The Offline Value of the PS3

so. here’s a thought that my fellow thinker, firerock (wish i had a link to you, man.), helped me achieve through his comment on the sony piracy post from earlier today.

it surrounds the rogue hax0rs out there who work to get the most out of the hardware they buy. (yes, they buy hardware — not ‘license’ it so they can do any goddamn thing they please with it.) they are making some cool mods and software for various game component hardware — the xbox 360, the psp, etc.

this thought stems from the fact that, for example, microsoft has magical powers to update the 360’s dashboard through an internet connection. so does sony with the psp. and, so will (presumably) the ps3.

the difference? the value of the hardware offline.

xbox 360:

  • expensive hardware, but not so much they won’t be able to profit on it alone. they are actually targeting this summer for the ‘break even’ point. more than likely, it’ll be next year sometime because they’ll probably drop the price in there somewhere.
  • immense value in being ‘connected.’ the only offline value is as a dvd player which is pretty ubiquitous.
  • xbox live (and the marketplace, etc.) is all connected.
  • the media extended is connected.

microsoft has done a good job at sticking the network in between the hardware and the value of the device.

the ps3:

  • sooooooper expensive hardware. i’ve demonstrated a laughable (if not slightly exaggerated) 12 game attach rate for them to come over into the black. regardless, it’s a stupidly expensive machine to build.
  • immense value in being ‘dis-connected.’ in other words, the best parts of the ps3 will be offline.
  • games – sony’s biggest games are single player games.
  • media capabilities – they’ve said the device will actually be tivo like in and of itself and NOT connected to an outside source.
  • the cell processor.  sony’s even told us it’s a supercomputer on a chip!
  • and the biggie – a super cheap blu-ray player.

the value for sony is in the hardware, not their services. basically, sony is selling us a supercomputer blu-ray player at a huge discount. that’s a helluva pitch i’m sure the hacker community is salivating over.

“here, bob. load the new hacked ps3 firmware with this flash memory card and jump onto psconnect for some goodness. make sure you thank sony for paying for half your machine when you do!”

m3mnoch.

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17 comments so far

  1. Isaac on

    “i’ve demonstrated a laughable (if not slightly exaggerated) 12 game attach rate for them to come over into the black. regardless, it’s a stupidly expensive machine to build. ”

    Come on, m3mnoch. You are an intelligent individual, and I’m sure that when you wrote “demonstrated”, you meant “showed that it’s reasonable to think this when we lack the necessary knowledge about several random variables”.

    You do have credit for giving a reasonable analysis, but I think it would be more reasonable to speak with more humble words, because when we state “demonstrated”, it means that we gave a rigorous enough analysis to reach an official conclusion; in many cases, analysts (including you and me), lack the necessary knowledge to come to that end, and it’s almost certain that in our debates, we have ignored a lot of information (because we had to).

    Anyway, I almost totally agree with you on this article. That’s why I fell in love with the PS3 when I saw what it was capable off (the machine itself, not the services). And as I’ve told you some other times, I love single player gaming. I guess PS3 will be a definite for me. (Don’t count the PS3 offline though; maybe “HUB” will be something. I just don’t want to assume it won’t *just* because it’s Sony and just because LIVE comes from Microsoft)

    Then again, it’s going to be expensive for me this generation, because all consoles are apparently must haves this generation 😦 The 360 has too many must have (single player) games announced, even when I didn’t like the first Xbox (gameswise) in the first place. And all this comes from a Nintendo fan.

  2. Isaac on

    OK, I know it sounds contradicting that I say we should speak with “humble” words and then I consider ourselves “analysts”, but I only said it because we tend to analyze things a lot, not because we are “analysts” per se. Then again, maybe that’s obvious, but I just wanted to clarify.

  3. firerock on

    Well, Sony might be a media giant, but MS has the biggest advantage of them all: MS Windows system. X360 is just another gateway for MS to get their influences from office to our liveingroom. XBL is the best idea they have come up with and you have to give them a nod on how they have achieved so far. No matter how evil MS is, their idea of connecting our world through one system is better than other company can offer.

    On the other hand, Sony built a all-in-one system that looks impressive on the paper so far. But I believe this project is bigger than they expected. Sony is seeing what MS is achieving through XBL, and they know it is the future. Online data distribution is the key idea in this console generation. Sony might be able catch up, but time is not on their side. And Cell chip is their biggest selling point, not their HUB. On the other hand, MS has always feature their XBL as the key selling point. As XBL matures, people are starting to appreciate the network.

