Nintendo vs. Sony: It’s Like Atari vs. Betamax

Overview

I was trolling around YouTube and came upon three gaming commercials - one vintage ad for the Atari VCS 2600 (circa 1977 - check out the Wikipedia entry here), one current ad for the Wii and one new-ish ad for the PS3. After viewing them it hit me like a brick, and in a more intuitive way then I’ve written about previously: Nintendo has captured the imagination of families and casual gamers in a way not seen since Atari stormed onto the family entertainment scene back in the 1970s. Atari was and Nintendo (both the Wii and the DS) is all about community, ease of play and, most importantly, fun. And the ads clearly show this. The cultural disparity between Nintendo and Sony is de-nuded in the commercials, where the Wii ad is whimsical and fun, with lots of different types of people involved - different ages, different ethnicities, different styles. It is the gaming console for everyone. The PS3 ad, conversely, doesn’t have a human being anywhere. There is a space-age looking gaming console and a Rubik’s Cube. That’s it. It conveys an image of power, of coolness, of intellectual superiority. This might work for the hard-core gamer but it is hard to imagine Mom or 9-year old Jane chuckling at the PS3 ad, while they’d both be roaring at the goofy and entertaining Wii commercial.

The Punch Line

Does this at all remind you of Sony and the Betamax? Sure, it was “better” - but what did that mean in the end? Not much. The Mini-Disc? Pretty cool, but again, lacking mainstream appeal. The PS3 - whiz-bang graphics, loaded with power, blu-ray, blah, blah, blah. Who cares? What do you want to be, Sony? Because your messaging (narrow appeal) and your stated intent (broad appeal) are very different. And it is only getting worse. Every day. You’ve got a steep hill to climb, Howard. It seems to me that the handheld battle could portend the outcome of the console battle, where the DS is kicking the crap out of the PSP (outselling it by almost 2:1 per VG Charts). And now you’re out to take this realization and apply it to a re-design of the PSP. So how’s it looking? Because thus far, it ain’t looking too good.

The Buzz on the PSP(2)

From Kotaku 03/12/2007:

Rumor: No Denying It, PSP2 is Coming

And not only that, it looks like it’s coming later this year. There
have been rumors ever since the DS Lite hit that Sony was also planning
a redesign of its portable. Some of those rumors have ground in
reality, some of them are just wishful thinking. Nothing official has
been announced, and Sony has shot down any chatter regarding a redesign
saying it’s not happening. With all this, PSP2 looks to be a pipe-dream
— Like it’s not happening.

Apparently, it is.

Various third party and highly placed sources state that the PSP2 is
coming. Speculation is swirling around the industry, and third party
publishers are hoping to tie their games to the PSP2 launch. Thing is,
Sony has yet to pass along any information about when that will be.
Meaning we won’t see big third party titles at launch.

Word has it that a big announcement will most likely hit at E3 with
Sony unveiling the redesigned portable. An announcement of launch date
(which should be sometime 4th quarter) is entirely possible as well.

From 1up.com 03/13/2007:

Something needs to happen with the PSP, ASAP.

That’s the message retailers have, according to our sources, sent Sony.
With sales of the PSP lagging (Sony’s PSP hardware shipments to
retailers last Fall were down 72 percent over the year before, only a
meager 10,000 units in the U.S.), word is that a few big name retailers
have given Sony a mandate: drop the price or they’ll drop the system
from their stores. Entirely. With shelf space at a premium, the
expectation is for Sony to do something substantial to keep its
hardware moving — or else.

********************

Speaking with John Koller, the Senior Marketing
Manager for the PSP, at the Game Developers Conference last week, 1UP
learned that a price drop was not announced to retailers at Sony’s Destination PlayStation retailer event last week.

But something else was.

According to Koller, Sony did share plans that got retailers excited.

********************

It seems that Sony hopes to repeat the success Apple has had with the
iPod’s pricing structure — thanks to new colors and models, the iPod’s
price has largely remained the same over the years. Koller also
admitted that Sony paid close attention to the spark in sales the DS
Lite iteration of the Nintendo DS caused once it released.

From pspfanboy.com 03/13/2007:

Analyst: lower price, younger demographic

Analysts get paid a lot of money to come up with stuff. While most of
the info they spew out is incorrect, it’s still fascinating to see the
kooky predictions that they come up with. GameDaily BIZ
reports that Lazard Capital Markets analyst Colin Sebastian believes
that Sony will be targeting younger players in future PSP campaigns:
“Sony could be preparing to bolster the PSP handheld market with a
shift in marketing towards a younger demographic, possibly including a
hardware price cut later this year.”

A lower price combined with some more kid-friendly software a la LocoRoco
may help the PSP compete directly against its biggest competitor: the
DS. Certainly, Nintendo has reaped the benefits of going for the
younger gamer: will Sony be able to strike gold as well?

From DailyTech 03/14/2007:

Sony has never denied
the possibility of revised hardware for the PSP, but always took the
stance that there were no plans for a second release of its portable.
That is, until Ray Maguire, a Sony executive in the UK, was caught on
record on Tuesday saying that the current PSP is just the “first
iteration” of the handheld, according to GamesIndustry.biz.

********************

Sony has
released a “smaller, lighter” version of each of its PlayStation
consoles, leading many to believe that the PSP will also go through a
similar treatment. The original PlayStation was redesigned and
rebranded as the PSone after a significant shrinking of form factor.
The PlayStation 2 also underwent a downsizing transformation, along
with a change in the optical drive mechanism to increase reliability.

A redesigned PSP may help bolster sales of Sony’s
handheld, which has been playing a distant second to Nintendo’s wildly
popular DS Lite. Last year, Nintendo re-designed its innovative, but
clunky, handheld with new colors and a smaller size and was met with
critical acclaim and impressive sales numbers. Despite the hype
surrounding the arrival of the PS3 and Wii, it was the Nintendo DS that
outsold every other video game system, including the PSP, during last holiday season.

And This Means?

That Sony is scrambling. Nintendo changed the playing field in the handheld wars by taking risk - by changing the input (stylus) and introducing the two-screen layout - while Sony focused on graphics and processing power. The results thus far are conclusive - and damning - for Sony. The big question is whether or not the proposed changes are meaningful enough to tip the competitive balance, and if they are truly going to result in a handheld player with mass appeal. As noted above, it appears that as goes the handheld market so goes the console market, with the Wii continuing to trounce the PS3 by a 3:1 margin. Further, another interesting tidbit are the latest web traffic stats for the “Big Three” native sites - Nintendo.com, Xbox.com and PlayStation.com. Nintendo.com is up 91% year-over-year, while PlayStation.com is down 8% over the similar period (FYI, Xbox.com is up a healthy 47% YoY). Conclusive of Sony’s defeat? Of course not. But are the trends disturbing for Sony? Absolutely. At some point Sony has to get the joke: is it super hi-tech and niche or mass market? Because right now it is straddling two worlds and not serving either one - or its shareholders - particularly well. Let’s hope Sony has learned some lessons over the past 30 years - if not the last 3.

The author does not hold a position in the securities of these companies.