Searching for where the Playstation 3 went wrong
December 17th, 2008
The Wii has continued to shatter sales and industry expectations throughout it’s two year lifespan by selling over 41 million units, easily becoming the sales leader in the current generation console wars. Even with the year advantage held by the Xbox 360, the sales of the Wii have been a juggernaut during both the holiday seasons, as well as the traditional low sales periods of the year such as the spring and summer. While the Wii has brought a breathe of new life into an industry that had an arguably stagnant consumer base previous to it’s launch, it is important to look at the other profound effects that the Wii has had on the industry, predominantly the hardware sales of the previous console leader, Sony.
The true question that needs to be examined is how Sony, over a three-year period, has gone from the market leader to the bottom of the charts? With most questions there isn’t one straightforward answer. A recent article from Eric Krangel of alleyinsider.com puts 3 reasons behind the poor sales numbers; It is too expensive, Blu-Ray still isn’t a factor, and There are no must buy console exclusives. While I applaud Krangel’s sound arguments, I can’t but feel that there is some empty gap when it comes to his reasoning.
While here in the United States we like to think that the value of the all mighty green back as an unwavering, it is important to take inflation into consideration. With the Playstation 2 launching in 2000 for 299.99 it seems like the price of the Playstation 3 is outrageous by comparison. However with inflation taken into consideration, the actual cost of buying a launch Playstation 2 with current market values would actually be around $370, much closer to the current $400 cost of the base Playstation 3. So in actuality it isn’t really the cost of the Playstation 3 that is hurting it’s sales, but infact the perceived value of the dollar.
One of the biggest selling points of the early Dreamcast vs. Playstation 2 arguments was the inclusion of DVD playback support in the PS2, which is often credited as the reason for the overwhelming early adoption of the console. With the Playstation 3 and its use of Blu-Ray as the console’s proprietary format, Sony has tried to once again create consumer demand for their product through the consoles alternate functionality. While Krangel states that Blu-Ray remains a non-factor, there is no evidence to think that it is a reason for the lackluster sales of the console. Pointing out that added functionality as having a part in the downfall for a product is simply misinformed and a show of ignorance on Krangel’s part.
The lack of any Console exclusives is another point that Krangel uses as the cause for the poor sales of the Playstation 3. Taking a gander at the list of million selling games on PS3 shows that 8 out of 20 are exclusive to the platform. Further exploration shows that up to this point the only major loss for a console exclusive from the PS2 was the timed exclusive release of the Grand Theft Auto series. While other franchises have also gone to a platform neutral release policy, the final implications of this situation is a hard one to place blame upon, especially since Sony has done a fair job at securing exclusives, such as Resistance, Motorstorm and Uncharted.
With all of Krangel’s points having significant holes in their reasoning: What is the cause of the current troubles of the Playstation 3? I believe that it all boils down to the change in the consumer expectations of what a video game console is, all brought on by the introduction of the Wii. Just like the PS2 changed consumer perceptions, the Wii has ingrained itself in both popular, and consumer culture. No matter the price, functionality or games on the system, the Playstation 3 lacks the base appeal of the Wii, and the sales will continue to suffer because of it. With the Xbox 360 Arcade being offered at a lower price, as well as Microsoft’s pack in strategy both failing to help overtake the Wii’s sales in November, direct evidence of this change in consumer perceptions can be seen. Love it or hate it, the Wii remains the single roadblock to both Microsoft, and especially Sony’s split domination in the hardware market.
-Eric Wall
Tags: Blu-Ray, Industry News, Nintendo Wii, Predictions, PS3, Xbox 360
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December 17th, 2008 at 4:18 pm
I agree with your conclusions, Sony and Microsoft are splitting their market while Nintendo is owning the (now massive) casual audience. The price difference between the 360 and PS3 is definitely hurting Sony but I think Xbox Live is a real problem for Sony as well. Sony’s Home was intended to one-up the sense of community that is Live, unfortunately for Sony it appears to be destined for failure. Though I think Sony has finally come to their senses and they realize they are in real competition with Microsoft, I would be surprised if they get their act together before the PS4. I’m just not sure the success of the Wii can be replicated by Sony or Microsoft, they are wooing different audiences at this point. I’m not even sure Nintendo will be able to do it again, no Wiipeat if you will… sorry that was awful.
