Sony, PS3, Blue Ray….what’s happening??!

There has been significantly important information circulated recently on Sony’s PS3. First, Sony’s is discontinuing the 20GB version of the PS3 and introduced an 80GB for Korean market only. Then the rumor mills are churning with that Sony plans to cut prices of PS3. Is this a natural product evolution cycle or a defensive move that may relate to sales?

Sony operates like any other company; they abide by the manufacturing and industry rules. The rules of the gaming industry was defined almost 15 years ago when Sony unveiled its PS1. Consoles were sold below cost but good margins made on software. As production capacity increased, consumers enjoyed further price cuts on the console. This was obviously made possible by reduction of key production material costs.

Industry rules are generally driven by product roadmaps and component costs. Both new and End-Of-Line(EOL) models are decided in advance taking into consideration market demands, competition and component roadmaps. Manufacturers negotiate with suppliers in advance to secure production materials suppliers at low prices. Finally, various components and price combinations are evaluated to determine the one that best suits the market and consumer needs whilst preserving a profit margin for the company.

The question then arises as to why new models are being introduced 6 months after the first.

During the launch of PS3 in Europe, Sony announced that 600,000 units were sold in 2 days. This was view as a disappointing launch from a event perspective (source: TF1, LCI, Launch of Playstation 3 in France). If sales to do meet expectations, it is crucial for manufacturers to make quick decisive measures based on market needs. In this case, consumers opted to purchase the 60GB version of PS3 as the price difference with the 20GB unit was $100 only. The 60GB unit came equipped with Wifi capabilities as well. We can safely assume that the entry-level unit was meant to drive people to stores.

Another possible factor is the contract between Sony and its hard drive suppliers. Component issues or shortages would mean Sony has to review its product roadmap. Sony announced that the demand for its 60GB unit is much higher and they are assessing how best to address the consumer needs. However, the fact that the 20GB units are discontinued is not good news at all.

PS3 is one of the best and most powerful gaming unit in the market today. The question is whether Sony has found its right audience. Microsoft’s XBOX is continuously increasing its presence in the market. I am not referring to market shares but ‘love shares’ and ‘technological shares’. Their games are getting better and providing new experiences for the consumers. GRAW II and Halo III is an example. It has even introduced the HD DVD and an Elite edition XBOX 360 with HD support. In addition, they are now binding the console with Home Theater, taking the fight full on with Sony. More recently, they announced linking XBOX with Windows Live Messenger, which is definitely a good way to attract additional audiences.


Let not overlook Nintendo’s Wii. Nintendo continues to produce great games for gamers. They focus less on technology compared to its competitors. They fight on a different front. Nintendo survived with its GameBoy while many of competitors folded or faded away. Lynx from Atari, GameGear from Sega and the fantastic portable PC Engine from NEC are now all defunct. Nintendo continues with its success on Nintendo DS and now Wii is making heads turn and raking up the cash register. This is despite they fact that Wii has nether great games nor HD or Blue Ray support. It does have, however, games that entertain.

So where does Sony fit into all of this? The Blue Ray battle that has started on the Home Theater market will be fierce but Sony using the PS3 as a primary advantage to promote its format. By introducing entry-level units, it is enticing consumers to take up its format. Discontinuing the 20GB unit, may displace Sony from some markets. Unless Sony immediately introduces a higher capacity PS3 model at a lower cost.

Some of the more recent announcements seem to suggest that Sony is taking greater defensive actions. Though PS3 may not be as successful as they anticipated, it appears the new PSP model will help strengthen its dominance. Sony has to continue to innovate to survive. It cannot afford to lose the battle in the HD format as they did in the Betamax many years ago.

We can probably expect Sony to react aggressively in the coming months and years. The PS3 is just one of its ammunition from the arsenal. Hang on, sit tight…the battle is getting interesting.

Digital Home war goes mobile. Review of the actors.

Microsoft just announced that it will be making Live Messenger available through the xBox 360 game console. This move is a reflection of the long ongoing battle which started more than 10 years ago to control the Digital Home market.


This announcement indicates that though the battle for the Digital Home continues, it has moved from the living room to the mobility sector and new weapons introduced.

In previous time, similar industries, for example PC or Consumer Electronics, would be fighting a ‘war’ among themselves. Then a decade ago, people started talking about convergence. This was essentially a declaration of war by the PC manufacturers who decided to invade the living room territory controlled by CE manufacturers.

