Wednesday, January 18, 2006

Who loses next generation?

I just opened this site and so I thought I should make a new post. It has been a couple weeks since my last because I have been very busy studying the securities industry for my big test.

There are many dynamics that create the videogame industry. It is easy to look back and see what specific things turned out affecting past generations. Using some of these principals it becomes possible to TRY and predict what the future could hold.

If we look at the dynamics of the Playstation brand we can see what contributed the greatest to it's success. Or, rather, we can look at what started the ball rolling. Obviously great games and good marketing came into play as well. The PS1 was developed as an add-on to the SNES about halfway through the life-cycle of the SNES. The whole deal went very sour and it provided Sony with a great opportunity to put some finishing touches on an existing hardware unit and, most importantly, it let them release a system halfway through an existing generation, allowing them to have better technology and hardware than the competition. On top of this, many game developers were eager to develop software on a medium where they didn't have to worry about cartridge chipsets and the complications with programming on them. This resulted in a platform with many games and hardware with much stamina compared to the competition. When the N64 was released, the developers were content to stay with Sony as it was a sytem they were used to and because Nintendo stuck with cartridges (a choice that benefited gamers but not developers. You remember at the time the PS1 had like a 4x CD-ROM and loading times were painfully slow).

The PS2 was the king of this latest generation. Not in quality of games but certainly in terms of hardware sales, which of course pushes software sales regardless of their quality. This is not to say that there weren't many great games on the PS2, only that they were a somewhat smaller part of the dynamic that created such a huge success for Sony. The PS2 came to market about a year before the competition, giving them a huge advantage in terms of real time. I will go into this in greater detail later when I talk about the 360 because Micro$oft has the time advantage this upcoming console generation. A second huge advantage it had was being the first home-console with backwards compatability, providing not just a new console, but a replacement with a huge library. It makes sense that they would hold on to many of their base as they already had games that would run on it and they didn't have to wait for "their" system because it came first to market. I think this has translated into a false sense of security for Sony.

The strategy for this upcoming generation is not set. All the pieces have not been revealed yet. So it is impossible to try and predict everything. Having said that, there are a few facts that we know.

#1. Sony will not be first to market this console generation. Obviously the 360 has taken this award already. Looking at gamers in general you see a large base of young men, a class of society not well known for their patience. How many PS2 owners will have a 360 instead of a PS3 simply because they couldn't wait another year for the competition? I would be willing to bet on a lot, in America at least. Sales in Japan are very bad for the 360 making me wonder why they didn't release those consoles in the states instead.

#2. Sony will not have the only backwards compatible system. Micro$oft did what they could to bring backwards compatibility to the 360. Its not perfect, but it works well enough and with enough titles to get the job done for mostly everyone. Nintendo is pulling out all the stops and making the Live Arcade feature of the 360 look like a cheap knock-off with their virtual console. Granted, it is hard to say for SURE because we haven't seen it, but the concept is undeniably much better than Live Arcade. I have also heard that Nintendo is having talks with Sega to possibly bring Genesis titles onto the virtual console. On top of this there are rumors floating around of being able to interchange graphics on older games or maybe purchasing a visually and audibly upgraded version of older titles. I don't put much stock in rumors but I wouldn't be surprised if it turned out to be true. Still, the fact remains that Sony cannot market the PS3 by touting backwards compatibility.

#3. The PS3 will not come to market halfway through the generation. This helped the PS1 to have superior hardware at a reasonable price. The PS3 will have cutting edge technology, but it will cost the consumer alot of money. Speculation puts the price at around five or six-hundred dollars. Sony hasn't said anything so the price could be higher or lower, but if it is lower Sony will have to pay out the difference from their own pocket and if it is higher it will prevent many consumers from buying one. Either position hurts Sony quite a bit.

#4. Developers will not pick Sony based solely on media format. All three media formats are comparable in terms of ease to the developer with just a couple points. The HD visuals of the 360 require more disk space, especially since they are doubling everything to run on standard definition. Some developers are having problems fitting it all on a single disc. Nintendo will be using discs pretty much the same size as Micro$oft but without HD content it means they have more space freed up.

Those are what I can pick out as being the facts. Each of them eliminates a former advantage of Sony. Obviously in order for them to keep their market share they need to give us something new. Something that the consumer and developer can each weigh and decide if they want to keep following Sony. I think the 360 coming out a year earlier really hurts the Sony marketshare in the U.S. How many people will hold out for a name brand? More will wait just for a specific game, but how many games on the 360 will already be out? Certainly there are many more aspects to this dynamic that we need to explore. Unfortunately we have to guess on the rest of these aspects, as we don't have evidence of a reaction. We know what will go INTO the equation, we don't know what it will produce.

#1. Sony has said they will not have a centralized online community. With Xbox Live being so popular and Nintendo introducing their own online solution it is a wonder that Sony hasn't come up with an answer to this problem. With online gaming becoming ever more popular I am sure they will eventually implement a system, but how long until they decide to?

#2. Sony is losing developers. It is hard to tell how long this will go on, or to what extent but more and more developers are going 3rd party to cut down on their development cost ratios. They already have a viable software product, why not market it across platforms? Many exclusive Sony developers are cutting their ties. Also, never forget that developers are real people, just as excited to make new games with better graphics with which to express themselves. How many games will come out on the 360 because developers didn't want to wait for the PS3? When a game takes on average 2 years to make, a year makes a huge difference.

