Why the PS3 will flop 2
Its amazing how many people read the last one, and the response. This was the article that put me where I am. So this is for all the fans, just try not to be as fanboyish as the last time.
So, the PS3 is out an available, and so are the other consoles. So, after looking at the reaction of how wrong and right I was. Lots of my predictions came true, but at the same time, many came up that I never though of. So, after the launch, how do I think it will fair. Just look at the title. Here it is, back by popular demand. Here is why the PS3 will flop.
The first thing we must look at is why did it fail. What were the major factor to its low sales numbers and publics reaction.
What can I say thats already been said. It's unaffordable. The competition is cheaper. That sums it up right? It may be hard for many to choke the 600 dollar price tag when you can buy a console for 250$, which is one of the major reasons the Wii did as well as it did. And with the 360 already out, it's hard to pick it up. It was defiantly a bad chose on Sony's part as the PS3 will take this one to the grave with it. That and that they are making it for $800 a peice. Not the smartest idea.
While this may not effect sales much, it's the reason you'll go out an buy on, and keep it. Basically, its Residence: Fall of Man, and thats it. Yes, once again, why chose this console when you can get a large library off goofy titles from the Wii, and even larger open from the 360. Not only that, sales numbers can be equated to the fact that people bought it, didn't like it, and recommended other consoles to there friends.
Advertising plays a large role in selling a product, and Sony has been known for it's advertising; however, since the "I'm playing with nuts" campaign, it hasn't been looking so good. While less annoying, Sony's ads make no scenes. The idea, I presume, is to look hip and modern by being so abstract. While the idea looks good on paper, it fails once you see the actual commercial. There are three in all. One with the eggs, then the Rubik's cube and then the baby. The egg one is the worst. What is Sixaxis? Well, most of you will know since you have seen the E3 segment. The average Joe isn't going to know what "Sixaxis" means. The other one is the baby. From what I have heard it's actually a reference from Space Odyssey 2001. Um, hello, do you think your target audience saw Space Odyssey 2001, or let alone remember it. Even if it's not, it still makes no scene and even when it tells you it's the graphics, it doesn't maake MUCh more sence. The only redeeming one is the Rubik cube since the simplest of minds would be awed by the exploding cude. It also doesn't help that in your launch date a "1" looks like a "/". That and you launch on "11/17".
It might not help your console when you mentioned its name and "people dieing" in the same sentence. Why this wouldn't change some people views, in simple minds(most people) they would hear "death" over anything else and then immediately make a decisioning that its bad. Not only that, but there were people selling it on E-Bay. While this isn't as bad as the last one, people would think bad of it, by think of the stupidity of both parties. The press wasn't as well recived on the PS3 either with many publications talked up the Wii and talked little about the PS3, unless words like "dissapointment" came along with it.
Now, did you read my console analysis. You DIDN'T!? Well, if you did you'd see my discussion on momentum. So what is it? Well, the idea is that a console is based off of it's launch. If it sells strong, it continues to sell strong. If it sells few units then it will continue to sell few units. What stops this is that it can slow down a bit and speed up a bit. In order to do this you need a strong game. I mean STRONG. Halo 2 is a great example of one. It pushed X-box by leaps and bounds. The problem is it isn't much. Despite these sales boost, it only put the X-box at over 20mill. Thats good, but a long shot putting it in the lead. It only beat out the Gamecube, who also sold over 20mill. units. So, whether a console does goos or bad, expect it to continue this trend.
The Domino Effect
The major idea may be something I like to call the "Domino effect". Yes, I know it's not very original, but hear me out.
The first thing is the developers. So, your a developer making a game for the PS3. Making a PS3 game is hard work and takes a lot of time and money, so you expect a return on your investment. Well, if you knew anything about the PS3's launch the games to console ratio was about .98. In other words, the average number of games bought was between 0 and 1. So, with about 18 or so launch titles do you think your game sold a lot, especially since one or two games are owned on most
consoles. Also, we must take in the the PS3 has only barley past the 1million mark. So, even if everyone bought your game it would only sell a little over 1million.
Here's where a problem arises. Developers don't get 100% of the profits. Some of it is distributed between the publisher, the retailer, the warehouse, and the console manufacture(in this case, Sony). The developer actually only get about 20%. So, if your game didn't do so hot because of the above reasons, your not going to be too happy.
