Below is my response to a Finalsquall post in the "Do you believe in Sony's 10 year plan?" thread found here.  It is a quick, post-specific explanation on my take on the fundamentals of console cycles.  It should be noted that there are many externalities that can have a profound effect on console sales (one I forgot to mention in the below post is brand name), but that the cycle itself is a reasonable depiction of reality.

If this thread gets some attention, I may write a larger, more in depth and detailed article on the subject.

finalsquall said:
I believe Sony is playing it smart. MS is being aggressive with their approach and for now it is working. Sony has to wait for the right time. Sony has a lot of room to lower the price and sustain it. MS can't go down much lower.

I believe that Sony will lead the way in the end. The PS3 has loads of potential and we will start to see a new standard in gaming and entertainment. Sony's Candle stick has a lot of wick but is slower to burn, whereas MS has a smaller candle wick and will burnout quickly. Wow that's Penis envy for ya :P

So in the end? Yes! 10 yr plus for the Ps3 :D maybe 4 more for the 360.

No.

Sony has no room to lower the price and sustain it at the moment.  As of their last financial report the PS3 is causing them to bleed money.  If you mean that because it literally costs more they literally have more room to drop prices in the extreme long run then you are still making a flawed argument.  Ultimately, two things drive console sales.  A hand in hand marriage of price and a large, quality library.

The nature of the console cycle is thus:

Price and games begat console sales, console sales begat game development, game development begat strong game libraries, strong game libraries begat better console sales, better console sales begat higher economies of scale, higher economies of scale begat cheaper consoles and so on.

Sony's problem is that they are already behind the eight ball, and the nature of the console cycle is that they will fall FURTHER behind, not catch up.  Having said that, it IS possible for externalities to effect the function of the console cycle.  One common one would be first party games.  But the problem is (with the SOLE exception of Gran Turismo 5) Sony doesn't have a single upcoming first party game of a high enough caliber and notoriety to really effect any sort of noticeable shift in the console cycle.  Unfortunately for Sony, the only other common externality involving the HD consoles is company liquidity.  Microsoft has a tonne of money to buy EXTRA games from third parties in ADDITION to those received through a console cycle that ALREADY benefits them.

Of course the cycle GREATLY benefits Nintendo.  But they are effected by the negative externality that presumes game developers dont feel they can garner great sales on the system.

you could've responded to his post in that thread y'know...just saying.

I did...

This IS that post directly copied over...

Now anything relevant to say?

I actually think Sony's 10 year plan will work. What Final probably meant is that within 3 years the manufacturings costs of the blu ray and the core processor will probably have dropped dramatically making the console much cheaper. Sony can then continue to drop the price in line with their manufacturing costs.

I'm not saying that the PS3 wont still be being made ten years after launch. I'm saying that it wont be selling in meaningful quantities.

It was relevant albeit not to the subject of the post. I don't think 10 year plan means no new consoles released. If you view it that way, it makes more sense. This "10 year plan" thing has been beaten to death though. You'll do well to leave it be. Many of us may not even find gaming of relevance anymore when that time comes.

The focus of the thread is an explanation of the console cycle, and why it prevents a strong PS3 recovery versus the other consoles as many predict.  Not the 10 yr plan per se.

Fine then, I'll help you out. This gen is very different from any gen before it. Thus, using previous generations to predict may not be accurate. Ps3 looked to be dreamcasted early in it's life and that didn't happen. It's fallen behind again and the naysayers are competing for first to write an article.

In reality though, the best selling console this gen is very different form it's competition i.e it's offerings are vastly different.  Thus, the overlap between potential customers isn't as great as it was last gen. The only guaranteed shared potential customers is between the ps3 and 360. If you compare these two only, the ps3's future isn't as gloomy as it's painted.

It still makes sense to multiplat both of them and the 360 will never break away enough to make multiplats worthless without an M$ moneyhat. Thus, ps3 will not stop seeing 3rd party support. Also, ps3 is ahead of the 360 in Japan, thus, those making HD-type games that are JP-centric (think yakuza 3) would be hard pressed to ignore the ps3 regardless of what it's WW market share is in the future.

Things were a lot different last gen where the xbox, GC and ps2 were all pooling from the same customerbase (like the PS360 now). Thus, there became not much reason to buy anything other than the ps2 at this point in it's life. I don't think we can say the same about the wii. This is why it will struggle to reach 50% marketshare and I doubt it will ever reach 60%.

Granted, all this doesn't point to a "recovery" for the ps3 but if you're like me and don't believe it's dying by any metric then it doesn't need to "recover". It will sell at relevancy for the next 3/4 years in the least and continue to see software support. this is partly because of the "hardcore" nature of the ps360 crowd but these people are limited unlike casuals. This is also why I risk losing my 60% bet on the wii because casuals are potentially limitless but I do believe the wii will slowdown soon enough like it has in Japan.

In conclusion, the ps3 would be relevant for however long this gen lasts. It would see a successor in due time but would likely still be kept around for a few more years. 10 is optimistic though. Counting the ps3 out however is waaaay premature.

Good post pristine, and I agree with some of ur points. To say that the wii will struggle to reach 50% is kind of a stretch. However, one point that I whole heartedly agree with is that practically everybody wants to be the first to write an article when the PS3 "dies." It's like they just wish it would happen sooner than later so they can get it over with. Why? Its beyond me.

It's been stuck in the 48% range since the 360's price cut. It was breezing through marketshare previously. There were many threads expecting the wii to reach 50% before 2008 ended but that never happened. This is why I used the word "struggle".  It's march now and it hasn't even made 49%. It's still selling a little over ps360 but at this rate (only 20K over PS360 last week), it would take a long long time to get to 50%.