 | |||
|
|
|
|
|
 |
Is the PS3 Dead in the Water? Part 2 September 07, 2006 John JCal Callaham |
|
 |
|
| |
Summary: The bad news keeps piling on from the Sony camp, this time with the revelation that the PS3 will not launch in Europe this year. How much worse can it get? What are the consequences? JCal tells the story.
 Introduction | Page:: ( 1 / 5 ) |
Since the E3 announcements on the launch price and the launch date of the PS3 for Nov. 17 in the US and Europe and Nov. 11 in Japan Sony reps have made some … interesting claims about the PS3. Sony Computer Entertainment head Ken Kutaragi made the claim during E3 that the $599 price tag was “probably too cheap “. Later, Sony Playstation studio head Phil Harrison said in an interview that the PS3 was “clearly a computer”, rather than just being a video game console. This past summer, Sony Computer Entertainment Europe CEO David Reeves was quoted as saying that the PS3 would be successful “…even if it didn’t have games.” Meanwhile rumors were rampant that the PS3 was suffering from production problems in its hardware, notably because of its Blu-Ray disk drive. which only started launching its stand alone disk players this summer only a few months before the PS3’s launch. As of this writing, Sony hasn’t even admitted that the PS3 has started manufacturing yet.
[image]
| <% print_image("01"); %> | <% print_image("02"); %> | <% print_image("03"); %> |
All the quotes and all the rumors finally came to a head Wednesday morning as Sony’s European division finally admitted that the simultaneous global launch for the PS3 wasn’t going to happen after all. Thanks to a shortage of the laser needed for the Blu-Ray disk drive, the console is now being delayed until March of 2007 in that part of the world. Furthermore, Kutaragi also admitted Wednesday that unit amounts for the US and Japanese launches would be very small; just 400,000 units will be available for sale on launch day in the US and a tiny 100,000 units will show up in Japan. Sony is still claiming that it will ship a total of six million PS3 units by the end of its fiscal 2007 year (which ends on March 31, 2007), but you have to take those numbers with a huge grain of salt at this point. So far Sony hasn’t made good on any of its previous numbers yet - remember when the PS3 was supposed to launch in spring 2006?
FiringSquad contacted Sony for more info about their announcements and their brand new PR head David Karraker sent over a brief response to our inquires. Karraker repeated that Sony would only have 400,000 units of the PS3 available for launch day in the US but added, “….what consumers should focus on in my opinion is the fact that we will have 1 to 1.2 million units available by the end of the year, which is a significant amount that will ensure we don't see any dip in supply levels through the holidays.” Further questions sent to Karraker by FiringSquad were not answered by the time this feature was posted. Only the next few months will determine if his claims pan out.
| Consequences, Sonyquences | Page:: ( 2 / 5 ) |
The PS3 delay in Europe and the shortage in the US also means that sales of PS3 games for 2006 will likely be on the lower end of expectations. Electronic Arts, Activision, Sega and UbiSoft all had PS3 launch games in the pipeline, but with only one or two exceptions all of their PS3 launch titles will also appear on the Xbox 360, the Wii, or both. With the unit availability of Microsoft’s and Nintendo’s console certain to be more than the PS3, the Xbox 360 and the Wii will certainly benefit from higher sales of those ports. In addition, both the Xbox 360 and the Wii are looking like they will have solid first party exclusive games. At the same time appears as though retailers who were looking for a major jump in their sales may have to have their expectations adjusted thanks to the lack of PS3 consoles on store shelves.
