Introduction

For a while, it looked like Sony had an unbeatable console in the Playstation 3. At their E3 2005 press conference last year, they first showed off the console along with a few tech demos, a playable early version of Unreal Tournament 2007, and a number of game concept videos. Everyone who attended that conference thought that the PS3 would easily be the champion of the next-gen console wars, despite the year head start of Microsoft's Xbox 360 and the low price and low development costs of Nintendo's Revolution.

How times have changed.

On Monday night, Sony once again held a massive pre-E3 press conference at one of the huge sound stages at the Sony Pictures studio in Culver City, CA. Sony execs came on stage to tout once again how the PS3 would not just be a video game console but a full-fleged entertainment device.

And then they started showing off the first launch title PS3 games, some of which were playable to press conference attendees at the end of the pre-E3 press conference. Graphically, the games looked a lot better than games on Sony's previous PS2 machine, but they certainly didn't look like a lot of the movies that Sony showed off at last year's press conference. Moreover, games like Warhawk, Resistance, and Gran Turismo HD didn't look all that much better, if at all better, than current games on Microsoft's Xbox 360.

Then came the more surprising and at the same time most disappointing news of all: pricing. Normally price points and exact release dates for new consoles don't come during E3, but later in the year and closer to the actual launch date. Not this time for the PS3 as Sony announced two separate versions, one with a 20 GB hard drive and the other with a 60 GB hard drive, which will retail for $499.99 and $599.99, respectively. A US launch date of Nov 17 was also announced.

The crowd at the conference didn't really know what to make of it. Most people had assumed that the PS3 would be expensive, and certainly more expensive than the PS2 which launched for $300 back in 2000 in the US. But no one expected that the high-end PS3 version (which besides having a bigger hard drive will have several other features that the 20 GB version won't have) would retail for twice as much as the PS2 launch price.

I spoke with several people who attended the press conference right after it concluded. Their opinion was one of shock and dismay that Sony would ask such a high price for a product that, at first glance, didn't seem to be a huge quantum leap over the Xbox 360 in terms of hardware features. One very well known game developer told me that it was a surprise that Sony would reveal the pricing for the PS3 at E3. "That was a big mistake," was the game developer's response. A well know game journalist also told me that the PS3 press conference showed that the console was dead in the water. "There will not be a PS4," according to this journalist.


So how did Sony, who was on top of the world at last year's E3, come crashing down so hard this year? There are several factors, in our opinion…