Fundamental Flaws with Sony’s Big Picture Strategy

boy, am i fired up this morning.

with all of the talk about sony’s ps3 trying to do too much and the ‘live killer’ shaking the foundations of the xbox faithful, i thought i would point out a few strategic mistakes sony is making. it’s stuff that seems so very blatant to me, but the world at large seems to be missing some very fundamental lessons capitalistic societies have taught us throughout history.

just buy the hype! regurgitate the information! don’t think!

a few of you out there, no doubt, will just chalk this up to m3mnoch’s spree of ‘sony hatin.’ i say, not sony hating, but sony’s management hating. i think ken kutaragi is an old man who should have retired when he got demoted.

the ps3 will be the shot that kills his albatross.

optional components are just that — optional.
the large (and i mean LARGE) majority of users who are buying a game console are buying it for the games. there’s an old ‘law’ that comes into effect here: pareto distribution. basically, what it means is that a very small fraction of consumers will use most of a products features.

essentially, change is good — just don’t change more than 20% of your product.

it’s a fundamental law of the universe, broken only by brand new ‘disruptive’ technology. (hence why it’s called disruptive.) arguably, nothing about this next generation is disruptive. as reggie has stated before, nintendo is really the only one going out on a limb and shooting for that ‘disruption.’ (and, despite what he says, it’s really only their controller that allows them to qualify for the term ‘disruptive.’) the other two, microsoft and sony, are taking an evolutionary approach instead.

here’s where microsoft is smart and sony is not: microsoft is leaving the optional stuff out of their core offering.

microsoft is controlling costs like a pro this time around (it’s amazing how a $4 billion loss will do that to a fellah.) and sony seems to have gone batshit — spending like fools. let’s take a look at the big players in terms of extras for a ‘game machine.’

with microsoft:

• you want high definition dvd? add on.
• you want wireless networking? add on.
• you want media center abilities? add on.

with sony:

• you want high definition dvd? built in.
• you want wireless networking? built in.
• you want media center abilities? built in.

while some people will say, “so?” the important thing to remember is that all these components add extra cost. (ahem…. see price below.) and, they are not part of the core ‘gaming console’ package.

niche within a niche.
another fundamental problem is sony’s persistent need to integrate their own damn proprietary technology into everything. they make microsoft look like open source advocates!

you would think they’d learned their lesson after the whole ipod embarrassment fiasco. they let an gaijin company soundly thump them about the head and shoulders on their own turf. why? because they didn’t want to support mp3.

their connect service is sucking it up bigtime. same reason. memory stick? yeah — stupid. umd? dumb. why do you think they are trying to give them away in bundles with industry standard dvds? a sony live service with only sony movies or music? dead before it starts. that’s why itunes is a killer. they have content from ALL of the labels.

so, with the ps3, they are setting it up to target a niche (the small percentage of users to actually use their extra, non-gaming features) within a niche (only sony branded media formats and technology).

anyone in the business of mass-market consumer products will tell you that’s stupid.

price.
in japan, price is seen as an indicator of quality. your common consumer will spend exuberant amounts of cash to acquire a premium item. that’s sort of their mindset.

mass-market western world? not so much.

we (i’m american) are mostly concerned with price. low cost is king. it’s all about getting a deal. that’s why places like wal-mart and costco are cleaning house. europe is the same way. it’s about getting the lowest price for the most comparable product. i call it ‘disposable consumerism’ tho, i’m sure there’s an official term for it.

it’s why you buy those $70 portable dvd players. not because you think you’ll use it. not because you think you need it. but because it’s only $70 for a portable dvd player! the western world is all about bargains. ‘look honey! i bought all this crap, but i saved us 30%!’

oh, and, i should also mention that, in video games, the western world makes up over 80% of the market.

japan’s video game market percentage (~12% or so) is actually shrinking as a function of worldwide marketshare. as in, the western world is growing faster than japan is. that’s a big reason japanese developers are standing around, scratching their heads trying to break into the western market. that’s why games like gta (uh… does it get any more western world?) or madden are top sellers.

that’s why western developers keep churning out first person shooters much to japan’s chagrin. because they sell. and they sell well to the largest video game market.

so, you would think sony would try to build a machine that appealed to 80% of their target market, right? nope.

