Sunday, February 11, 2007

Sony PlayStation 3 Revisited

If you haven't noticed, I've been subjective about the PS3 before I started writing for this blog. When in May of 2006 Sony announced that the premium (read: only version anyone would ever consider of the ) PS3 would cost $600, I was pissed. The PS2 is a fine console and by now damn cheap, too. Sony has fumbled with the PS# since the beginning, and they've been arrogant about it to boot.

Sony assumed that people would not care about the exorbitant price tag - relying almost solely on brand name, just like I assumed - and buy the next version of a video game console. Sony's downfall came when they tried to push the PS3 as a media platform as well as a video game console. Here's the golden rule: If it plays video games, people will know it as a video game console. It plays Blu-Ray movies and MP3s? Consumers will still recognize it as a video game console. The Xbox 360? Yeah, it plays media, but if will forever be known as a video game console for consumers.

Sony pissed me off by figuring the cost of a Blu-ray disc player into the PS3, thus raising the price. Not only do I not want to spend $600 on a video game console, but I also have no interest in either of the high-def movie disc formats.

The market actually surprised me. The PS3 craze lasted only a week after the PS3's American launch, and then the whole franchise promptly imploded. When SCEA (Sony Computer Entertainment America) President Jack Tretton promised $1200 to anyone who could find a PS3 on store shelves, the writers of webcomic Penny Arcade found $13200 worth of merchandise in less than an hour. Simply put, PS3s aren't exactly flying off the shelves.

For the best market indicator, we turn to eBay. At the time of this writing, there are 1043 PS3 systems being sold - 98 Used. Two months ago, there ere 10 thousand such auctions. Many Playstation 3 consoles were selling for over $700. At this point, on the other hand, you're hard pressed to find a PS3 selling without a bundle for more than $600 - with games and controllers, $750 at most.

The scalping supply for PS3s is shrinking. Right now, there are 1886 Wii systems for sale on eBay - nine-fifths of the number of PS3s. In a month or two,practically no one will be selling PS3s as they're being sold. We will no longer see the majority of PS3s sold in mint condition. The PS3 seller will turn into a consumer who has finished using his or her console and now wishes to sell it. I'm not going to say that the PlayStation 3 has reached market saturation, but the supply curve is shifting downward; since all PS3s are the same, that means the price is declining, as well.

Sony has managed things very badly. They've completely misjudged the market. Even the future doesn't look bright. You know why? At this very moment, Nintendo Wiis are flying off the shelves. And with those Wiis are games. And when a consumer spends hundreds of dollars on the video game system, the chance of buying an additional console is minuscule - especially when the marginal cost of that second console is over twice what you paid for the first. Couple that with a low penetration of high-def television sets - necessary to fully enjoy the PlayStation 3's capabilities, and you have yourself a quagmire. Sony is taking a hit that will stay with them for years to come.

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