Since its launch three years ago, Sony's PlayStation 3 has always been more expensive than its rivals, Microsoft's Xbox 360 and Nintendo's Wii, in large part because the components in the PS3 cost so much to assemble.
At launch, for example, the console cost Sony about $805 to build, according to technology research firm iSuppli, with the highest-priced version selling for $599.
According to a report, the component costs of the Sony PlayStation 3 may finally mean the company is closing in on break-even for the console.
(Credit: Sony Computer Entertainment of America)But now, a new iSuppli report issued Friday suggests that Sony may finally be nearing the break-even point with the PS3. It said that its teardown analysis service estimated that the design cost of the new 120-gigabyte PS3 Slim comes in around $336, while it sells for $299 in the U.S.
That means that while Sony is still losing about $37 per unit--plus somewhat more for marketing, royalties, box contents, and other expenses--it is for the first time closing in on breaking even with the console itself.
A Sony representative said Friday the company has a policy never to comment on the cost structure and breakdown of its hardware.
According to iSuppli, its 2008 analysis of the PS3's component costs showed that the then-$399 console was losing at least $50 per unit. So it's notable that even at the lower price, Sony is losing less money. Further, the analysis firm suggested that with component costs dropping rapidly, Sony could soon find itself making money on the PS3.
To be sure, companies like Sony, Microsoft and Nintendo are willing to subsidize the cost of their video game consoles because they make their real money on sales--and royalties--of games. The more consoles they can put in consumers' living rooms, even if they take losses on them, the more they can make on the games.
But Sony took a beating in the media in the early days of the PS3 because it was losing so much on each PS3, not to mention that the high cost of the console made it an unattractive buy.
Now, with the August release of the PS3 Slim, and its reduced price, the console is finally coming close to matching its rivals' sales numbers. In September, the PS3 even won its first-ever month, as measured by total console sales. In November, however, the benefits of a great deal of pent-up demand for a lower-priced PS3 seemed to have been played out, and once again, the PS3 came in third, trailing the Wii and the Xbox.
Still, the PS3 was only marginally behind the Xbox in units sold in November, and there certainly seems to be renewed enthusiasm for the console at the lower price.
And when Sony finally sees a profit on each PS3 sale, there will no doubt even be smiles in the company's board room. Stay tuned to see when that actually happens.
Updated at 1:05 p.m. PST with a response from Sony.
The video game industry just keeps on seeing its sales numbers decline, in spite of a huge month for Activision's Call of Duty: Modern Warfare 2, and the crucial holiday month of November was no different than the last nine months of 2009. For the month, according to industry analyst The NPD Group, sales across the entire video game business were $2.7 billion, down 7.6 percent from $2.92 billion a year earlier.
Yet, NPD added, industry-wide sales were so high in 2008 that even despite this November's significant drop, the month was still the second-best November on record. "I think we all have to realize the incredible year that was 2008," wrote NPD analyst Anita Frazier, in a research report.
Winning the month, yet again, at least in console sales, was Nintendo's Wii, with 1.26 million units sold. That's significantly more than the 1.1 million units that Wedbush Morgan analyst Michael Pachter predicted late last month, in the wake of Black Friday, that Nintendo would sell. Microsoft saw its Xbox 360 take a solid second place with 819,500 units sold, and Sony's PlayStation 3 brought up the rear with 710,400 consoles moved.
Despite a big year-over-year jump in PS3 sales, those numbers had to be disappointing for Sony. The PS3 had finished ahead of the Xbox in October and September, mainly as a result of the pent-up demand for the machine in the wake of its mid-August price cut to $299.
For the Wii, first place is nothing new, and it's clear that consumers had a bigger hunger for that console than its competitors' offerings. But while 1.26 million units sold is impressive, it's quite a bit lower than the 2.04 million Wiis that sold last November, even given the fact that Nintendo lowered the price of the Wii from $249 to $199 in September.
