A Key Ingredient of Sony's Successes

[The_Liquid_Laser]

Dallinor said:

The_Liquid_Laser said:

It might seem like Sony's strategy is better or maybe Nintendo and Sony have equally viable strategies.  However, Nintendo has the better strategy in the long run.  Nintendo can survive and be profitable even when it is at the bottom.  Sony can't.  Nintendo does not sell hardware at a loss and they made a small profit during the Gamecube and Wii U years.  On the other hand the Vita was too crushing of a blow for Sony.  They had to leave the handheld market.  Even the PS3 years were pretty bad for them, and they actually weren't too far behind the Wii in total market share.  If Sony ever had a Vita-like turnout in the home market, then they would have to leave gaming entirely.  Nintendo has already had a couple of Vita-like results in the home space and they are still around.

So, in the end, Sony caters to developers because they have to.  If they don't then Nintendo will force them out of the marketplace.  Could you imagine a generation where Nintendo got CoD and GTA as exclusives on top of all of their first party games?  They would be unbeatable.  Sony will never let that happen, because they need these franchises just to survive.  But they are also vulnerable, because Microsoft can get these franchises too.  Generation 7 shows that Sony actually has to be very careful in how they approach things now.  Because they have the first party lion, Nintendo, on one side, and they have the third party thief, Microsoft, on the other.  They have to make sure they distinguish themselves from both companies.  They were actually lucky in Generation 8, because both the Wii U and XB1 flubbed their launch.  We'll have to wait and see if they are careful enough with the PS5.  If not, then they might end up with another PS3 situation or worse.

That's actually by no means a certainty. They went into the red with the PS3 with the razor blade model, but they didn't have the massive network income they do now. Even if you cut their market share in half they would still have significant revenue streams that didn't exist for them in the past. Digital income has changed how PlayStation makes profit. They're financially stronger now than they have been in the entire history of the company.

The Vita is insignificant in terms of overall loss to PlayStation.

The PS3 years were unquestionably the worst years for PlayStation.

For that scenario to take place I'd imagine that there's an alternative service to home consoles that's cheaper, more accessible amd more popular and as they become obsolete Nintendo would also not be immune to that impact either. It would be an evolve or die situation. 

History shows they can both co-exist and be highly successful in the same space. Sony are undoubtedly more concerned with MS.

1) The Vita was, in fact, a significant loss.  How do I know?  Because they wouldn't have gotten into the handheld market to begin with if it wasn't significant.  They invested a lot into their handheld lines and lost.  More importantly it shows that Sony cannot survive at the bottom.  Nintendo can.  Whenever Sony gets a loss this bad they have to leave the market behind.  This is why Nintendo has a better long term strategy.

2) Playstation has always used the razor and blades model.  It still uses this model.  They take losses early on to get a lead in marketshare and then get their profits in the rest of the generation.  Or in the PS3's case they took heavy losses early on and never got enough marketshare so the whole generation was a big loss for them.  Their most conservative version of the razor and blades model was actually the PS4.  They lost so much on the PS3 that they were conservative on the power and cost of the PS4, and it made them a ton of money.  It also helped that Nintendo and Microsoft flubbed their launches.  Right now it looks like the PS5 is going to be a powerful console.  They are hoping to take losses early on and win a lot of marketshare like with PS1 and PS2.  It could easily turn against them like it did with PS3 though if they don't win enough market share.  One thing is certain.  If they are releasing an ambitious (pricey) console, then they are not looking to repeat the PS4.  The PS4 was not ambitious.

Subscriptions will not save a failing console.  Subscriptions do legitimately make the PS4 profitable, because it has a lot of marketshare.  Subscriptions are directly proportional to install base though.  They make a successful console succeed more, but they won't save a failing console.  Playstation can still not survive at the bottom.  If they have another PS3 situation they will still lose a lot of money.  If PS5 sells like the Vita...they will have to leave the market.

I doubt their home console market can turn into a Vita situation over the course of one generation though.  Playstation has too much going for it.  However, that doesn't change the fact that Nintendo's strategy is better in the long term.  Nintendo can last through a winter that Sony can't.  Every company has it's share of bad luck.  What happened in the handheld market will eventually repeat in the home market.  Given enough time, Nintendo will permanently come out on top.