#3. Nintendo is very popular in Japan. Sony's largest base is in Japan. If the Revolution turns out to be a more enticing/exciting/cheaper system it only makes sense that many people who owned a PS2 would rather own a Revolution, especially considering the backwards compatability of the latter. How much market share do you think Sony might lose to Nintendo in Japan? Of course this same point applies in the states.

#4. Halo 3. Look, Halo is not, in my opinion, the best FPS game ever made. It is a solid title with many great features and it certainly is ONE of the best FPS games. But hands down, it is the BEST multiplayer FPS. This coupled with Xbox Live make Halo a killer app for 360 (assuming it doesn't suck. Bungie has a pretty good track record though.) I keep hearing that Halo 3 will hit stores when the PS3 does. There is a hardware push associated with the release of any AAA title and Micro$oft will definately sweep up some potential PS3 buyers at this time.

#5. Nintendo is a great big wildcard. Speculation runs rampant from 3D visors to displacement mapping, to Nintendo diapers so you don't have to get up and pee during your game. I don't pretend to know and would be hesitant to make a guess on what their remaining secrets will be but looking at their history and from a purely sensical standpoint the secrets they are holding on to will be the biggest and best. Assuming this is the case, Nintendo could sweep up market share in a big way. Where do you think those consumer will come from? Nintendo says they want to increase the market by selling to the non-gamer, but those sales will creep in slowly. It is the existing gaming community that will immediately test, judge, and buy/reject the Revolution as a concept. Considering some of the announced launch titles for the Revolution it is safe to say that everyone will have a chance to play an incredible game using the new controller.

I said earlier that Sony needs to offer something new to keep their market share, and they ARE. I don't think though, that some of these offers are going to be what consumers will latch onto.

#1. HD. Obviously Sony has some big competition in this market in the form of a big white box, with a HUGE black power converter. Also, as I stated in an earlier blog HD-TV penetration is at about 15% in the states right now. How many consumers will want to shell out extra money for HD they can't personally take advantage of? On the flip side Sony will be the only one to offer a system with built-in capability to play HD movies in the form of...

#2. Blu-Ray. Sony is putting a lot of effort into pushing this new media format. It might succeed but if it doesn't Sony would be odd man out in the movie world. And miking lasers that are capable of Blu-ray and standard DVD is much more expensive.

#3. Complicated hardware architecture. More and more you hear developers speaking against the PS3. With multi-threading being so new there are no development tools to help developers meaning that games that take advantage of this technology will take longer to make and be more expensive, both to the developer and the consumer. The PS3 cell processor is the equivalent of an eight core processor, exponentially complicating multi-thread programming. The director of the FFVII tech demo at E305' stated it would take 300 people 5 years to remake the game at that level. How many games do you think will take full advantage of the PS3 hardware? How many consumers want a product that may never reach its potential before it is obsolete hardware?

#4. Cutting-edge features. Did you know the PS3 will be able to refresh at 120 frames a second? Did you know there is not a TV on the market, HD or otherwise that refreshes at 120hz? How many features in the PS3 will the average consumer ever need? You can hook it up to 2 HD-TV? You can have 7 people play off one system? There are two video cards in the PS3. These cards aren't even out on the consumer market yet, but they will hit at $600 a pop. How much money will it cost Sony to manufacture each PS3? How much of that will be passed on to the consumer?

On top of these things the PSP is a wasting product for Sony, meaning it costs them more to manufacture than they charge the consumer. And certainly the PS3 will be a wasting product, though we can't know at this point to what extent. How much money can Sony lose on this multimedia front?

I don't think that Sony will exit stage like Sega. Not yet. But these factors will all contribute in their own way to change the market share between console manufacturers in the upcoming generation.

Rivulet aka Benjdude

6 Comments:

Anonymous Anonymous said...

You're right about Halo- it gets a lot of credit as being the best when it really is just ONE of the best. Xbox is really marketing to mostly FPS fans( online or otherwise-yadda yadda)...which will eventually cost them. Personally I'm not that interested in FPS's and I like that Nintendo has a wide varieties of game types to choose from-whether they be cutsie girl games (yes, I like Harvest Moon) or Soul Caliber or whatever. The technology that goes into the games isn't that big of a deal to me since being a gal I haven't ever gotten into it. I just want games that hold my interest. But I appreciate your opinion/ predictions for the gaming idustry's up and coming tech. advances. =)

January 19, 2006 11:43 PM  
Anonymous Chaos Incarnate said...

I personally agree. I predict that the PS3 will not be the top dog on this race. The failing category I would like to point out is the issue of software. Thus far, the only thing next-gen has offered us is bigger and better. Graphics are cleaner and faster, XBox Live is God compared to what it used to be, and consoles are becoming more inclusive in terms of what home media they offer. It's sweet, I can go to my friend's house and play DOA4, with the in-game music being streamed off of my iPod. However, nothing is new, everything is bigger and better. We have seen Perfect Dark before, we have seen Call of Duty before, we have seen wireless controllers and shooting games and sports games and fighting games and XBox live before. Sony's games will look great, but they will, again, be little more than a visual update.

Before you played WarioWare, have you ever seen anything like it? Before you played the DS, did you ever imagine something like that would happen? Before you saw the Revolution's controller, could you concieve that gaming could interact with you like that? The Revolution is not just Nintendo's new console, it has been their business plan since they first entered the fray.

January 20, 2006 2:49 AM  
Anonymous Chaos Incarnate said...

Oh, and I forgot to post something. This is an article written by a self proclaimed Nintendo hater.

http://www.firingsquad.com/features/nintendo_revolution/

January 20, 2006 2:51 AM  
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