  4. Isaac on

    I think PS3’s biggest selling points will be brand, Backwards compatibility, Blu-ray and perhaps power (if that’s what you mean with “Cell”, but I don’t think it’s their biggest selling point). Maybe a few 1080p users.

    Also, I think Sony is still in time for catching up in online distribution. It’s barely starting and they announced they will have online games too.

    What is interesting is where will hardware evolve once that disc media becomes relatively useless, and what kind of algorithms and development tools will be (or will have to be) developed.

  5. Opa on

    Isaac, Sony’s biggest selling point was/is their brand, but it is quickly eroding. It now appears that all of their demo’s from last years E3 were a sham. There is still no release date, no clear refutation of the BoM that Merrill Lynch arrived at, they terminated a dev/artist for talking out of school, etc. Oh, and lets not forget the root kit debacle.

    Sony’s brand has definitely taken a few dings in the last year.

    If you take even the most generous scenarios, Sony still loses money, and lots of it on the PS3. This will indirectly impact the quality of the games on the system as well. Sony doesnt have an infinite supply of cash, so they have to budget how much they can spend on game development. This directly leads to games lean on content and rich on graphics, or rich in content and lean on graphics. You cant have both from Sony’s 1st party dev’s because they are losing so much money on the hardware. One killer game doesnt put a dent in the losses. Either way, Sony cannot produce a killer app for the console.

    When you look at the market for blu-ray, it’s much much smaller than the market for dvd’s were. 90-92% of the homes in this country do not have HDTV televisions. Also, the only movies that will really benefit from blu-ray are new releases, shot on HD film. Existing films will NOT be remastered for blu-ray since there is no benefit of taking source media shot at 24 fps and upconverting it to 60fps 1080p. It’s like taking an 8-track and making it a dvd-audio disc. It would be pointless.

    So to this day, no one has made a compelling user need argument for blu-ray. It’s a product with no market, like New Coke. There is NO consumer demand for it. When people realize they can buy a DVD for 15 bucks, or a blu-ray disc for 30, and they are exactly the same source material, blu-ray will die.

    The last time i checked, XBOX live is the fourth largest phone network in the world as classifed by the FCC. Sony doesnt have a centralized network and it’s not something you build overnight, in a week, a month, or even a year. XBOX live has been up for 4 years.

    Online distribution has already started with companies like vongo. Look for netflix and blockbuster start doing downloadable high def movies too. Sony cant make Sony movies exclusive to Sony online or they alienate Blockbuster, Netflix, and Hollywood video.

    The decisions that were made during the PS3 design phase are utterly stunning. If you realize that the PS2 was out 18 months before the XBOX, and the PS3 is still nowhere to be seen you begin to see the enormity of the problem. They overbuilt/overdesigned the PS3 on the whims of Ken Kutaragi who panicked when the original XBOX was released.

  6. m3mnoch on

    dude. opa. wow.

    don’t take this the wrong way, but if you were a chick… and hot… and i wasn’t married… and we lived in the same part of the world…. er. i should stop while i’m ahead.

    anyway.

    that was awesome. it’s so refreshing to see someone earnestly pronounce some of the same sentiments i’ve been spouting.

    woot! i’m not the only one on reality island!

    m3mnoch.

  7. outspoknpoet on

    Just to elaborate the awesome comment from Opa about blu-ray. The best comparison I can come up with the old ‘Laserdiscs’ that were supposed to be the ultimate in ‘Next-Gen’ Video. Granted, the blu-ray won’t be the size of a Vynyl album, but nothing about it has been PROVEN. If they actually had some games on blu-ray and demonstrated the difference, they might make me a believer. Until they do I will say that 360 has won the console war already.

  8. Grindstone on

    Opa, awesome post. Just awesome. I’ve taken the liberty to paraphrase and send it off to some of my cronies, with kudos to you, of course.

  9. Oncnawan on

    Off topic, but I don’t have your email address, M3mnoch:

    Commenters on various internet forums are speculating as to the price point of Sony’s PS3. Those who position the price near the cost of an Xbox 360 Premium have not satisfactorily explained how Sony is going to fund the difference. The answer is: the PS2.

    Sony and Microsoft are in different positions financially and temporally (time-wise) in this generation. Microsoft has significant profits from which to fund this war. Sony is strapped for cash. Microsoft lost money on the Xbox almost up until the 360’s release (if internet sources are to be believed). PS2 sales, hardware and software, are profitable to Sony now and have been for some time.

