Friday, May 25, 2007

Console Post of the Week

I saw this over at Game Daily today:
"Reports from Asia also suggest that Sony has reduced production of PS3s, at least temporarily, which may suggest that a price cut is less likely this year. We continue to believe timing of Sony's first PS3 price cut is likely to accompany a stronger software release lineup as well as further cuts in production and component costs."

That's taken from the latest Lazard Capital Markets report.

We already went through the math a couple of weeks ago, but that had to happen. Sony couldn't continue to manufacture 4X (or more) the number of units they were selling each month.

Here's where I think Lazard may be mistaken, though: I don't believe that production cuts are enough, not unless they mothball 75% of their capacity. Sony is in such a painful position right now that they need to cut manufacturing AND eat a price cut.

In other news, Sony's executives opened their mouths, which is always bad news. First off, there's Jack Tretton, who's basically a walking gas can. Here's his response in a GamePro interview when asked about Microsoft potentially developing a Folding@Home client:
Would they be even having this conversation if we weren't doing it? I don't know. I would guess that the medical community would take help from anywhere they could get it, but the commentary that I heard is that Stanford isn't sure that [the Xbox 360's processing abilities] would help them very much, which is odd to be because if it helped at all, it seems like they would welcome it with open arms.

It's really ugly territory to get into, but let's take fighting a disease and see if we can get some credit for that. It's not a cool game to play one way or the other, so I don't want to even give the impression that that's our motivation and I'd be very disappointed if they're looking for PR value or to try to suck off some of the goodwill that we're doing.

Seriously, Sony needs to sit Jack Tretton down and say "Shut the **** up." I can't put it any more plainly than that. He sounds like a complete jackass in that quote, and worse, he sounds like a creep.

Tretton's quote was so bad that I'm not even going to mention Dave Karraker's interview with GamePro, which was another delusional moment, but without the creepiness.

Sony did have something good this week: the 1.8 firmware update. [question: how many freaking updates has this firmware had in six months? Twenty?] 1.80 added upscaling for PS1 and PS2 games as well as DVD's. That's an excellent feature addition.

Here's another piece of good news for Sony: Funai announced that they're going to manufacture a Blu-Ray player. That matters because Funai is decidely low-end, so the player is almost certainly going to be cheaper than anything else currently available.

Oh, and the PS3 sold 8,659 units in Japan this week. Stellar. Let's say you're a Japanese developer, and you have X million dollars to commit to development over the next 18-24 months. You see the Wii's installed base at 2.45 million units and the PS3's base at 900,000 units, and that gap has been increasing by 50-75K a week for the last four weeks.

You make the call: would you rather put out one PS3 game or two Wii games in that market environment?

On to Microsoft, which I'm sure didn't relish seeing this over at (this excerpt is long, but it's worth reading):
The problem is clear. A large number of Xbox 360 consoles from launch onwards have shipped with manufacturing problems which have manifested themselves in the dreaded "three red lights" - an error code displayed on the front panel which means that the console has died, and needs to be returned to Microsoft for service.

The number of systems which shipped with these problems is a matter of some debate, but it's clear that it is a far, far higher proportion than the company originally admitted. Early claims suggested that Xbox 360 consoles were only failing as often as you would expect from any piece of consumer hardware - a figure generally agreed to be around 3 per cent. However, entire batches of consoles at launch were failing en masse - and the reliability, although it improved, continued to be poor for months afterwards.

Has this been fixed? Who can say - Microsoft has certainly made no promises regarding enhanced reliability for the Xbox 360 Elite console, so it's simply impossible to judge whether new machines rolling off the production line will be any better than their predecessors. Even giving the benefit of the doubt, that still means that millions of machines from the "unreliable" period of the console's manufacturing are sitting under televisions around the world.
This, however, is only half of the problem. For a new piece of consumer hardware to display a high failure rate is damaging, but not seriously so, as long as the company has a good system in place to ensure that customers' systems are being repaired, and goodwill is being maintained.

Unfortunately, Microsoft has made two massive blunders in this regard. Firstly, it has taken to shipping refurbished systems to customers whose consoles have died - not a huge problem in itself, but the reliability of these refurbished machines is also vastly suspect, which results in anecdotal cases where gamers have returned their consoles to Microsoft three or even four times, with each subsequent console suffering the same fault after a few months. These cases make compelling "horror stories" for consumers, and have been widely disseminated.

Secondly, despite its shameful appearance on Watchdog, and being lambasted by the press over its behaviour, Microsoft continues to insist that British consumers whose consoles have failed after its 12 month warranty period must pay GBP 85 (around 125 Euro) to have the system repaired. Its customer service representatives are adamant on this point, refusing to budge even when it is pointed out that these manufacturing flaws are clearly Microsoft's responsibility under consumer law, regardless of the terms of the firm's own warranty.

Ouch. As I said a few weeks ago, the "failure rates are a moving target" comment from Peter Moore was nebulous enough to indicate that someone, somewhere, has reliability numbers--and it's not necessarily just Microsoft.

So Microsoft has a reliability problem, and as previously discussed, they have a price problem as well. Halo 3 is going to sell a massive, incomprehensible number of units, but is it going to sell a massive number of new consoles are well? I can't answer that, but I have a hard time believing that millions of people are waiting for Halo 3 before buying a 360.

What Microsoft is missing here is something that we're all familiar with as gamers: combat initiative. Striking first is a huge advantage, and Microsoft needs to drop the price of the 360 to force Sony to respond. Initiate the action. Control the action. Sitting around and reacting is an excellent way to fail.

Nintendo is still crushing everyone. There's your update on Nintendo.

Wait, here's one more piece of information: I'm willing to bet that the software lineup for the Wii this fall is going to be better than people are expecting. Remember, Nintendo doesn't need Halo 3--the Wii demographic is far broader than the 360's or the PS3's. So don't be surprised if there are a few games that don't review particularly well that wind up being gigantic hits, just because the consumers playing the games are looking for a different experience than the people who are reviewing the games.

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