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December 17th, 2008 at 7:55 pm
Though I agree with you that Krangel’s argument aren’t rock solid in making the case for PS3’s failure to lead the market I don’t feel your argument is very strong in picking apart his. After reading his article myself I think I have a better understaning of his point. So…think of this as a…mini rebuttal if you will.
#1) True….adjusted for inflation the PS2 would have cost $370 in today’s dollars but it is not a fair comparison. $299.99 is a strong price point. Once you get above that it’s harder and harder for the casual gamer or average consumer to stomach it. Parents really struggle to find this purchase legitimate in this economy. And that is without any games or periphirals. Wii tempted many people into making the plunge with it’s low price point. People who otherwise wouldn’t have purchased a console. It even tempted me into doing something I have never done before….I bought 2 consoles…in the same generation from two different brands. So it’s not just the affordability issue….it’s also the fact that the environment is much different than what the PS2 faced. Xbox was unproven and Nintendo wasn’t even in the same game park anymore. On top of that you were getting a DVD player on the cheap. Which brings up the second point.
#2) You argue that the lack of enthusiasm for the blu ray format isn’t a reason for failure to lead in the market and so Krangel was off the mark. I disagree. I think Krangel was pointing to one of the REASONS for PS2’s success and how the PS3 has been unable to take advantage of the strategy of including a relatively inexpensive access to new and otherwise expensive piece of hardware. The DVD was a BIG step up from VHS…not just in picture and sound quality but in general coolness alltogether. VHS began to look more and more like the old bulky 8 tracks of our father’s or older brother’s generation. There was genuine fervor and excitement for the DVD which is absent here in Blu Ray. I don’t think that’s Sony’s fault necessarily but if it was their strategy to replicate what the PS2 did I think it was a poor one.
#3) Lastly….console exclusives. I think exclusivity will be very, very rare in the future. So when you do have exclusives they need to be strong in identity and popularity. Gear of War and Halo are so heavily branded with Xbox I don’t see them going over to Sony any time soon. Other than Metal Gear Solid….and Final Fantasy…I don’t think the average gamer out there can think of many big name exclusive titles that can rival what the PS2 did. It’s just a different environment. I think Xbox has done the best at creating and maintaining exclusive brands while luring away other brands out of exclusivity with Sony. Wii wins hands down because Nintendo has simply expanded it’s install base.
In short the three points that Krangel made are in effect 3 major keys to the PS2’s success that the PS3 failed to achieve. Add the slumping economy and it just makes it worse. I agree…..a major price cut is in order to keep PS3 “in the game”. With at least to other respectable and viable options for less money ….why would the masses pay $100 or $200 more for a PS3? Sony hasn’t been able to answer that question convincingly just yet. The 360 was my choice after 2 generations with Sony. The main reason? Price. The secondary reason? The 360’s evolution of it’s game library and the xbox live was just too nice to pass up. I haven’t had any regrets. I had hoped to someday buy a ps3 but I’m still waiting for the cost to come down to earth. In the meantime I’m enjoying my 360 and my wii….which together cost what it would have cost to get one PS3 at launch.
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Eric Wall reply on December 18th, 2008 5:17 pm:
Do you really believe that the price point is the driving factor behind the sales of the Wii? I think it contributes to it, but the Wii could be priced over the three hundred dollar price point and still find mass critical success. Look at all of the people still shelling out the big bucks for hardware, there remains such a demand where it has created a sellers market for the console. Simply look at the sales of Wii-Fit, a game which costs 90 dollars, yet has over 11 million units sold. Wii-Fit is one of those games that once again changes perceptions, something that Sony has been unable to accomplish.
