microsoft didn't get its Xbox 360 dev kits out on time either. "We won't be able to take advantage of all the components of the machine, but it was the same last year,'' Guillemot said. "It's a challenge for the publishers."

Still, larger publishers may have the resources to be able to deal with this problem but others may not, especially when development for the other platforms is noticeably more affordable. "Developing for Sony's platform is incrementally more complex than what you're looking at for Microsoft or Nintendo,'' said Mike Hickey, an analyst for Janco Partners. "With costs that could go over $25 million a game, you're not seeing third-party content where it needs to be at this stage to have a successful launch."

So how many titles should consumers expect this holiday when shopping for the PS3? Kaz Hirai, Sony Computer Entertainment CEO, claims that there will be upwards of 15 titles available and that Sony is now giving game makers the final prototypes and software, "allowing for plenty of time to prepare games for PS3's debut." For the sake of comparison, Xbox 360 had 18 titles available at its launch last year.

"I don't think there will be too much of an issue," said Hirai.

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So I don't really expect Sony to drop the ball with developers. I think the launch lineup won't be as amazing as some people at Sony are declaring, but eventually the platform should get "good" games, assuming you love MGS4, GT:HD...um... I don't expect Sony to blow it with the developers on the dev kits in the long run. Last summer the 360 beta kits kept crashing and final ones didn't show up until end of July / early August, and that was if you were working on a launch title. Sure, the 360 launch lineup wasn't that strong but in 2006 the 360 games are getting much better. I expect a similar thing for the PS3 games.

But on the pricing side, it's going to be hard for a lot of people to pass up a Wii with fun content for a PS3 with some content as discussed above. We've been through this debate some, but it does seem like the banking and research analysts are joining the WTFSONY bandwagon.

[Blocked Image: http://www.izuno.net/pics/e3_2006/wtf.jpg]

another interesting development:

http://www.next-gen.biz/index.php?optio ... 6&Itemid=2

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A story claiming that Sony is preparing to stop the potential sale of pre-owned PlayStation 3 games is being met with some skepticism by industry insiders.According to a UK news source, citing retail contacts, Sony is preparing to make it illegal for consumers to sell used PS3 games. The plan would involve Sony adopting a licensing system whereby gamers would agree that they are purchasing a license to play a game, rather than the game itself.

If true, such a move would be a massive boost for publishers and developers which do not profit from the lucrative and damaging retail trade in used games. In fact, many publishers are furious that they have to spend support money on consumers who have not actually contributed a dime to the company's coffers.

In turn, it would be a catastrophe for retailers, which make a significant proportion of margin from used games. Consumers would likely be less than overjoyed.

Sony, which is refusing to comment on the story, does have a patent on technology which would tie a piece of software to an individual piece of hardware. But technology and desire are not the only parts of the puzzle. Whether the company would be prepared to take on retail, consumer goodwill and, most likely, the U.S courts, is another matter.

One expert in retail law told Next-Gen.Biz, "Sony can theoretically sell a license to play the game, but the user would have to acknowledge acceptance of the license. You've seen this when you install software on a PC. I'm not sure that the license agreement is enforceable if the licensee doesn't agree to it.

"Also, even if the agreement is enforceable, it's hard to preclude subsequent sale of the disc. The consumer could theoretically agree that he doesn't own the right to transfer his license, but why couldn't he sell the medium that held the license (the disc)? Sony can't enforce the agreement against a third party, as it lacks privity with the third party.

"Stated differently, I don't believe Sony can keep someone from selling a disc, even if they create a license agreement. The only way that this can truly be effected is to require registration of the disc with a specific PS3 console. Sony has a patent on such a technology, and could render a disc unplayable once registered. That would accomplish their goal (if they really have such a goal). In summary, I don't believe this is real."

A senior games publishing source told us, "Sony and the rest of us would love to put an end to this damaging trade, but actually making it happen looks like a fight that's beyond even Sony. I can't see it happening, but i hope I'm wrong."

Another senior manager at a third party publisher said, "I know that Sony is very upset about the used games market. But this story seems a bit far-fetched."

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My gut's telling me that Sony won't do this.

But the bigger question is around controlling the way content is purchased and used. Think of it it this way, if you make a song, you'd like to be paid everytime someone listens to it. Everywhere. That's not really possible given our infrastructure. Same witih movies or TV programs.

It's an issue of revenue capture.

For games, how can a developer/puslisher/console manufacturer capture revenues for content? Further, what is fair to all sides? As always, this relates to who gets what? Every time someone experiences a game for the first time, I'm sure Sony would like to capture revenue. Traditionally this has meant when a sole gamer buys, plays, and owns a copy of the game. Today that's getting very blurred with all the different distribution models (rental vs purchased copy vs public LAN vs playing at a friends house vs borrowing).

