Bodhesatva said:
Sony can stand to lose money on the PS3, there's no question. A few billion perhaps, it's hard to say, but they'd probably jettison the division if it kept that up for long.
The problem is that Microsoft can stand to lose even more money than Sony can -- a whole lot more. If Sony makes five dollars elsewhere, Microsoft makes fifty, and that's the problem here. Sony's strategy for market dominance relies on burning those extra 5 dollars, but Microsoft can burn a great deal more than that. I'm going to re-emphasize this, because I still feel people don't realize the enormous difference between Sony and Microsoft. They see that both companies make billions of dollars, both companies have lots of other avenues of revenue and profit, and see each as giant, money making organizations. They're basically the same, right? No. Microsoft has 7-8 times as much money in reserve and has 10 times as much profit per annum, so it's not even close. |
Sooner or later Sony will have to face the reality that Microsoft is not going to run out of funds or abandon the market for more lucrative and greener pastures. Owning 'the box' on your TV is a HUGE deal, but the difference in the high end CE arena is that Sony
wants to own that box, while Microsoft
needs to own that box. Sony cannot afford, and will not win, a protracted battle with Microsoft if this goes on another seven or ten years with another round of consoles. If Microsoft cannot build a better, more reliable console, they will instead buy exclusivity and/or gobble up the best studios. It's not a major risk for Microsoft, because there will still be a broader value to their business strategy if they wrest exclusivity for all the major software releases, not just in terms of the 360 vs the PS3 and the Wii, but also for the PC vs Linux and OSX.
Sony is a victim of their own success. In beating down all-comers for 10 years and dominating the home console market with a combined 220m units sold, they woke the 800 lb gorilla in Redmond. The PS3 became too ambitious in trying to challenge two markets at once.
The mistakes aren't uncorrectable, but they have significantly stalled the PS3s rate of adoption. The issue Sony will now face is Microsoft beating them to the punch on price drops and Microsoft flexing its muscle with channel stuffing. I'm not really sure how Sony can change their game plan, but towing the line that "all is fine" and "we're in it for the next 10 years," isn't a winning solution. The only route Sony can go right now is to figure out some way to get the price down or to alternately start throwing around a lot of incentives to cross purchase a Sony TV, a PSP, or a whole bunch of BR discs. Another viable option, IMHO, would be to bring back the neutered 20Gb PS3 at $479 to compete with the Elite. The 20Gb versions seemed to be selling well enough even at $499 -- at least in my area they were always out of stock.
