PlayStation 3: E3 Aftermath May 28, 2006 Jakub Wojnarowicz

Overview

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Sony dominated the previous generation with the PlayStation 2, Nintendo got along quietly with the GameCube but failed to make a serious dent in the market, while Microsoft established itself and the Xbox as a solid contender. The Sega DreamCast, despite being arguably as technically competent as the PS2, got crushed under the weight of public expectations and Sony hype.

When this generation began surprisingly early with the Xbox 360, some predicted that it would follow in the unlucky footsteps of the DreamCast, buried by the public expectations for the new PlayStation. Yet, it turns out that Microsoft’s biggest issue with satisfying demand for their new console. True, much of the fault is Microsoft’s – they rushed the 360 for a holiday launch last year, but the demand for their product is undeniable.

During the previous generation, Sony was coming off a dominant win by the PlayStation against the Saturn and N64. Sega and Nintendo fought from underdog positions, while Microsoft came late to the party. However, the PlayStation 2 did not live up to the hype generated around it. The GameCube’s graphics remained competitive, despite many predictions at the outset that it would be inferior. The Xbox had a clear advantage with its hard drive, graphics, and internet connectivity.

Consequently, while Sony is rolling into the new epoch off a decisive numbers win last time around, they are not the technology leaders and they know it. Microsoft successfully stole that momentum with the Xbox, and the PS2’s own failure to distance itself meaningfully from the GameCube didn’t help matters. As a result, the PlayStation brand name is eroded somewhat, now known more for being popular and having the most games, than for being the best console.

To make matters worse, Sony’s PR machine has been turned against it in recent months. Whereas everyone was expecting the PlayStation 3 to rule this generation as early as a year ago, with all the talk about Cell and Blu-Ray, this year Sony finds the media and hardcore gaming public hostile. Jokes about the hype of years past, like the “Emotion Engine”, are so commonplace they are now cliché. This ties back to the PlayStation 2’s failure to not only not beat the Xbox, but even the GameCube, which had been derided in preview press as underpowered. Worse, the press not only didn’t cut Sony any slack when it came to their pre-rendered movies at last year’s E3, they flat-out called Sony’s bullshit. Predictably enough, this year, the games demonstrated didn’t look anywhere near as good as those overly optimistic renders. Undoubtedly the PS3 looked good, but it didn’t live up to expectations Sony created for itself.

Quite simply, of all the attendees this E3, Sony had the most to prove. They came in with a plan to deliver the goods, the fastest, most powerful console to date. The PS3 was going to have the most graphics and processing power, it would definitely have a hard drive, and its media would be stored on Blu-Ray, the more advanced of the two next-gen disc formats. Perfect, right? Then Sony announced the price.

The Price

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There are two ways to look at PlayStation 3 pricing. The first is from Ken Kutaragi’s perspective – the PS3 is better-equipped than any console on the market, with a next-generation DVD drive, larger hard drives than the Xbox, and arguably the most performance of any console. The second, more realistic way of looking at things is that Sony is trying to push Blu-Ray as a standard, leaving gamers with a potentially useless video disc player that they spent a lot of extra money for. Worse, if you buy the cheaper version of the PS3, you don’t even get an HDMI connector, meaning that it’s possible, or even probable, that you will not get 1080p or even 720p. That ultimately depends on whether the movie studios decide to limit non-HDMI signal quality in order to prevent piracy, but honestly, who expects the studios to not use every gimmick at their disposal?

On top of it all, you do not have the hot-head in charge of the PlayStation go out in public and say how the most expensive console of this generation should be even more costly. Yes, Ken, more of our hard-earned money should go to Sony, because the company deems it necessary to push its strategic HD content delivery through a gaming platform. The ultimate utility of high capacity next-generation DVDs on current games is debatable right now, to say the least. Ken’s statement is provocative, at the least, and only adds to Sony’s public relations issues. In a sense, it may be true – the PS3 may be a great deal if HDMI isn’t necessary and if Blu-Ray takes off, but that’s a lot of caveats.