    It was in Microsoft’s best interests to end the Xbox era and usher in the time of the 360. Sony wants to milk the PS2 for as long as possible. Therefore, Microsoft is severing 1st party support for the Xbox and focusing on the 360, while Sony is grafting the PS3 into the PS2 experience and will maintain that relationship between the two consoles for as long as it is profitable to so do. PS2 sales (especially software) will be used to cover PS3 losses.

    Case in point – God of War 2. Rumoured to release in Spring of 2007 … for the PS2. Why would Sony release such a game, a guaranteed financial success, on the PS2? Both Sony and the developer know that releasing on the PS2 will bring in serious money, whereas releasing on the PS3 would mean release to a very limited number of consoles, with a more expensive and protracted development period. Furthermore, a PS3 release would soon pit the game against 1st and 2nd generation PS3 games that will look much more impressive. On the PS2, the game will be backed by the excellent reviews of its predecessor and will be released to an audience of tens of millions of consoles.

    If Sony can make all PS2 games compatible with the PS3, they can continue hardware and software sales of the older system to cover the losses on the PS3, while simulaneously driving PS3 sales with the early adopters. Give Sony 12 to 18 months and the price of the hardware will have dropped sufficiently to allow them to either break even on cost, or drop the price to stay competitive. At that point, PS2 support will taper off.

    The potential disadvantage of this approach to Sony is that fewer quality launch titles and first generation games will be made if prime developer time is spent on the PS2. Sony wants more PS3 units sold earlier for two reasons: PS3 v. 360 marketshare and Blueray adoption. Supporting the older console may draw support from the new system, especially for developers who are not ready to make the jump to the new hardware from a skill or a financial point of view.

    The biggest impact of this decision will be felt by those consumers who are deciding between a Microsoft and a Sony console, and will not be buying both. While this strategy benefits Sony in the short run, in the long run it may lose them some gamers who are attracted to the plethora (yes, Jefe, a plethora) of games on the 360 (launch titles, plus first and second generation games).

    Sony has no choice but to take this approach, however, given the early launch of the 360 and Sony’s financial position. In such a postition (committed to a console that is launching later than competitors and whose release is not dated, or even feasible until all the technology is finalized), this is the wisest course of action.

  10. Isaac on

    “Isaac, Sony’s biggest selling point was/is their brand, but it is quickly eroding. It now appears that all of their demo’s from last years E3 were a sham. There is still no release date, no clear refutation of the BoM that Merrill Lynch arrived at, they terminated a dev/artist for talking out of school, etc. Oh, and lets not forget the root kit debacle.

    Sony’s brand has definitely taken a few dings in the last year.”

    I never said it’s the biggest selling point, but I also did not exactly mean “Sony” when referring to brand, I was talking about the name “PlayStation”. And if you want a refutation of Merrill Lynch’s ridiculous analysis, go here:

    http://psinext.e-mpire.com/index.php?categoryid=4&m_articles_articleid=368&PHPSESSID=b2ecac39cf88e2d955d71322c09662b3

    “If you take even the most generous scenarios, Sony still loses money, and lots of it on the PS3. This will indirectly impact the quality of the games on the system as well. Sony doesnt have an infinite supply of cash, so they have to budget how much they can spend on game development. This directly leads to games lean on content and rich on graphics, or rich in content and lean on graphics. You cant have both from Sony’s 1st party dev’s because they are losing so much money on the hardware. One killer game doesnt put a dent in the losses. Either way, Sony cannot produce a killer app for the console.”

    I wouldn’t be so sure about all this, since it’s mostly speculation. I mean, just because Sony is losing money it doesn’t mean they can’t find ways to make great games, let alone make it a priority to make great games. We will just have to see what they do to reach conclusions, instead of jumping to conclusions before the PS3 is even launched.

    “When you look at the market for blu-ray, it’s much much smaller than the market for dvd’s were. 90-92% of the homes in this country do not have HDTV televisions. Also, the only movies that will really benefit from blu-ray are new releases, shot on HD film. Existing films will NOT be remastered for blu-ray since there is no benefit of taking source media shot at 24 fps and upconverting it to 60fps 1080p. It’s like taking an 8-track and making it a dvd-audio disc. It would be pointless.”

    Well, I would agree with you if it was only Sony doing such moves. Why is AN ENTIRE INDUSTRY (electronics manufacturers, movie studios, cable providers, video game developers, console manufacturers, OS developers) going towards high definition, especially when it costs too much? Why are so many that stupid? Perhaps they are not that stupid, and the few that will convert to High Definition will be enough for all or most of them to earn profit.