"Nintendo products top Amazon.com's most wished for and most gifted lists for video games, and Wii remains at or near the top of the most-searched for video game terms on Yahoo," Nintendo said in a statement. "As families and friends gather for the holidays, Nintendo games offer the best shared experiences."
Microsoft saw sales of the Xbox drop 2 percent, from 836,000 last year to 819,500 this year. But Xbox spokesperson David Dennis said overall, last month was the best November in the Xbox 360's history, in terms of dollars spent across the board.
Though it did finish in third place, the PS3's sales were through the roof compared to last year, almost certainly due to the price cut. Sony's sales of 710,400 PS3s was up 87.9 percent from last November's poor showing of just 378,000 units.
Indeed, Sony touted that big jump, though without mentioning the recent price decrease of the PS3. "In November, PS3 was the only hardware console to see any growth when compared to last November," the company wrote in a press release, "experiencing an (87.9) percent lift and a 122 percent increase from the previous month."
On the software side, it was pretty clear that the Xbox--with four of the top 10 best-selling games on that platform, compared to two for the PS3 and four for the Wii--was November's big winner. That was no more clear than in sales of the biggest game title of the year, Call of Duty: Modern Warfare 2, which broke the single-day record for sales for any entertainment product when it launched November 10, and was expected to make up a fifth of all games sales in November. The Xbox dominated sales of the game, with 4.2 million units sold, while just 1.87 million were sold for the PS3.
Dennis said the reason for that was clear: "It's Xbox Live," Dennis said. "People's friends are on Xbox Live, and you buy the version of the game where your friends are."
Nintendo seems ready to resume its dominance over its video game console competitors, Microsoft and Sony, and to shake off several tepid months of sales, an analyst suggested Monday.
Those comments came after Nintendo put out a press release boasting that it had sold 550,000 Wiis in the U.S. during Thanksgiving week, leading Wedbush Morgan analyst Michael Pachter to estimate that the company may have sold about 1.1 million of the consoles for all of November.
Analyst Michael Pachter thinks the Wii is ready to resume its dominance over its rivals.
(Credit: Nintendo)Last November, Nintendo moved 2.04 million Wiis, so if Pachter is correct about this month's data--his estimate was based on a formula in which November sales numbers are equal to roughly double the Thanksgiving week sales figures--the company sold only a little more than half the units it did a year ago. Still, Pachter estimated that Microsoft and Sony will have sold about 700,000 Xbox 360s and PlayStations, respectively, during November.
A Microsoft representative said that, while the company doesn't provide internal sales numbers, Black Friday week Xbox sales were the best of the year and at least two times the previous week. A Sony representative said that the PS3 had a banner Thanksgiving week, and that 440,000 of the consoles were sold during the week. Nintendo did not respond to a request for sales numbers for Thanksgiving week a year ago.
Using Pachter's formula, the PS3 sales numbers would mean that about 880,000 of the consoles were sold for all of November.
Since the true beginning of the so-called next-generation console wars in November 2006--when both the PS3 and the Wii were released, joining the Xbox 360, which hit store shelves a year before that--the Wii has been the dominant player, routinely outselling its competitors.
Now the prices for all three consoles are within $100--the Wii and the lowest-priced Xbox are $199, while the PS3 is $299. That has led to an increase in sales for Nintendo's peers, especially for the PS3, which in September won its first month ever for U.S. sales, according to industry analyst the NPD Group.
Indeed, even Nintendo has acknowledged it had lost some of its steam. Last month, the company's president, Satoru Iwata, said, "The Wii has stalled."
But Pachter suggested that the Thanksgiving week numbers show that Nintendo has simply been a victim of its own success, and that the sales of the Wii--and its handheld game machines, the DS and DSi--are still very impressive.
"You can't really criticize Nintendo for" past success, Pachter said. "They're definitely going to be very solid and dominant this holiday season, but last year, they were so large and dramatic, (those numbers) are going to be hard to compare to."