Price is a major issue for a console that aims to have broad appeal. The original PlayStation caught everyone’s attention not because it was immediately better than the Saturn – it was too early to call that – but because it was cheaper. The PS2, while more expensive, was still quite accessible and sold extremely well. How many of those families and students will be able to afford a PS3?

The Nintendo Attack

Last generation, Nintendo said it wasn’t about the hardware, it was about the games – and an affordable console. They offered a system that didn’t play DVDs, didn’t have a hard disk attachment, was the cheapest on the market… and they ended up third in the race.

This time around, Nintendo has adapted their strategy a bit. Rather than offer mere empty words about “the games” and those lucrative first- and second-party titles, Nintendo is bringing a silly name for their console and a controller with considerable potential. Despite the company’s claims to the contrary, it is still about compelling hardware, and the Wii controller is very intriguing.

Just imagine playing Jedi Knight on the Wii.

Even without a Star Wars game featuring light saber combat, Nintendo is still a lock to at least improve their position if not capture second spot. Seeing as Microsoft hasn’t lost momentum, the obvious victim of Nintendo’s bite will be Sony’s slice of the market share pie. Since the PS3 is going to be at least twice as expensive, it’s a fair bet that Nintendo might walk away with the lower-income segment altogether. Now don’t think of this as just poor people, but students and larger middle-class families.

Nintendo had a very strong show, with the typical lineup of dorks in Mario Bros. shirts, but also many more casual folk lined up. Talk about the console was fairly popular. While the company didn’t steal the show, it at least matched the 360 for hype.

Microsoft & Conclusion

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Furthermore, Microsoft has Halo 3, Gears of War, and Mass Effect lined up as AAA titles exclusive to the 360. On top of that, there are other titles near the top tier, like Too Human, Forza 2, and Ninety-Nine Nights, as well as multi-platform games like Marvel: Ultimate Alliance and the new Splinter Cell. Finally, Microsoft stole a blue chip away from Sony by ensuring that the new GTA game will no longer have a delay for other platforms. This says as much about Microsoft’s bargaining power, as Rockstar’s calculation that Sony will not resume its dominance.

Conclusion

Quite simply, Sony blew it. The PS3 didn’t have a bad outing at E3; in fact, it was quite a good show for a console that’s being hurried into production. Several of the games featured for it, notably Assassin’s Creed, and of course MGS4, garnered considerable attention.

The problem is that Sony needed a killer E3 to get the momentum back on its side. Sony had to overcome media cynicism, the 360’s early launch and growing list of titles, the low pricing of the Wii and its ingenious controller – and they failed. Not only that, the PlayStation took a step back in several departments, notably by losing GTA lead time, and having to answer uncomfortable questions about HDMI and HD content for the lower PS3 model, while at the same time deflecting overall pricing issues.

While Microsoft is in the HD DVD camp, it doesn’t have a major stake in the standard and thus isn’t compelled to push it. Sony, as the big name in Blu-Ray, is in the vanguard and is basically forced to add Blu-Ray to the PS3. If the PS3 didn’t have Blu-Ray, all sorts of questions regarding Sony’s commitment to the format would arise, not least from fellow Blu-Ray investors. However, Blu-Ray is figured to be the primary reason for the PS3’s relatively high cost.

Sony has become increasingly reliant on its computer entertainment division in recent years, it has been the only one that is consistently profitable, its growth has been phenomenal and it more or less subsidizes other operations for the company. Sony needs the PS3 to become a huge success. The PlayStation is Sony’s heart, it is the vanguard of the Blu-Ray offensive, and the PS3 is a huge investment – so it must sell in high volumes over a long time, with many game purchases, to amortize the cost.

Meanwhile, the Xbox division can afford to lose money as long as MS has other gold mines. Nintendo plays cautiously and modest sales will be profitable for the company, while at the same time the possibility of the Wii breaking through is increasing.

Will the PS3 succeed? In some ways, there is no doubt. The PlayStation brand name is the strongest in the world, and sheer momentum from one generation to the next will likely propel it to the top spot. However, it is doubtful that Sony will dominate as thoroughly as it once did – and how it needs to again.