So you poured a lot of time and money into making a PS3 game, but aren't going to bee making money. Well, what do you do? You start making Wii and 360 games. The Wii's game to console ratio was 2.5 meaning most people had between 2-3 games. Thats pretty nice, and also factor in that it's easier to make a Wii game then one for the PS3. Also, don't forget your potential sales are higher, with the Wii at 4million and the 360 at 8million. I expect most development teams are going to have at least one 360 game or Wii game planned along side any PS3 production(if there is one).
Now this will directly effect the consumers. If there is no games to buy on the system, will they buy it? Probably not. Developers are no longer big on Sony's console, so they won't make games for it. So instead they will make a Wii or 360 game. In fact, expect most development teams to have at least one or two other games in production for every one PS3 game. The problem really arises when you notice that the Wii and 360 owners are getting all the games. So instead of buying a PS3 you buy a Wii or 360, which further increases this problem, as more developers will continue to do this. It doesn't help that Sony is way behind because that will be a major factor in causing this occurrence.
The last leg is the retailers, and just like the consumer, they will be directly effected. If no one buys them and developers aren't even making games, why stock them? This is also true as your seeing a lot of PS3s in EBs and Gamestops. Go to your local retailer and you will probobly find at least one PS3. Demand is declining. They have no where to go. Don't forget, there's a risk of them cycling. If one person buys a PS3 used at an EB, does Sony get more money? Nope. They get money for the first one, but after it's returned it becomes EB's/Gamestop's. The other idea here is if the person brings it back to the store again. What going to happen i they are going to cycle to the stores. Of course, this isn't as likely, but is defiantly going to hurt Sony, and if something similar happens, then expect retailers to stop taking them.
The Snowball Effect
For most, these ideas may sound like crap. Looking at sales, the PS3 did well. It sold over a million, which is great for a console when it first comes out. Then this sounds like Sony will do fine right? Well, the Dreamcast did well before it kicked the bucket as well. The main problem is that these problems will get worse and worse as time goes.
Well, what is the biggest question. Why will this happen? Well, lets look at what made the PS3 hit 1 million in the first place. It's my little friend hype. You remember him. He makes games that are mediocre seem good. He's a little devil isn't he. Well, he got his hands on the PS3. Yes, it's sales were directly a byproduct of hype. The main reason people were camping out was that they were smart. They were going to sell the system on Ebay. Only problem. Everyone got smart at the same time. So all the Ebay people buy them up, and those who wanted one got it from Ebay. Then there was a surplus. No one bought them, and they went right back to the store. So basically, you have the majority of the sales right there. In fact, the PS3 may never sell this well again.
It's also worth mentioning that the PS3 also recived sales from the fact it was a launch system. Launches usually do well, but then will either hit or miss. Much like a Windows platform, just less of the latter. Most systems do well at launch, no surprise there. Expecially on of the caliber of the PS3. So, with this in mind it's not hard to see why it hit a high number.
The biggest problem they have it that $600 price tag. Well, in actuality, it may be the 800$ production cost. People don't want to buy a $600 machine. They want to buy cheaper. Can Sony lower there price. Nope. They have to wait for it to go under 600$ before they can turn a profit, and then they have to wait till it gets even lower before they can drop the price(to continue to make a profit). The problem arises when you see Nintendo and Microsoft have 100% controll over the price. Right now, the Wii and the X-Box 360 can be sold for less and still make a profit. They could lower their prices right now, but because Sony's system is so much, they can wait. Wait until the PS3 has a price drop and then cut there own prices. By the time that happens, both companies production cost have dropped and they could cut it by about $100. Thats stings doesn't it.
The other thing is exclusive titles. While yes the PS3 has exclusive titles it's the fact that Nintendo and Mircosoft have more. While Sony has both Metal Gear Solid 4 and Final Fantasy 13, Super Smash bros Brawl and Halo 3 trump it in terms of sales. The thing is that while Sony has exclusives, Nintendo and Microsoft have more and theres have more potential to sell more units. We mustn't forget Nintendo still has Super Mario Galaxy and Metroid Prime 3 and Microsoft has the newest Grand Theft Auto game.
Speed of production also put's Sony at a handicap. Even if there was demand for the PS3, Sony just will not be able to keep up with demand. Since it takes a lot of resources to make PS3s, they won't be able to keep up with sales. Essentially, a customer could easily look toward the competitor's product. The other thing is rate of games. Even with a lot of exclusives, Nintendo can Microsoft will be able to churn out more at a faster rate. This puts more pressure on Sony to make sure they are better and a lot more.
