Reader Counter-Point: The PS3 is Doing “Quite Well”

I get lots of interesting mail from readers, much of which expands on the themes I’ve written about in Information Arbitrage. I recently received an interesting and detailed note concerning Sony’s PS3, offering a perspective backed up with some data that is much more rosy than mine. In the spirit of equal time, I thought I’d share the contents of this note in full-text, unedited, in order to let my readers make the call.

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I enjoy your blog. I have been reading your posts about the
console industry and have some counter data-points.


I understand you look at things from the PoV of an investor. As an investor in
Sony, I see data (listed below) which makes me confident of the PlayStation
platform. It indicates, at least, that the PS3 is doing quite well and that the
Wii is not likely to destroy the PS3 or Sony’s profits from SCEI.

1. The PS3
launched at a very high price, yet the sales are doing as well as the PS2 in
its 1st year. In that context, it is quite a testament to its appeal. If we
time-align the 2 launches: http://vgchartz.com/hwcomps.php?cons1=PS2&reg1=All&cons2=PS3&reg2=All&cons3=PS3&reg3=All&align=1

2. And interestingly, PS3 sales are doing as well as the xbox360 (time-aligned
from launch), though the PS3 launched with competition from the 360 And Wii
while the 360 had no competition during its launch year. Again, a testament to
the PS3’s appeal. http://vgchartz.com/hwcomps.php?cons1=X360&reg1=All&cons2=PS3&reg2=All&cons3=PS3&reg3=All&align=1

3. For FY06, 15M PS2s were sold. In fact, high-quality titles are still in the
pipeline for the PS2, as part of Sony’s typical long life-cycle and
support.  The importance of the PS2 sales is that these are likely to be
PS3 buyers in the future, given backward compatibility built into the PS3 and
of course, Sony studios-exclusive franchises popular with PS2 gamers. (The Wii
will likely hit that number by Nov (1 year after launch) but is unlikely to
exceed ~18M since it is now at under 10M.)



4. The PS3 and Wii are in different market segments. I don’t have studies to
quote, but there are unlikely to be many gamers out there who would buy a Wii
if they find the PS3 too expensive currently and then not buy a PS3 when the
price falls to 250-300 bucks.



5. Sony has a massive number of exclusive first-party titles in the works due
to the large # of game studios it has.



6. Lastly, check out HOME on the PS3 as a glimpse of a possible future. Good
stuff.

I agree that the Wii is a game-changer but it is not attracting away the kind
of gamers that Sony designed the PS3 for. Wii seems to be expanding the size of
the gaming industry by pulling in people who may not have gamed otherwise. But,
if what the Wii offers is a motion-sensitive controller, adding that to the PS3
is quite easy, given that it already has wireless motion-sensing built in.


As an admirer of the console’s hardware engineering and its feature-set, I hope
they add that, if for no other reason than the fact that a larger install base
means more and better games.

P.S. My gut-feel is that the Wii will fade out.
Imo, it is fairly gimmicky and gets boring surprisingly fast. But, thats my
personal experience only. The other 10M buyers may disagree  =)


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I think this reader has hit on some pretty important points that warrant mention. And it is not as if the PS3 is destined for financial failure, notwithstanding the myriad missteps by multiple layers of Sony management. But I also believe that price cuts and an adaptation of its existing controller is not a prescriptive for the PS3s success, especially if Sony wishes the console to appeal to an increasingly broad-based audience. And it is not as if Nintendo will be standing still, either. It can reduce price. It can add lots of functionality to its existing feature set. It can more fully leverage the community aspect of its platform, bringing even more people together to engage in contests that can be enjoyed by gamers of all levels and stripes. And, most importantly, it has caught the imagination of game developers, for whom creating a broader palette of games is both fun and less financially risky than for those creating for PS3 and Xbox 360. In short, I think my reader has raised great points and I appreciate that he raised them, but I remain unconvinced that Sony management will get the long-term PS3 strategy right and/or that Nintendo management will get the Wii strategy wrong. But hey, that’s just my two cents.

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