For the Thanksgiving week, Nintendo said it sold more than 1.5 million devices, meaning that it sold almost 1 million of the DS and DSi. And to Pachter, that might be the most impressive data point of all.
After all, he said, the DS first came out in 2004. "When is this thing going to get old?" he said. "It never dies. It's amazing to me, but people just keep buying them."
Still, Nintendo's biggest advantage--over the PS3, at least--is that the Wii costs $100 less. And if Sony ever drops the PS3's sticker under $200, that could mean big trouble for the Wii, Pachter said. Such a move would force Nintendo to do something dramatic to keep up.
While he didn't say that Nintendo would need an entirely new console at that point, he did say that a sub-$200 PS3 would force Nintendo to do something like add a processor and graphics card similar to what is available on the PS3 and the Xbox. And that, among other things, means high-definition.
"I think consumers need that," Pachter said.
Updated at 5:10 p.m. with comment from Microsoft, and at 7:55 p.m. with comment from Sony.
Microsoft on Monday said that millions of Xbox Live members have used the new social-media features that the company pushed live a week ago.
In June, Microsoft announced it would begin offering Xbox Live users access to Facebook, Twitter, and Last.fm. And while the manifestation of each of those services is scaled down on Xbox Live, the rollout has been one of the company's big pushes this fall for its hugely popular online system.
According to Microsoft spokesman David Dennis, the first-week figures show that at least 2 million Xbox Live users have logged into Facebook, and that half a million Last.fm accounts were created in the first 24 hours of availability. Dennis didn't address how many Xbox Live users have used the service's Twitter feature, except to say that there have been "tweets from nearly every market where we have Xbox Live."
So, based on the data Dennis provided, the Facebook integration with Xbox Live has had the most adoption. And while 2 million people logging into Facebook is far short of the 20 million total Xbox Live users, it is notable that fully one tenth of the service's users have tried the Facebook feature in just the first week.
Still, there's no way to know if the numbers of members using the social-media features will climb higher. There are those who feel that the Facebook and Twitter implementations lack some of the richness that has led to those services' phenomenal growth, and one has to wonder how many Xbox Live users will choose to spend time with Facebook or Twitter instead of doing things like watching movies or playing games.
As for Last.fm, Dennis said that in the first week, Xbox Live users had streamed 120 million minutes of music. Last.fm is a part of CBS Interactive, which also publishes CNET.
Lastly, Dennis said that 1.7 million Xbox Live users had gone to the new Zune marketplace--formerly known as the Xbox Live marketplace--and watched video.
U.S. video game industry sales plunged in October, dropping 19 percent from a year earlier, and 16.4 percent from September, according to data released Thursday by the NPD Group.
But with the tremendous, record-breaking, out-of-the-gate performance of Activision's Call of Duty: Modern Warfare 2 and the coming holiday season, NPD is bullish on the industry's fortunes for November.
Still, the $1.07 billion in total sales turned in by the industry in October were paltry, compared with $1.32 billion in October 2008 and $1.28 billion in September 2009. NPD analyst Anita Frazier tried to soften the blow a little bit in her monthly report, noting that while sales were down precipitously in October, it was still the third-best October sales report turned in by the video game industry.
"The continued economic turmoil, and in particular the troubling unemployment rate, is undoubtedly impacting industry sales," Frazier wrote in a statement. "Our latest Economy Tracker indicated that although consumers' general opinion about the economy is improving, their outlook on their own personal situation is worsening. If consumers' personal outlook continues to erode, they could very well be much more conservative with their holiday shopping this year."
That last sentence is no doubt one of the most chilling group of words imaginable to the honchos at companies like Microsoft, Sony, Nintendo, Electronic Arts, Activision, and many others involved in putting video game hardware and software in consumers' hands, especially as their most important sales months of the year are now at hand.
As always, regardless of the monthly results, the big console makers each had some things to celebrate in the NPD numbers.