10 years on, there are still no winners. However, two companies Apple and Sony have clearly taken the lead even though they hail from opposing sides. One from the computer industry whilst the other from the Consumer Electronic industry.

Apple is promoting itself from the ‘Digital Hub’ angle. For Apple, the lifestyle centers around the computer and all your digital peripherals are connected through it. The computer is used as a central storage location. Progressively, Apple is adding components to its digital hub and moving towards the Multimedia entertainment.
It has made numerous announcements over the years but there are 6 very important ones:
1st : Easy connection through all your digital peripherals.
2nd : Release of the iPod, to manage your digital music collection on the go.
3rd : Release of iLife, to manage your digital life (pictures, movies, DVDs) easily.
4th , : Release of the iPod new generation with Pictures, Movies support.
5th : Release of the iTV, to centrally control your digital life from your TV set.
6th : Announcement of the iPhone, to allow interoperability between communication and mobility

Sony is coming from the consumer electronic universe. Computerized technologies are integrated in order to contain the consumer in the Sony Ecosystem.
1st : Integration of a unique interface (iLink) with HiFi components
2nd : Creation of new media to facilitate easy to share between devices. The DAT and MD failed. The UMD and Blue Ray Disc are their new bets.
3rd : Creation of the Memorystick, a uniformed media storage for digital elements across Sony products
4th : Release of the first Playstation, that revolutionized the gaming industry (from both a technology and business point of view)
5th : Release of the PSP, the ultimate technological portable entertainment system.
6th : Release of the PlayStation 3, bonding video games with HD / Home Cinema.
7th : Announcement of Sony Home, a central storage place where you can share all your digital life through the Playstation 3.

Companies continue tofight this battle but none are emerging as a clear winner yet. Most of them lag behind Sony and Apple. However, some of them are extremely strong in technologies (Philips for example) and some of them have good products (Samsung for example). Nevertheless, they fail to share the same success as Sony and Apple. Sony and Apple managed to find that extra ‘little something’ which made the difference. They understood how consumers needs and how they interacted. Other companies either attempted to copy this success or flooded the market with product imitations to gain market shares.

What about Microsoft? In this battle field, Microsoft has the most powerful army but at times failed to launch a coordinated and timeline attack.

The Windows Media Center seemed to be the right move to try to convince the consumers to setup a computer in the living room. However, the complexity and the lack of services at that time contributed to its failure. WMC is now embedded in Windows Vista OS and will hopefully be more successful.It is also surprising to see Microsoft late arrival to the digital music battle.

Zune was Microsoft’s response to Apple’s iPod. It is even more surprising to witness their inability to create sustainable technology. Last year, Urge, supported by PlayForSure technology, was created with the support of famous artists (i.e. Justin Timberlake) and MTV. MTV was supposed to be the ‘cool’ version of iTunes and create a new way to download and share digital music. PlaysForSure technology was intended to be shared among all manufacturers and music stores to allow interoperability among consumers. It failed to materialize. One can probably attribute it to a lack of communication and marketing support from Microsoft. PlaysForSure was promoted through retail stores in USA and manufactures who tried to create a new label similar to ‘Intel inside’. There was also a lack of direct communication from Microsoft to consumers, convincing them to go in the stores and ask for a ‘PlaysForSure’ product. Ironically, Zune does not support PlayForSure.

So, what should we think about the latest announcement from Microsoft on Live Messenger?

This is a clever strategic move that may propel its future success in the digital home battle.Most major companies are now linking mobility to entertainment and digital home. PSP can be hooked up to PS3 and ‘Sony Home’ to allow digital gaming transfer and upload of content. Nintendo DS is linked to Nintendo Wii and can share mini games. So far, these moves do not have strategic or financial impact but will help cement its position as a leader in the digital home battle.

By linking xBox users to windows live messenger, Microsoft is moving in the right direction :
- Connecting users from various databases
- Providing mobility at home in order to increase the consumer experience
- linking games with chat

This is a right move and consistent with its other major initiatives. One was to allow consumer to connect its iPod to xBox 360 and play his own music while playing video games. The second was to create a new label Game for windows and allow consumer to interact between video games and PC.In this digital home battle, the various actors are fighting for the control of the Digital Home and the mobility. Any initiatives to merge technologies and bind consumer is a good move and Microsoft proved they can overcome internal challenges to create future winning platforms.

Let’s see how consumers will react .