[image]
| <% print_image("04"); %> | <% print_image("05"); %> | <% print_image("06"); %> |
Some of our speculations were confirmed Wednesday in a research note written by Michael Pachter, the well known financial analyst for Wedbush Morgan Securities. In the humorously titled paper “Flirting with Disaster: The Trilogy”, Patchter wrote that total US and European video game sales for 2006 would grow by 2 percent versus their previous prediction (made just the previous Tuesday) that sales would grow by 3 percent this year. In a phone conversation with FiringSquad following the release of his report, Pachter told us that he believes that the PS3 shortfall will help Microsoft’s Xbox 360 sales somewhat but really help Nintendo’s Wii the most thanks to its lower price. So will people who wanted a PS3 this year go and get an Xbox 360 instead? Pachter told us that he expects only 200,000 Xbox 360 consoles sold this year will be “substitutes” for people waiting for a PS3. Ultimately, Pachter feels that while the shortfall will affect Sony in the short term they should turn out OK in the long term. Indeed his 2007 sales predictions for video game sales as a whole remain unchanged and retailers will be mostly unaffected in his opinion.
A few weeks ago, Michael Goodman, an analyst for financial firm the Yankee Group, predicted that the PS3 would be the overall winner in the next-gen console wars, edging out the Xbox 360 and blowing away the Wii in terms of total console units sold in five years. With the announcements of the European delay and the shortfall of PS3s in the US and Japan for the launch, we contacted Goodman again to find out if he plans to change his predictions. Goodman told us over the phone Wednesday that he had just heard about the changes on Sony’s part and as a result was not able to say whether his earlier predictions would stick, but did say he will be making some kind of changes in his report in the next couple of weeks.
| Microsoft, Nintendo, EA | Page:: ( 3 / 5 ) |
FiringSquad also sent inquiries to publishers Electronic Arts, Activision, Sega and UbiSoft to get their official responses on Wednesday’s development. All of them have PS3 launch titles scheduled for this fall. Only EA responded back to us by the time this feature was posted: “While this is disappointing news for European consumers who were anticipating the arrival of the PS3 this year, Sony should still have opportunity for a strong launch next year in Europe. EA will have a great portfolio of games ready when the console arrives in Europe. We look forward to bringing our PS3 line up to gamers in the region next March.” EA did not respond to a follow up asking if the small launch unit numbers in the US will affect their sales.
FiringSquad also contacted other game developers to get their feelings on the PS3 delay in Europe and the unit shortfall in the US and Japan. One well known developer, who wished to remain anonymous for our article, told us, “This isn't a surprise; anyone who is surprised by this has had their head up their ass for the last 9 months. Sony has been behind for a long time. Frankly, I wouldn't be surprised if there is another, even worse announcement made later in the year. It will hurt the games biz; sales will be down in the very crucial (fourth quarter). The 360/DS/WII markets won't make up the difference. This will affect game scheduled to ship 6,9,12, even 18 months from then, as profits from that (quarter) that would have been spent on new games won't be there. It will have cascading effects into TV sales and HDTV penetration will slow.”
Alex Cruz, the president of Maxum Games, told us, “There will be one group who will be ecstatic on Nov 17th. – Ebay sellers. This low number of units will promote an exclusivity club of elite PS3 owners. The ones who can afford the $700 cost plus the $500 Ebay mark up will mostly receive these units and no one else. This might cause a sense of snobbery regarding the PS3 which will not be good. When the last three consoles came out, their price points where not as significantly different as this generation. People are going to feel an even stronger loyalty to the system and games they can afford. However ugly, the owners of low cost systems will be teased by the owners with the highest price system. This may cause resentment and distaste for the PS3 they cannot afford nor obtain. Sony may not recover and will probably lose the number one console spot not because of limited supply but because of alienation. ‘Hey, there goes that bastard driving away in his new PS3.’”
Cruz added, “On the developer side, less PS3 units means a smaller install base. A smaller install base means less profit for an exclusive title. This announcement will only hurt Sony’s relations with publishers and developers. They are all now reconsidering how much resources shall they devote to the estranged PS3. The industry may recover in the next couple of years when console prices level out and innovative solutions are presented to aid in the complexities of next-gen development.”
| Randy Pitchford | Page:: ( 4 / 5 ) |
Pitchford added, “We need hardware to play software. We need software to care about hardware. The whole chicken and egg problem is slowed for the millions of loyal Sony game players and game makers who are anxiously awaiting the launch of the new system. Meanwhile, for 360 fans and Nintendo fans, it's probably great news. For my own part, I generally am happy about anything that allows more people, including me, to enjoy better video games, including the games we're making at Gearbox for all of the next-generation platforms.”