For Nintendo, which has seen sales of its once-high-flying Wii dip and perceptions that the console's days of seeming infallible may be over, the numbers had some hope: in October, the Wii took back first place among the consoles--respectively the Wii, Microsoft's Xbox 360, and Sony's PlayStation 3. In October, Nintendo moved 506,900 Wiis, beating out the PS3 (320,600) and the Xbox (249,700).
Sony was coming off the first month the PS3 won since being launched in the fall of 2006, but while the console was beaten out by the Wii, there must certainly be some measure of gratification in having the PS3 come out ahead of Microsoft's console offering.
"In October, we saw continued momentum [for the] PS3, with nearly 70 percent growth, when compared to last October," Peter Dille, Sony Computer Entertainment of America's senior vice president of marketing, said in a statement. It was "the only console to see any growth year over year."
NPD itself touted Microsoft's chief bragging point for October: "Across all categories, the Xbox 360 platform contributed the greatest portion of total industry sales, representing 27 percent of total industry sales for the month," Frazier wrote.
Yet despite the record-smashing first-day sales posted this week by Call of Duty: Modern Warfare 2, the video game industry as a whole is facing a very painful reality: If sales don't improve quickly, there will be layoffs, slashed budgets, canceled games, and more.
Electronic Arts, for example, announced this week that it is planning to lay off 1,500 people as part of a major restructuring--the company's latest--and as a way to stave off growing losses.
And while the industry may have hoped that console sales--especially with prices for next-generation hardware now at their lowest levels ever--would help it rebound, Frazier did not offer much hope.
"Year to date, the hardware category has experienced the sharpest decline in the industry, with unit sales down 10 percent compared to the same time period last year," Frazier wrote. "Recent price cuts helped spur a one- to two-month increase in unit sales, and this month's Wii sales reflect that boost, but the other platforms have not sustained the sales momentum [after] price reduction."
CNET News reporter Ina Fried testing out Microsoft's much-heralded Project Natal.
(Credit: CNET News)According to a report issued by British games magazine MCV, Microsoft's much-heralded Project Natal hands-free gaming control system could hit store shelves as soon as November 2010 and cost as little as $50.
MCV said that Microsoft could launch Natal with a 5 million unit global shipment.
"This and other details have emerged following a behind-closed-doors Microsoft tour of U.K. publishers and studios," MCV wrote. Microsoft "has been demoing the tech and detailing its 2010 plans in order to spur more development support."
MCV also said that it had been told by a publishing source that Microsoft is "trying to get as close as possible to 'impulse buy'" with Natal.
The technology is considered very important for Microsoft as it seeks to differentiate the Xbox from Sony's PlayStation 3 and Nintendo's Wii.
The Seattle Times weighed in on the story by predicting that, "This is probably a preview of what (Microsoft CEO) Steve Ballmer and (president of the entertainment and devices division) Robbie Bach will disclose at the Consumer Electronics Show in January."
Microsoft did not immediately respond to a request for comment.
There are literally hundreds of banned Xboxes for sale on Craigslist right now in the wake of a decision by Microsoft to kick as many as a million players off of Xbox Live for illegally modifying their consoles to play pirated games.
(Credit: Daniel Terdiman/CNET)Update (5:45 pm): This story now includes a statement from Microsoft.
Want an Xbox 360 but don't care about playing online or taking part in any of the Xbox Live services? Then this is your lucky day.
Thanks to a recent decision by Microsoft to ban as many as a million players from Xbox Live for illegally modifying their consoles to run pirated games, there is now an absolute glut of "modded" Xboxes for sale on Craigslist.
And while a brand-new Xbox Arcade--the lowest-price version of the console--sells for $200 with no free games, it is now possible to spend as little as $100 for a used, modded Xbox that comes with a slew of hit titles. You just have to be willing to give up using Xbox Live and be OK with your new game collection including mainly pirated titles.