I also fail to understand how you think that the perception of the value of a dollar isn’t a valid point. Gamers begrudgingly pay an extra 10 dollars for their games, which is essentially right in line with the rise of inflation in the market over the past 8 years. The fact remains that things become more expensive over time, Sure the launch prices were a tad high, but they are now right where they need to be.
Exclusivity will always be something that exists (Certainly as long as Nintendo exists in some form of Hardware Manufacturer), it seems that coming early to the party with the Xbox 360 has helped Microsoft in branding certain franchises in the Xbox camp, but to say that Sony has lost all of their PS2 exclusives is talking nonsense. God of War, Ratchet and Clank, Kingdom Hearts, Gran Tourismo, all seem planted quite happily with Sony.
The point I wanted to make in writing this was that it isn’t really what the PS3 has failed to do, it is what the Wii has succeeded at. By Changing consumer expectations make the keys to the PS2’s success completely pointless.
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Jenni Chasteen reply on December 19th, 2008 11:18 am:
While I agree that you’ve proven Krangel wrong here I wouldn’t exactly say that this article is about the Wii changing expectations… since it’s a small point you make at the end and you’re not really comparing strategies thoroughly. I think the overall point of this came across as “The PS3 isn’t under performing because it sucks; it’s actually got a lot going for it. Also Eric Krangel smells.” lol
This was a good read—I think Krangel was quick to dismiss the PS3 and it sounds riduclous to say a console isn’t selling well because it has extra features no one cares about. (And I would aruge that while right now a lot of people don’t have HDTVs, that’s going to change as prices drop and more HD content becomes available to people). And I’m not exactly sure what he meant by LBP not being a “game changer” when I believe that it will LITERALLY change gaming and I know a few people who are buying or just bought a PS3 and THAT’S the game that won them over.
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Scrybe reply on December 19th, 2008 1:39 pm:
I think you misunderstand my point. In short what I am saying is that the same strategies that worked for the PS2 monumental success as a sales leader could not be replicated because of the changed landscape in terms of gamers, the economy and the software. The PS3 is an awesome machine but I think the pricepoint (though you may rightly believe is unfair) does matter to the average person. Sure…people are shelling out $90 for the Wii fit but those smaller transactions seem to be more palatable to the massess then the what appears to be a large investment for the PS3. Keep in mind I’m referring to the first year PS3 was out. I’m a single dad so I talk with single moms all the time who don’t know anything about the gaming consoles….but they all like the Wii….and the #1 reason I get from them is price compared to the other 2 consoles. The other is that they actually played it somewhere and connected with the experience the way Xbox and PS3 just couldn’t do.
And I never said PS3 lost ALL of it’s exclusives. I tend not to speak with such finality. I was trying to stress that franchise names that are commonly known to the ‘masses’ (read: non gamers) used to overwhelmingly be connected to Sony…the dynamic is shifting now for whatever reason.
Again…the overall point had nothing to do with whether PS3 was great or not…I think my point (that I derive from Krangel somewhat) is that the old strategy and keys to success for the PS2 don’t work in this new landscape.
Lastly…I don’t think if the Wii was priced in the same range as teh 360 and PS3 it would be a monumental a hit as it is. I think it would have still been popular and even the leader in sales initially but it’s just not worth spending 400 for what you get.
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Jenni Chasteen reply on December 22nd, 2008 8:57 am:
I think the bottom line here is that the Wii is cheaper, simpler and appeals to a mass market and the PS3 is expensive, robust and appeals to core gamers–the end.
What I mean is you have 2 different types of products… like comparing a home karaoke machine for kids to a turn table and mixing board; yes they both play music but they aren’t intended for the same audience and no one would really compare them as direct competitors. And maybe that’s just the turn that gaming and interactive entertainment is taking…
With that said the overall message that Krangel makes that the market has changed the Sony is going to have to rethink their strategies is true, but it also doesn’t mean that they’re doing everything wrong either… because at the end of the day, even though the Wii is selling through the roof, as a gamer (and not a soccer mom) I can’t even tell you when the last time that I turned my Wii on was. That says to me that there’s certainly a market, albeit a smaller and more passionate one for the PS3 (which yes, I own).
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