Consumers might cry out that this is gouging, but i think the reality is more subtle. The reality is that people put different value on playing different games. For many die hard Halo fans, getting Halo2 the moment it came out was critical, so they waited in line and paid full price. To other people, it was not as valuable so they waited a few days...etc...to the point where other people waited till Halo2 went down in price or they could borrow or rent etc. Sony seems to be saying "no, we think that if you want to play it, you gotta pay on our terms and on our timeline, not yours." This is sort of similar to the logic that "people will save up their money to buy the PS3 because it's just so damn awesome."

In the end this feels a little arrogant on Sony's part. Everything about the PS3 and Sony's strategy has this arrogant flavor about it. X360's "flavor" has been more open, while Wii's is downright inviting.

The question is, will the different parts of the gamer market buy into Sony's attitude? Only if the content is there. Hence we wait... :roll:

Excellent post, Fletch.

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So far no industry has been destroyed by it's used market. They just have to adapt. But nobody likes to adapt their business model, especially when they're on top. Subconsciously it strikes people as defeat. It's perfectly natural to protect ones turf. Maybe Sony's DRM is their version of adapting, and maybe it will work. Maybe the industry will adapt by choosing to regulate used-game sales like the car industry has. Either way, I'm hopeful that the industry will adapt, because something bad is on the horizon. When production costs all of a sudden explode in proportion to market demand, it's usually a sign that the bubble is about to burst.

With the increasing cost to produce games, how can the industry increase the amount of revenue flowing back into developers? Yeah yeah, this is the question everyone always discusses. A few obvious answers we should all know by now:

1) Better managed production processes

2) Better toolsets that speed up tedious processes and minimize rework.

3) Consolidation However there is a risk of too much consolidation causing all games to look and feel and play the same.

4) Increase sales from

- existing gamers buy more product

- existing gamers stay in the market for longer (keep buying and playing into 40's, 50's etc..until death)

- nongamers of all ages start buying and playing

The real answer to #4 is to innovate. New genres with new appeal will draw in more people who've never played games before. On new consoles like 360 and upcoming PS3, I don't expect there to be huge innovation in early generation games, as usual for each cycle. Once the hardware price drops, you get non gamers interested in buying the hardware because of an innovative new game that appeals to them.

I really think it's going to happen this generation, but not until later in the cycle, say in two to three years when the hw prices have dropped enough and the core install base is large enough. I am hoping some of the kick ass graphics and eye candy will help polish some really innovative gameplay types that aren't based purely on violence or conquering etc that get all these non gamers out there to start choosing interactive entertainment over seeing another shitty movie or watching CSI:Cleveland or CSI:Albany or whatever shows are on by then.

Back to the rental issue and Sony...I don't think the games industry is going to collapse. There is too much demand for interactive entertainment and too many minds struggling to innovate the industry to not produce a breakthrough at some point.

One thing to keep in mind, for hot new games, how easy is it to find them used a week after release? Because game sales are so hit driven, sales curves of big products tend to match movie opening curves. Most sales occur in the first month, sometimes two weeks, and then steadily drop. Really good games are often not sold back to EB or GS simply because they are that good. It's the shitty games that get recycled more. But I don't have the latest and greatest data on that, and I think it warrants knowing more information to have a meaningful discussion here.

I do agree that overall, game developers work their assess off and often don't get the appreciation or financial compensation they always deserve, and the rental market is sort of a thorn in the game developer's side.

Still, we have to appreciate consumer demand. When a game ships, not everyone who would want to play it has enough personal demand to buy it at full price. I think the existance of the rental and other markets is a reflection of that overall demand like any other industry as Fletch points out above. How do we increase the demand/value factor for consumers? By having better overall product. I'm not saying that the existing games don't have a lot of greatness in them, it's just the overall value of product as a whole simply don't offer enough appeal yet to have a mass market explosion in sales.

Innovation. Innovation. Innovation.

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Innovation isn't a sure fire path to market glory though - plenty of more innovative games bomb while plenty of "me too!" titles earn their developer's a packet. It's easy to see why developers are so often tempted to tackle the established genres that they have a guaranteed market for (provided their product isn't shit). It's going to be really interesting to see what happens with the Wii, which is really the cmost obvious and drastic example of gaming innovation in a long long time. Will it really draw in hoardes of newcomers as so many expect, or will it just be something new for those already interested in gaming to play with?

When I say "innovation" i mean the entire package from idea to consumer purchase, not just developmoent of a new gameplay type or something.

If a developer creates a new technology that at the time absolutely thrills everyone like GeoMod in Red Faction, it only becomes an "innovation" if it attracts consumers and spawns new gameplay in other games etc that further attracts gamers.

The Wii controller innovation, yes...time will till if it is a true innovation or will fall by the side of Virtual Boy from the early 90's.