Running a search for "modded Xbox" on Craigslist's Bay Area site returned 35 listings from the past three days. A similar search on New York Craigslist resulted in 87 listings. And dozens and dozens more are for sale on other local Craigslist sites.
One listing promised a "banned/modded" Xbox 360 with a 20 gigabyte hard drive; 20 HD movies; and 13 games including Madden 2010, Call of Duty: Modern Warfare 2, NBA 2K10, and others.
"Everything works perfectly," the ad reads. "The 360 was treated better than I treat most people."
The ad also reminded potential buyers that, "since the console is banned, you will not be able to connect to the Xbox Live service. Therefore, this posting is for those of you who don't care if you can play online or not."
One Craigslist poster named Danny Cuccovia, a 22-year-old student from West Valley College in Saratoga, Calif., was actually looking to buy a modded Xbox 360, and despite the incredible deals available right now, wasn't interested in one that couldn't get him onto Xbox Live.
A gamer looking to potentially go pro, Cuccovia suggested that modded Xboxes are great because there is no end to the supply of pirated games and that sellers of those games put very realistic-looking labels on them.
He also said he was sure that many of the people selling their banned Xboxes on Craigslist were doing so because they want to get a new one.
That was certainly the case with Kevin, a 29-year-old from Manhattan's East Village who logged into Xbox Live a few days ago only to discover the bad news about his console.
"I logged in, tried to play a game online, and it said I had been banned from the service for violating the terms of service," Kevin, who wouldn't give his last name, said. "I cursed, put my controller down, cursed Microsoft, and then bought another Xbox."
But even though he bought another used console that was advertised as being unmodified, Kevin said that when he tried to log on to Xbox Live, he quickly discovered he'd been cheated: the new device had been banned, too. So on Tuesday, he bought another one.
"If you're interested in a modded Xbox," he said, "I've got one for you."
Interestingly, Kevin and another New Yorker with a banned Xbox, 16-year-old Muhummad Sheikh, both said that the ban seemed to apply only to the console and not to their Xbox Live accounts.
Kevin said that his account still works, and that he was able to keep all his achievements, but he lost all the saved games. "They've done something funny," he said. "They call it a corrupted profile."
For sellers like Kevin, the rush to sell their banned Xboxes in order to buy a new one is pitting them against dozens, if not hundreds of people in the same boat. That means that getting the price they want is going to be near impossible. Kevin said that he had originally asked for $175--with an available legitimate copy of Rock Band for an additional $50--but has now dropped his price to $150. And still he has no bites.
"Someone (offered to) buy it for $100," Kevin said, "but I haven't capitulated yet."
In a statement issued late Wednesday to CNET News, Microsoft suggested that players who buy used Xboxes should beware that the company doesn't necessarily stand behind the consoles.
"If you purchase a modified console second-hand, the warranty is not transferable and the purchaser assumes the risk for any previous modifications," the Microsoft statement said. "If you purchase a console that has been previously banned, you will not be able to connect to (Xbox) Live."
To Kevin, the fact that the consoles have been banned but players' accounts still work smells a little fishy since that means if someone buys a new Xbox, they'll be able to get right back into their Xbox Live account and pick up, more or less, where they left off. And that could well mean that for the Xbox Live obsessed, there's no choice but to buy a brand-new machine, especially since many of the other consoles for sale on Craigslist right now have also been banned.
"Well, the holidays are around the corner," Kevin said. "They know what they're doing when it comes to making money."
Update (5:50 p.m.): This story has been updated with a statement from Microsoft.
It's oh-so enticing: you find a copy of a brand new game like Call of Duty: Modern Warfare 2 on a pirate site and the temptation to download it is too strong.
Well, that temptation may have cost up to 1 million users of Microsoft's Xbox Live the ability to use that service. According to a report in InformationWeek, Microsoft has banned as many as a million players from Xbox Live for altering their consoles in order to play pirated versions of games.
