Blu-ray sinks the PS3

Sony's Blu-ray fiasco is the gift that keeps on giving. The latest gift: handing the game console market to Microsoft and Nintendo.
Written by Robin Harris, Contributor

Sony's Blu-ray fiasco is the gift that keeps on giving. The latest gift: handing the game console market to Microsoft and Nintendo.

The Blu-ray albatross The Wall Street Journal (subscription may be required) reports that US sales of the PS3 fell 19% last month from a year earlier - while rivals Wii and Xbox are likely to see a rise.

The money quote:

Sony's strategy of selling a pricey game machine with advanced features and cutting-edge components appears to be backfiring as a deepening recession has U.S. consumers more price sensitive than ever.

If Sony doesn't close the gap with its rivals, it could risk making the PS3 an afterthought to game publishers. . . . At the end of September, the Wii had a wide lead with nearly 35 million units sold since its launch in 2006 compared with about 22 million Xbox 360 consoles and 17 million PS3 machines. Nintendo last month sold 2 million Wii machines in the U.S., while Microsoft sold 836,000 Xbox 360s and Sony sold 378,000 PS3s . . . .

A high price for Blu-ray The PS3's problem is price: $399 vs $250 for Wii and $199 for Xbox Arcade. Even at $399, Sony loses money on every PS3 sold!

The included Blu-ray player is a big chunk of that cost. Key to Blu-ray's victory over Toshiba's HD DVD, Blu-ray is now sinking the PS3 - in a more lucrative market.

Blu-ray also slowed the PS3 introduction as it raised costs. Who OK'd risking a multi-billion dollar game business to win an optical disk format war?

Feature creep or Christmas tree? All tech companies place big bets on new technology. The trick is to choose tech that will result in a visible customer benefit.

To be fair to Blu-ray, the PS3 was festooned with technoporn like the broadband cell processor - great on paper, hell to develop for - and a large disk that hurt sales. As the Wii proves, most people want to have fun, not geek bragging rights.

If an engineer is someone who can do for a nickel what any fool can do for a dollar, the PS3 designers weren't engineers, or marketers either. They crammed the PS3 with technology that didn't make a difference on the screen - all potential, no kinetic.

The Storage Bits take Sony's battling fiefdoms have created the worst of both worlds: a struggling 3rd place finish in the game market; and an optical format that has so many self-inflicted wounds that it won't succeed before better - faster, higher capacity and cheaper - optical storage arrives.

Blu-ray's costly licensing requirements mean that small producers won't move to it anytime soon. That keeps media volumes low and media prices high: at $0.40/GB it is 4x what magnetic disk costs and only a quarter of what the far more convenient flash thumb drives are running.

Meanwhile, the download market keeps moving forward as codecs improve, broadband speeds rise and studio execs learn about the Internet. The bricks-and-mortar crowd wants Blu-ray to succeed, but Sony has driven itself into a ditch during an economic hurricane.

Fixing that problem will take more intelligence and creativity - and I'm not talking root kits - than Sony has shown in years. Time to focus, guys. Taking back market share from Microsoft isn't easy, but it can be done. Good luck.

Comments welcome, of course.

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