http://blog.newsweek.com/blogs/levelup/archive/2007/05/21/monday-morning-quarterback-for-april-2007.aspx,
In a May assessment of NPD numbers in N'Gai's blog, Geoff Keighley reported that -
" Already third party executives are telling me that if PS3 sales stay below 100k for 3 consecutive months (sales for PS3 were 82k April, 81.6k May, 98.5 k in 5-week June), PS3 SKUs may start disappearing from release lists and in turn create a wealth of de-facto exclusives for the Xbox 360. Sony could stem the tide by supporting third parties financially with co-marketing for exclusivity (or even buying an exclusive window on a game), but I continue to hear tales of Sony expressing a lack of interest in securing third party exclusives. One Sony executive told me last week that Activision's Spider-Man 3 Collector's Edition for PS3 is a great example of how third parties might want to approach the PS3. Exclusive games or exclusive windows don't make a lot of financial sense to either party, so instead differentiate the PS3 version with exclusive content. "
N'Gai responded to Keighley's argument by saying:
"The reason nearly a million fewer people have bought PS3s than bought PS2s during each system's first six months on the market is that at $599, the PS3 isn't as perceived to be as good a value as was the $299 PS2. At this point in the PS2's lifespan, it had the following meaningful exclusives: next-gen Madden, SSX, Onimusha, the Metal Gear Solid 2 demo with Zone of the Enders packed in, NBA Street and Medal of Honor Frontline, with Gran Turismo 3: A-Spec a couple of months from release. PS3 has Resistance: Fall of Man, MotorStorm and...what, exactly? Many of us were waiting to see how much the PS3's positives (brand strength, Blu-Ray playback, superior computing power) would offset its negatives (high price, lack of killer apps, tricky architecture, Xbox 360's lead and Nintendo simultaneous arrival) during its first six months in stores. Now we have the answer: not much.
At Sony's pre-launch press event, you put me on the spot and asked me "How much would you pay for PS3?" Now, that was a bit of a trick question, because thanks to my job, I'm fortunate enough to get every machine free of charge. So after I finished stammering, I replied, "I'd want the $600 model, but $500 is my psychological threshold (60 Gig SKU is now $500 - but it is going to be phased out for a new 80 gig $600 sku). So I would wait for either a price drop or the release of Metal Gear Solid 4." In other words, if I had to spend my own money, I'd still be waiting. And it would appear that many North American gamers feel the same way.
Nevertheless, I don't think we'll see many third party games that are currently being developed for both PS3 and Xbox 360 drop their PS3 SKUs, even if Sony has multiple months under 100,000 units sold. The reason is threefold: Ubisoft CEO Yves Guillemot estimates the cost of a port adds just 10 percent to the cost of development; marketing budgets don't increase significantly with the addition of another SKU; and Microsoft isn't willing to pay for the majority of those titles to become Xbox 360 exclusives when they know that their larger installed base means that the bulk of those sales will take place on Xbox 360 without Microsoft execs having to lift a finger. Ironically, the latter is the same reason why Sony isn't willing to pay for exclusives: as Phil Harrison himself pointed out, the PS3 ecosystem is so unhealthy right now, any negotiations for a third party exclusive would be a) weighted almost completely in the third party's favor; and b) unlikely to have much of an impact.
If, having suffered a $2 billion loss during its last fiscal year, Sony is not willing to lop at least $100 off the price of the PS3--and you're correct that a price drop alone is unlikely to move the needle enough--that leaves the company's first party operation and a handful of remaining third party exclusives to shoulder the burden. But great games take time to make, and it's unlikely that such lookers as White Knight Story, Uncharted: Drake's Fortune, Metal Gear Solid 4: Guns of the Patriots and Final Fantasy XIII will be ready by the end of 2007. (SOCOM: Confrontation will get some PS2 dead-enders to upgrade, but the PS3's $599 price tag will remain an inhibitor.) And without potential killer apps on that scale, Sony will more or less be forced to cede 2007 to the Xbox 360 until both a price cut and better software manifest themselves. In the interim, Sony will have to endure message board mockery and mainstream media stories about the PS3's failure until they take the aforementioned necessary steps to reestablish some positive momentum
The one silver lining in Sony's cloud is that Microsoft still seems unable to take full advantage of its first-mover status. There's a $299 SKU, a $399 SKU and a $499 SKU--the last of which nearly outsold the PS3 all by itself. Ghost Recon Advanced Warfighter 2, Guitar Hero II and Spider-Man 3 are on store shelves. Yet Microsoft still couldn't break 200,000 units in April? I've said this before, and I'll say it again: this is not the kind of sales performance one would expect from an eventual market leader. Total Xbox 360 sales in North America stand at 5.4 million units; meanwhile, Nintendo has already sold 2.5 million Wiis. At this rate, Nintendo will almost certainly blow past the Xbox 360 globally in this calendar year, and has a shot at overtaking it here in North America, Halo 3 and Grand Theft Auto IV be damned.
I'll conclude my hardware analysis with this: I've also heard the same statements from third party publishers that the Wii is going to run out of steam. And while six months do not a generational champion make, I'd have to ask these executives: upon what basis are they making these assumptions? I hope they're not basing them on the so-called high-def revolution, because many people who have HDTVs are buying them because they're bigger and flatter, not because of picture quality, as evidenced by the fact that a lot of people have HDTVs without any HD content or signals. The Wii, meanwhile is optimized for 480p displays, and remains a phenomenon nonetheless. And when we look at the sustained superlative performance of the Nintendo DS in the face of technologically superior competition from the PSP and mobile phones, I wonder if this refrain that the Wii fad will soon die off isn't merely wishful thinking on the part of publishers who have overextended themselves on next generation consoles and high-end PCs, and are now trembling at the thought of reinventing themselves to compete in a world where Nintendo is number one."
Now, why did I post this?
- Do we think PS3/360 games are becoming 360 exclusives?
- Who do you agree with more in reading the situation - N'Gai or Keighley
- What would you do if you were a third party developer? I especially wonder about EA since it is a company whose empire was built on the PC, Genesis, PS1 & PS2.
- PS3 sales will likely increase to around 130-160k in July, but 360 may still beat it, or sell comparably, and when the August-Dec rush begins 360 should go back to mopping the floor with PS3 in terms of sales (lower cost entry barrier for Madden, Halo, GTA).
People are difficult to govern because they have too much knowledge.
When there are more laws, there are more criminals.
- Lao Tzu