This week, Activision's new Call of Duty was released, and InformationWeek speculated that because pirated versions of the game appeared on various sharing sites in advance of the release, the game's developer may have exhorted Microsoft to enact the bans.
"Xbox 360 consoles are equipped with digital rights management technologies designed to detect pirated software," InformationWeek wrote, "but some players have successfully 'modded,' or modified, their machines to circumvent DRM protections."
Even if someone has been banned, their Xbox will still play offline games, InformationWeek said. But it's not at all clear if the bans are permanent or if Microsoft will allow those who have been booted from Xbox Live to return at some point down the line.
In a statement Microsoft said its "commitment to combat piracy and support safer and more secure gameplay for the more than 20 million members of the Xbox Live community remains a top priority. All consumers should know that piracy is illegal and modifying their Xbox 360 console violates the Xbox Live terms of use, will void their warranty and result in a ban from Xbox Live. We can assure you that if an Xbox Live member follows the Xbox Live terms of use, purchased a retail copy of Modern Warfare 2 and played the game on an unmodified Xbox 360, no action will be taken."
And on the Xbox support page, Xbox Live Director of Programming Larry Hryb, aka Major Nelson, has addressed some of the circumstances that could lead to a player's being banned.
"Players who find their Gamertags banned from Xbox Live have wound up in that situation due to violations of the Xbox Live Terms of Use," Major Nelson wrote. "The Xbox Live team monitors players for not just cheating, but also for things like threats, racism, profanity, and just being an all around poor sport and ruining the game for others.
"When a Gamertag comes up as violating our policies for online behavior, the person who owns that Gamertag is punished by being banned from the service. Keep in mind, this isn't just a ban on a particular game. This is a ban on the Xbox Live service as a whole, so you won't be able to go online at all during your ban. Initially, you may be banned for a day, a week, or depending on severity, permanently! Kiss that $50 goodbye."
People always talk about dog years, or cat years, but what about video game console years?
It's hard to know what that math is, but one thing is certain: Sony's PlayStation 2 turned 9 years old Wednesday, and it sure feels like the best-selling video game console of all time has been around a whole lot longer than that.
Yet even though we're already more than three years into the PlayStation 3/Xbox 360/Wii console generation, the PS2 is still going strong. Routinely, month after month, its sales are in six figures--146,000 in September in the United States alone, according to The NPD Group--and there's no reason to think the 485 (and counting) developers who have made games for the platform are going to stop any time soon.
The PS2 turned 9 on Wednesday. What's that in video game years, if dog and cat years are equal to 7 human years?
(Credit: Sony)In large part, that's because there are millions of people for whom the world-beating processing power of the PS3 and the Xbox 360, and the graphics-so-good-you-can-see-beads-of-sweat-on-sports-players'-bodies aren't worth paying several hundred dollars for. For $100, they say, you can get one heck of a good video game playing experience with a PS2.
It "still holds a place in my heart--there's so many great games with huge amounts of replay value," said Michael Steavenson, a public relations professional who bought his PS2 around 2001. "I'm not so interested in blazingly fast processing speeds, graphics that make games look like a movie, or uber-cutting-edge hardware stats. If the game is well-designed, fun to play, and provides me with a good emotional connection, I'll play it forever."
According to Sony, one out of every three U.S. households owns a PS2, and, worldwide, almost 140 million people have one. To date, Americans have bought more than half a billion PS2 games, and all told, nearly 10,000 titles have been released for the platform. Not bad for a machine that has earned the right to be living out its golden years sitting on a porch somewhere, smoking a cigar and grumbling about kids these days.
... Read more
The PS3 Slim, the newest iteration of the PlayStation 3, comes with the lowest price ever for the PS3: $299. Because of the price cut, the PS3's sales rose in August and September, and many people see signs of a resurgence for the console.
(Credit: Sony)Is Sony's PlayStation 3 at long last ready to stop being its rivals' punching bag?