    “So to this day, no one has made a compelling user need argument for blu-ray. It’s a product with no market, like New Coke. There is NO consumer demand for it. When people realize they can buy a DVD for 15 bucks, or a blu-ray disc for 30, and they are exactly the same source material, blu-ray will die. ”

    Storage. Oh, and if there were people willing to pay a prime for an HDTV, there will probably be people willing to pay a prime for HD players and HD movies. I don’t think hardware companies and movie studios are stupid enough to think that Blu-ray/HD-DVD will sell a lot if they keep the costs twice of what DVD costs. Their plan is probably taking the price down to that of DVDs soon enough.

    “The last time i checked, XBOX live is the fourth largest phone network in the world as classifed by the FCC. Sony doesnt have a centralized network and it’s not something you build overnight, in a week, a month, or even a year. XBOX live has been up for 4 years. ”

    Well, it’s not like it has been in development a year. From what I read, HUB has been in development since the PS2 came out, but it seems that they missed the train this generation, just as Nintendo missed completely the online train this generation, just as Microsoft missed some trains and launched the Xbox 1 a year and some after PS2 launched. And why would Sony not be able to pull it off? They have several online games, so they have the knowledge, and an infrastructure (Well, they just have to keep working on it). I hate it when people assume they can’t just because they are competing against Microsoft, when we don’t really know a tenth of what happens in those companies. Somehow Nintendo is managing to pull off a great online service in very little time, so there is no reason why I or anyone should underestimate a company, especially a company that is on top for now in the videogame industry.

    “Online distribution has already started with companies like vongo. Look for netflix and blockbuster start doing downloadable high def movies too. Sony cant make Sony movies exclusive to Sony online or they alienate Blockbuster, Netflix, and Hollywood video.”

    And they probably won’t, unless they don’t want to learn from their past.

    “The decisions that were made during the PS3 design phase are utterly stunning. If you realize that the PS2 was out 18 months before the XBOX, and the PS3 is still nowhere to be seen you begin to see the enormity of the problem. They overbuilt/overdesigned the PS3 on the whims of Ken Kutaragi who panicked when the original XBOX was released.”

    I don’t think Ken Kutaragi “panicked” when XBOX was released, but anyway, the reason PS3 is nowhere to be seen is probably because of Blu-ray. If it had a DVD player only, it would have probably been out by now.

    I don’t mean to sound arrogant, but I’m not impressed. I think people are analyzing way TOO MUCH with so little knowledge as of now, and whether they, you or me are right will be seen when all cards are on the table (with time), and not now by just jumping to conclusions.

  11. Grindstone on

    Isaac, we aren’t jumping to conclusions, we are making valid inferences based on the information (or lack of thereof) provded to us at this time. Sure, it is may prove futile six months from now, but they are not facetious presumptions pulled out of our butts.

    Granted, we may be off base with our speculations. But considering the information we do have for the moment, it is all we have and we used it to support our conclusions. Just chill and accept the opinions with a grain of salt, just like any other.

  12. Isaac on

    Alright Grindstone, I appreciate your advice, and I’ll take it. I probably needed to take a chill pill.

  13. haveblue on

    Great post and comments from everyone. Thanks for the smart reading. I think I like the actual console war debates better than a lot of the games!

    My 2 stray comments are:

    1. I wonder if Opa is right and the Playstation brand has been damaged, by of all things, the PSP. I have seen quite a few posts on other sites from dissatisfied PSP owners about the system’s cost and lack of games. Sort of bad momentum to bring into your company’s next launch. Are Sony owners thinking, “Do I want another expensive Sony system with few good games?”

    2. On the other hand, what if the 360 continues to a phantom console? What if Peter Moore’s claim of 360s everywhere within a month falls flat? Microsoft will look foolish, they will to deal with the continued wrath of frustrated fans, and they will have lost their main advantage of launching early and getting a bigger installed base. That is the Microsoft nightmare scenario. E3 will come and the Sony Tsunami of Hype will begin. Could the 360 be lost in the shuffle if there aren’t any on the shelves to compete?

    Can’t wait until May to see what gets announced and what plays out. Then we can really get it on!

  14. HumanKevlar 81 on
  15. […] human kevlar posted a question over in his comment wondering what i thought of a particular article. it was a pretty interesting read, so i thought i’d post my thoughts here. […]

  16. […] i’m a big fan of foss — but, really.  who isn’t?  homebrew?  rad.  the offline value of the ps3?  i saw the quake 3 thing the other day, this one kicks ass. […]

  17. […] both have a strong hardware proposition but a weak paid content proposition.  (meaning, the hardware is very valuable without the “official” games/music — aka a pirate’s wet dream) […]


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