So what is the inevitable result? Since Microsoft and Nintendo can out run Sony in every factor, it will eventually all come back. MGS4 and FF13, while good game, just can't compete with the competition's line up, nor will they be able to make enough games or consoles. The other problem arises when there are multiple versions of a game. The PS3 will get it last, and if it was a must have the consumer will buy the competition's first. This will become a problem with Grand theft Auto as the 360 will get it first, then the PS3. Why buy the PS3 version when you can get the 360 one earlier. Even if they come out at the same time, the 360 may be the one ppurchesed because of that incesent price tag.
Another thing is if we look at the PSP. The two system parallel each other to a tee, so if we can predict some troubles for the PS3 by looking at the handheld. Theres is also some tidbits that are influenced by it. The first is it proved Sony is not holy. They came into the console industry and dominated for a decade,, but once they tried their hand at the handheld market, Nintendo told them. While it did well compared to other, it was no match for the DS. This proved that Sony
can't own it all.
The largest influence is the UMD. This was a media format for the PSP that would play movies. Good idea actually, letting people watch movies on the go. Sadly however, most people didn't like it. The reason is why pay the same price for a movie that they could just watch on their TV. Their big, beautiful TV. So what about Blu-Ray? Well, everyone in America(or at least 99%) own a DVD player. So why in the world would they buy a Blu-Ray player or a PS3. Sadly, Sony has yet to tell their consumers why they should. Its pretty yes, but still, everyone uses DVDs. It's hard to jump media formats, and Sony should know as DVD was perhaps the only successful one. Replacing DVDs isn't going to happen quickly, or any time soon.
Also remember that Blu-ray requires an HDTV to use it. You can go buy an HDTV right now if you wanted to, but why bother? It's expensive and you lready have another TV. Don't expect it to rocket off eitheer. Yes, all cable stations will be broadcasting in HD, but that doesn't mean America will go out and buy one imediatly. Even though online gaming has been a hit, only fraction of everyone uses it. It isn't widely mainstream just yet, even after about four years. It will take time, which Sony doesn't have. They need it NOW! Too bad, it may not be mainstream for another four to five years.
Another major parallel is that long game drought the PSP had. After launch, there were almost no games until August. Luckily, it's not the same with the PS3, but similar. Some games will be coming out in February and March, but thats about it; after that it's a long wait for some new ones. Nintendo, on the other hand, has plenty of games coming then. It wont be hard for the competition to zoom ahead if they can utilize the April and May months. This will surly put a damper on the PS3 as it did with the PSP. That long drought will put the competition way ahead. The difference was PSP was ahead first, the PS3 though, isn't.
Effects on the Company
So what are the long standing effects on Sony as a whole. Worst case scenario, they go out of business. Don't think I'm serious? If everything I said comes true, and the PS3 is truly a flop, then Sony could very well go bankrupt in a few years.
The reason can be broken down into two parts. The first is the production cost. As I've said before, it's about 800$. So that segment of Sony will lose money, and the PSP isn't doing well enough to balance out the loses. The other is because now, Sony's main area of profits have been videogames. I'll elaborate.
Over the last few years, Sony has began to move more into videogames. Should be obvious with how much they invested into the PS3. Well basically, they are making money from two areas, videogames, and movies. Problem is movies haven't been doing to well. The next big break for Sony is Spider Man 3, which should come out in 2007, but besides that, it's strictly gaming now. So if that area of Sony stops making money, and starts losing it, they are removed. With Sony removing one of their large profit sources, they now have to rely on movies. Well, Spider Man 3 will do well, but how long will it hold them for? The result will be downsizing as the company now has to hope that the movie sector will balance out the loses from the other areas, which have been losing money. This is a real problem for Sony. The PS3 could be taken off the market in 2008 if this continues, and Sony will collapse in 2010.
The number one reason why all this could happens is that Sony relied to much on their name. While Nintendo and Microsoft have done well to change their strategy and increase their market shares, Sony hasn't. Sony has been sitting in their corporate office thinking that they will stay profitable. The major price tag and graphic overhaul are there solely so Sony can keep a strangle hold on their market share. Too bad that graphics aren't everything. They also thought 3rd parties would always have their back, but it's hard when the competition are doing so much better. Sorry Sony, you lost your way. You dug a hole and your going to have to be the ones to dig yourselves out.