With its first-place finish in September in number of units sold, Sony finally has a tangible response to persistent criticism that its PS3 can't keep up with its next-generation video game console competitors, Microsoft's Xbox 360 and Nintendo's Wii.
For the month, according to video game analysts at the NPD Group, Sony sold 491,800 PS3s in the United States, while Nintendo moved 462,800 Wiis and consumers bought 352,600 of Microsoft's Xbox 360s. It was the first time since the next-generation console wars began in earnest nearly three years ago that the PS3 finished a month on top.
Yet, as everyone knows, a single positive piece of data does not a trend make--something Sony's competitors are quick to point out--especially when the existing trend is so contradictory. So, on the heels of those rosy-at-long-last September numbers, and the August price cut and launch of the new PS3 Slim that preceded them, can Sony finally demonstrate conclusively to its detractors that it is through being badly outmaneuvered?
According to a group of experts interviewed for this article, the answer appears to be yes. No one will yet predict that Sony is ready to grab hold of the leadership position it enjoyed in previous console generations. However, there does seem to be widespread agreement that for the first time since its November 2006 launch, the PS3 is ready to seriously compete for that role.
"I think that the fact that they did introduce a new footprint for the PS3 (the Slim) and a lower price point, coupled with some of the really high-demand games" coming out for the platform, "could really prime the pump for Sony to have a resurgence for the PS3," said Brian Crecente, editor of the popular video game blog Kotaku.
"I do think that we are probably going to see, if not it topping the charts leading into the holiday, it...doing better than it has in (the recent) past," he said.
Beginning a comeback in a hole
There's no doubt, however, that Sony is beginning any PS3 resurgence in a rather sizable hole. Since the start of the current console generation (in November 2006 for the PS3 and the Wii, and November 2005 for the Xbox 360), Sony has sold 25.26 million PS3s worldwide and 9.76 million in the U.S, according to VGChartz, a Web site that aggregates video game sales data. By comparison, the Wii has moved 54.19 million units worldwide, of which 25.05 million were in the U.S., and Microsoft--with its one-year head-start--has sold 32.51 million Xboxes, including 18.66 million in the U.S.
By those measures, the PS3 has a minimum of a 2-1 disadvantage, in the U.S. at least, when it comes to the PS3 install base. That fact puts pressure on third-party developers working on games for the console because they know that there are at least twice as many Xbox buyers in the U.S. as there are for the PS3.
That dynamic, in turn, has led to one of the biggest complaints over the years about the PS3: that the software lineup has paled in comparison to that of the Xbox. To be sure, Sony has always disputed that notion.
Hard to prognosticate
Over the last three years, this space has been home to multiple arguments that the PS3 would one day emerge as the clear-cut winner of the next-gen console wars. But there's also been plenty of room here for the theory that Sony's flagship video game device was doomed to languish behind the Xbox and the Wii.
Clearly, prognostication about the PS3's fortunes has been difficult. And with the state of the economy in flux, supply chains always hard to analyze, and consumers' whims ever-changing, there's no way to know for sure how the console wars will go from here on out.
But Sony definitely feels like it's finally in the driver's seat.
"Overall, we're just hitting a stride that just (reasserts) what we knew all along--that there's tremendous value under the (PS3's) hood," said Julie Han, Sony PlayStation spokesperson.
That's a notion that video game industry analysts agree with. Yet when talking about Sony's laudable September numbers, they also point, first and foremost, to the fact that there were a lot of consumers sitting on the sidelines, just waiting for the company to lower the PS3's price. In August, with the release of the $299 PS3 Slim, Sony did just that.
"It's really a combination of pent-up demand and (the point) where value and pricing meet," said Jesse Divnich, an analyst with Electronic Entertainment Design and Research. "The (thing) about the PS3 was, it was really a system ahead of its time. Developers didn't really have the capabilities to take advantage of all the power in the PS3, and at the same time you had systems like the Wii, which just had perfect timing. But now, (the PS3) has caught up."