FiringSquad also contacted Dean Takahashi, staff writer at the San Jose Mercury News and author of the books”Opening The Xbox” and "The Xbox 360 Uncloaked”, for his opinion. He told us, “The problem that Sony has now created is one of credibility. Can they execute to their plans? Will they always disappoint?” When asked if this will help Microsoft and Nintendo, he told us, “It presents a great opportunity for Nintendo, for sure. Nintendo's console won't be as difficult to manufacture, and it should be able to flood the market with consoles if everything goes well. For Sony, this puts it in exactly the same bad position that Microsoft was in the last time around. It is late, it has an expensive box, and consumers may not care about the difference in quality that results from the more expensive hardware.”
Dean continues, “Microsoft also stands to gain by turning the tables on Sony in a key region. It can gain a larger share of Europe, which is a critical market for anyone who wants to have a bigger share of the games business. Sony is essentially treating Europe as a second-class citizen. That won't sit well with European consumers, who also are likely to be unhappy with Sony's pricing. They may decide not to delay their purchases.”
He added, “It could cause the industry to shift more development resources to both the Xbox 360 and the Wii. In that case, Sony's lost sales are shifted to other players. But the industry has to be prepared for delayed consumer spending, which will hurt everyone. That would repeat the pattern set last year when Microsoft had shortages. That delay hurt companies such as Electronic Arts, which counted on both strong Xbox 360 game sales and current generation game sales which never materialized. Already some analysts are predicting that overall unit sales of consoles will be smaller in this generation because of the higher pricing. That is an unwelcome trend for an industry still bent on world domination.”
| Sony’s path to salvation? | Page:: ( 5 / 5 ) |
1. Sony actually makes good on its latest shipment numbers. Even though only 400,000 units will be available for the US launch, Sony is still insisting that it will ship six million units by March 31, 2007, the end of their current fiscal year. If they can truly solve their problems with the making of the Blu-Ray disk drive, the number of consoles available for sale will be considerable and could boost sales.
2. 2007 PS3 exclusive games will be as impressive as people want them to be. In 2007 Playstation fans are expecting Metal Gear Solid 4 and Final Fantasy XIII will be released, and even if Grand Theft Auto IV is no longer a PS3 exclusive that game will likely spur sales of the PS3 as well. Perhaps Sony will release the Killzone PS3 shooter, and make it as impressive as the E3 2005 pre-rendered movie made it look.
3. The Nintendo Wii could bomb. While Nintendo’s Wii console has a lot going for it, a lot is also riding on the hope that gamers will truly take to the motion controlling features of its wireless controller. There’s been some recent backlash against the controller with some parties feeling that the controller will make people tired and not willing to play games with the controller for long lengths of time. Will this prove true or will Nintendo actually offer a new and more accessible way to interact with games?
4. Microsoft could stumble with its first party launch games. While Microsoft has Epic’s long awaited Gears of War set for release on Nov. 12, other first party titles will miss this fall’s launch time period, including Mass Effect, Too Human and the recently revealed delay of Forza Motorsport 2. Halo 3 isn’t due out until 2007 either. Microsoft needs to have a solid amount of quality exclusive games in the next 12 to 18 months to make potential PS3 owners forget about Metal Gear Solid 4 and Final Fantasy XIII.
With Nintendo set to make major announcements (final launch date and price) for the Wii next week, the Tokyo Game Show announcements set for the end of the month and Microsoft’s X06 event set for October, the console war will become a bit more clear in the next several weeks. However, history may show that September 6, 2006 was the big turning point of the next-gen console conflict, one way or the other.