More Microsoft/Sony Notes
Some of you thought that I was picking Microsoft to "win" the next-generation console wars in last week's column.I didn't intend to frame the question that way.
Sony has executed very poorly in the last twelve months, while Microsft has executed extremely well. However, in terms of installed base worldwide, Sony has a tremendous advantage.
There are certainly scenarios where Sony could implode, but no reasonable man would bet on those scenarios. Given Sony's overwhelming strength in Japan, and the often-perplexing nature of the Japanese market to non-Japanese companies, it is almost 100% likely that Sony will dominate the Japanese market, with Nintendo a distant second and Microsoft an even more distant third. That gives Sony a built-in advantage.
However, here's the important point, I believe: Sony doesn't have to implode or even do poorly for Microsoft to do very well.
All markets have plenty of room for two successful consoles. What they don't have room for are three successful consoles. At least, that's historically been the pattern, and I see no reason for it to change now. Microsoft can be extremely successful in the #2 position in the U.S. and Europe.
I think that Microsoft will be a far stronger #2 than they were in the last generation, and I think they'll do much better in Japan this time (mostly because they couldn't possibly do any worse), but Sony is still the leader.
However, and this may sound contradictory, while Sony is clearly the leader, there is far more pressure on them than Microsoft. The PS2, even with the mediocre last twelve months, was about as successful as a console could possibly be. It will be extraordinarily difficult to repeat that with PS3. Microsoft, on the other hand, has a much easier compare when it comes to installed base than Sony does, and much more opportunity to improve its market share.
If you're wondering what the "Sony disaster" scenario could possibly be, I think there are two possibilities. The first relates to pricing. Sony can't bring out the new console above the $299 price point. A scenario where the bare-bones system is $299, with more expensive versions with added functionality available (hard drive, etc.) is fine, but $299 is the ceiling for the basic console. If Sony so strongly believes in their market dominance that they try to squeeze $349 or even $399 out of a consumer, they will have committed a fatal error.
Second, it appears to be a given that Xbox 2 will be both easy to program for and easy to port to the PC. If the PS3 turns out to be very difficult to develop for, U.S. and European might scale back or delay projects until middleware is available that streamlines development. That doesn't mean that companies won't develop for PS3, but if even 15% of projects move to Xbox 2 because of easier development, it's a significant shift. Remember, Microsoft eventually dominates markets through attrition over time. This is the kind of strategic advantage that is Microsoft's bread and butter.
Sony is far more dependent on gaming for revenue and profits than Microsoft. So the PS3 can't just be big--it has to be HUGE. Sony can't afford attrition of any kind--in units sold, in number of games developed for the system, in anything.
As a final note, I've seen several stories today "verifying" that Microsoft won't be introducing their new console at the Game Developer's Conference. Maybe they won't, but this is a big game of chicken right now between Microsoft and Sony, and every announcement either one makes is directly related to positioning. In other words, Microsoft may well be lying about when and where their console will be introduced. The one thing they absolutely do not want to do is wait until E3. It's nothing short of stupid to introduce a new console at the same time that Sony unveils theirs. I would be very surprised to see them wait until then.
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