That means, Divnich continued, that the time has finally come where the PS3's jam-packed collection of a powerful video game console, a Blu-ray player, and built-in Wi-Fi met consumers' needs, even as the price dropped to where large numbers of people feel they can afford it. The lowest-priced Xbox costs $199, while the Wii runs $249.
Finally hitting a 'sweet spot'
Divnich said that at $299, the PS3 has finally hit its "sweet spot." And he said while it's likely the initial boost of sales that came as a result of the August price cut will slow down, "Long term, into 2010 and 2011, I don't think the PS3 is going to be in last place to the degree it was before. The gap between the systems will be much smaller."
For his part, Wedbush Morgan analyst Michael Pachter said he expects the PS3 to outsell the Xbox during the holiday season because of the perceived value of the $299 PS3, loaded as it is with the Blu-ray player and Wi-Fi. He and others do, however, still think that Nintendo will sell more Wiis because of the broader general appeal of that device and the fact that it is seen as a better Christmas present.
"Is Sony back? Yeah," said Pachter. "Are they back as the leader? Probably not. Are they back in second? Probably."
Another analyst, Lazard Capital Markets Senior Vice President Colin Sebastian, also attributed the September PS3 sales boost to the "pent-up" demand for a lower price, and said that there would have been serious trouble for the console if the results had not been so good.
"If they had not shown the uptick with the price cut," Sebastian said, "then we'd all be putting a nail in the coffin for (the PS3). But what we're seeing is that there's still life left for the PS3, and that's an encouraging data point (for Sony)."
Still, as Pachter put it, "Microsoft is not the type of company that's going to stay (down) for a long time. They don't like it."
That's why, Pachter said, if the PS3 can keep pace with the Xbox for the next few months, there's a good chance that Microsoft will drop the price of its console another $50 sometime early next year, a move he doesn't think Sony would be able to match.
To be sure, Microsoft wouldn't easily cut the Xbox's price--"they're certainly not going to give money away just for the hell of it," Pachter said--but it is an arrow in their quiver.
Sebastian said he, too, could see an Xbox price cut next year, as well as one for the Wii. Would Sony follow suit if its rivals did so?
"They could do it," Sebastian said. "It's just a matter of what their tolerance is for absorbing less revenue on the hardware side, and whether they can make up that revenue on the software side."
According to Xbox spokesman David Dennis, a price cut is just one of many things Microsoft would consider as a way to keep pace with the market. He said other possibilities include different hardware and software bundles. "There's a lot of different levers you can pull," Dennis said.
Not surprisingly, Dennis is dismissive of the PS3's sales boost. He agreed that there were a lot of people waiting to buy the console at a lower price, but said that the impressive initial jump in units sold came as a result of early leaks of pictures and information about the PS3 Slim, and so there were "months of pent-up demand."
Further, he predicted that Sony would not see a sustained resurgence for its console and that even in September, when the PS3 outsold the Xbox and the Wii, Microsoft brought in more revenue for the entire Xbox ecosystem--including accessories, software, and fees for online services--than did Sony.
The two halves of 2010
In the end, most people seem to agree that the overall fortunes of the consoles have as much to do with software as price. That's why each of the analysts talked to for this story pointed to a bright future for Sony: They see a lot of strength in the PS3's coming games lineup, which includes titles like God of War III and Gran Turismo 5. And then there's also Sony's PlayStation Motion Controller, which could bring the PS3 more Wii-like functionality.
That's why Divnich said he thinks that the PS3 is likely to dominate the first half of 2010.
But he also expects that Microsoft will release its highly anticipated Project Natal motion-sensitive controller in the second half of 2010, a move that could stir up the console pot anew. Indeed, Divnich said he thinks that the Xbox will once again overtake the PS3 at that point.
And after that? It's anybody's guess.
