Let the console wars begin

If the nature of the ads on Comedy Central are any indication, the gaming console majors - Sony, Microsoft and Nintendo - are pouring big bucks into promoting their consoles. Every other ad on the network seemed to be gaming-related.

If the nature of the ads on Comedy Central are any indication, the gaming console majors - Sony, Microsoft and Nintendo - are pouring big bucks into promoting their consoles. Every other ad on the network seemed to be gaming-related.

The frenzy around the release of Sony's Playstation 3 shows the advantage held by the market leader from the previous console generation. With over 200 million sold in the Playstation series, Playstation is the brand to beat as it is most closely associated with "gaming" in the minds of the average consumer. The riots at stores, the gunfire, and the consoles flipped on eBay for thousands in profit shows the excitement that the market has for this new console.

Maintaining that excitement is going to take canny footwork on the part of Sony. Sony seems to have filled their console chock full of cutting edge technology. Besides an 8-core CPU and the inclusion of an integrated Blu-Ray drive, Sony has included a lot of "exotic" technology (quoting an analyst at iSuppli from an article on OSNews:

"To give an example of how cutting-edge the design is," Rassweiler stated this morning, "in the entire history of the iSuppli Teardown Analysis team, we have seen only three semiconductors with 1,200 or more pins. The PlayStation 3 has three such semiconductors all by itself. There is nothing cheap about the PlayStation 3 design. This is not an adapted PC design. Even beyond the major chips in the PlayStation 3, the other components seem to also be expensive and somewhat exotic."

Exciting stuff, but there are costs to this. As the aforementioned article notes, Sony loses as much as $300 for each 20GB console sold. This is in contrast to the XBOX 360, which according to the same article, now makes a modest profit as costs have been reduced dramatically over the course of the year (at launch, they were estimated to lose $126 per console).

This matters, as consoles make money to the degree that they manage to sell enough games to offset the up-front loss. Sony has a ways to go to generate that profit (though their costs will surely go down over time just as Microsoft's did, though those "exotic" components may slow that process somewhat), and in a pinch, has less room to lower prices. XBOX 360, if it is now profiting a bit per console sold, has much more price flexiblity, which can be very useful in a three way contest between very compelling consoles.

Exotic components are also the reason Sony had to delay the PS3 from last Spring, and why there are likely to be supply issues through the holidays. This matters in the run-up to the Christmas buying season. People are likely to want to buy a game console for Christmas now that all three options are available. Unfortunately, when they go to the stores, they should have no problem finding an XBOX 360 or a Nintendo Wiis (the latter of which doesn't seem to suffer from the same supply issues, likely because they didn't try to compete with the performance of either XBOX 360 or PS3), but have a lot of issues tracking down a PS3. Non-hardcore gamers don't buy multiple consoles, so this should be a cause of concern for Sony.

To make matters worse, most consumers aren't likely to notice much in the way of visual difference between the XBOX 360 and PS3 games - I know I didn't (I haven't had a chance to play with Nintendo Wii yet). Perhaps this is because the early games for the PS3 are mostly ports from other platforms. On the other hand, we've also heard that an 8 core CPU (versus the XBOX's 3 core) is very hard to program, and there's a lot of question whether 8 cores will really make much visual difference.

But, then again, the frenzy around the PS3 release shows that Sony has serious fans, and if customers continue to buy every console they produce, Sony could have the last laugh. Should that happen, though, their success would have been in spite of their actions, not because of it. Next time around, Sony execs should remember that production issues matter. VHS beat Betamax not on technical merits, but execution. If the technology interferes with the execution, sometimes it's better to defer technology till its possible to add it cost-effectively...something Microsoft (and Nintendo) are in a much better position to do than Sony.

By the way, if you have an XBOX 360, I highly recommend "Dead Rising" by Capcom. If the idea of killing zombies with anything you can get your hands on (electric guitars, frying pans, gumball machines, mannequins, golf clubs) while trapped in a large shopping mall appeals to you, then this is it. I started playing it around 9:30 PM on Friday, and when I checked my watch, it had somehow become 3:00 AM the next morning. In other words, gamer crack.

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