here’s a worst case scenario: if the western world sees an xbox 360 for $300 (the premium package after a price drop because they’ve already been on the market for a year) and a playstation 3 for $600 ($499 + $99 hard drive) — what do you think they are going to buy? the games are the same to joe consumer (multi-platform titles are the norm in order to make back those huge development budgets). the screenshots look the same. both say ‘hi-definition’ on them. both have online services.

the feature sets look pretty identical. one’s just half the price of the other.

no. all of the ps3’s built-in features that are going to be used by a very, very small (that whole niche within a niche thing) segment of gamers are just a big bloat-anchor to the ps3’s price.

online gaming.
video games (hell. all games in general.) are all about playing together — with other people. just think back on that lost family tradition ‘game night.’ single player games were just a cheap substitute for live competition before technology allowed for anything else. it’s not nearly as much fun beating even the best ai as it is to ‘pummel on’ and ‘gloat over’ some other flesh and blood person whom you just handed them their ass.

duh. everyone knows that.

even in less one-on-one games, team games are just that — about teams. would you rather have your buddies on your team or a bunch of bots? it’s fun to play together. there are a few single player breakout hits (in terms of sales, not reviews) but the rest of that sales power curve is dominated by multiplayer gaming.

the real differentiator. the real ‘law of the vital few.’ the real 20% that can change and will still be adopted by the majority of consumers is online gaming.

sony is too late and too slow in coming around to that fact. they recognize the importance. otherwise they wouldn’t have done such an abrupt about-face in the last 6 months — from ‘no unified online service’ to ‘an xbox live killer!’

like that twerp with ‘short man syndrome,’ kutaragi is just over compensating.

m3mnoch.

UPDATE:

i just thought i’d wave at all of you folks coming in from the avs forums.

/waves

and, i’d also like to point you to the article where i am not even “trying to be believable in his rants.” why, yes, “special member” richard paul. you guessed correctly — kind of. i’m not trying to be believable. that’s the whole point of that post. to illustrate how unbelievable their plan is.

you may also want to read my post on The Blu-Ray of Damocles or even why DVD-9 is Not Too Small. my favorite that i think you’d like? probably the one about sony Breaking Consumer Economic Principles.

and, hell, i’ll even quote some stuff i wrote on joystiq about why — get this — high definition dvd formats are stupid in a console!

the trickle of hd content is actually just a symptom.

the actual problem with hdtv adoption is that there’s no consumer pain point to solve. not like the move from vhs -> dvd (a technology that caught ‘fire’) or the move from broadcast -> dvr. (also caught/catching fire)

with dvd, you didn’t have to rewind!
with dvr’s you now CAN rewind!

hdtvs are seen as technology just for the sake of technology by the majority of consumers. they don’t need to see every blade of grass. they don’t care what’s on that piece of paper. they don’t want to see all the pores in william h. macy’s face. they don’t feel like they are missing anything of value by not upgrading — they still get the same content, writing, sound and features as an hdtv owner. just with a little less fidelity. not to mention it’s confusing: 720p? 1080i? dlp? lcd? what?

it’s the same reason not everyone has a big screen tv. people don’t feel like they are missing enough to pay 3 or 4 times the price for a big screen. (meaning ~$300 for a 27″ or going to ~$1000 for a big screen)

so, until a killer app comes along, we’re just going to see hdtv growth through attrition. as old tv sets die, hdtv prices are pretty comparable to standard definition prices so they “might as well get an hdtv.”

it’s consumer apathy that’s been killing the hdtv market.

multiply that by about 10 and you are seeing the hints of consumer apathy that will control the high def dvd market too. the problem there is that many people already think dvd is high def. heh.

yeah. it’s pretty safe to say that high def dvd is going no where for a while. growth through attrition. awesome.

microsoft fanboy? uh. if it helps you sleep at night — sure. whatever. i prefer the term ‘jackass who hollers loudly about stupid business decisions in the entertainment industry — no matter who makes them!‘

…with the exclamation point of course.

everyone else from the avs forums? it’s been a pleasure to entertain you for a bit. thanks for stopping by.

ru paul? i hope you enjoy your ps3. let me know how you like it.

m3mnoch.

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