I found this from sombody at ps3forums.com. this article is old, its from 7/2007 but its a very good read and its makes A LOT of sense check it out-
Quote:
Gaming analysts such as Roger Ehrenberg are looking at the Sony $100 price cut on its Playstation 3 gaming console announced at the E3 conference this week and assume that Sony marketing made the move to attack Microsoft's lower-priced XBox 360 console. Roger takes Sony to task for this strategy as follows:
So now you're forcing Microsoft to lower its prices and trying to re-define the console wars at the high-end of the market. Sure, higher volume, lower margins, pressing for share. Makes sense. But it doesn't address the larger issue - you are now fighting Microsoft for a smaller piece of the pie.
Sure, the pie has been expanded because the Nintendo Wii is drawing in new buyers - specifically casual gamers - into the console market. But even more than that, the Wii is taking sales away from both Microsoft and Sony due to its fun user experience and low price point (less than half that of the 60GB PS3, even after the price cut).
This analysis would be true if Sony's goals were the same as Microsoft's and Nintendo's. The trouble is that they aren't. Sony's short-term Playstation 3 battle plan (and by short-term I mean two to three years) isn't that much about gaming. It's about who can get the lowest manufacturing costs for two key entertainment technologies that Sony hopes to lead in the next five years. More on that in a minute.
A little quiz might shed some light on the overall Sony puzzle. Think about the answers to the following questions:
1. Which next-generation optical disk technology currently has sold more drives to date? HD-DVD or Blu-ray?
2. What movie studio releases movies exclusively on Blu-ray technology?
3. What company currently has the largest market share of the LCD HDTV market by revenue?
The answers to these questions are:
1. According to a recent article in the Wall Street Journal (subscription required), approximately 103,000 Blu-ray players have been sold to date, but 3.6 million Playstation 3s (according to VGChartz.com) containing Blu-ray disc players have been sold as well worldwide. Only 310,000 or 0.3 million HD-DVD players have been sold, even including XBox 360 add-ons. Blu-ray movies are also outselling HD-DVD movies by a ratio of about 2 to 1.
2. Sony Pictures releases the high-definition versions of its movies exclusively on Blu-ray disks. That means that its future DVD revenue stream is tied to the success of Blu-ray for the time being.
3. Sony's Bravia line recently became the best selling LCD brand on a revenue basis, despite being third on a unit basis.
So now the picture should be getting clearer. By bundling Blu-ray drives into the Playstation 3, Sony has been able to ship almost 4 million Blu-ray players, more than 10 times the number of HD-DVD drives sold to date. That means that Sony is driving down the manufacturing cost of Blu-ray players because it is making them in higher volumes. That was the crux of the blue laser shortage last year -- Sony was making a boatload of Playstation 3s and suppliers couldn't keep up. Now they can. Playstation 3 sales are subsidizing lower cost Blu-ray high-definition movie players while ensuring that consumers have more of those players than any competing high-definition format. And conveniently, Sony gets a royalty payment for every Blu-ray player and disc, regardless of whether it makes it or not. So if Playstation 3 can establish Blu-ray as the dominant high-definition movie playing platform in the market, Sony Electronics wins big.
The second factor here is that Sony Pictures sells movies exclusively on Blu-ray disks. Blu-ray high-definition player deployments expand the market for Sony Pictures' high-definition movies on disc, making Sony Pictures' more valuable. And since DVD sales now are a bigger money-making business than box office sales for movies today, that has a huge effect on Sony Pictures' future. If Toshiba's HD-DVD were to become the standard, on the other hand, Sony Pictures would be just another studio.
Third, while Playstation 3s work just fine on ordinary TVs, PS3 games and Blu-ray movies look best on high-definition TVs. Playstation sales naturally generate some pull-through of high-definition TVs, and because consumers tend to stay in-brand with most bundled purchases, that drives some number of Sony HDTV sales. And since Sony HDTVs sell for some of the highest average prices of any of the flat panel makers (and therefore generate significant profit), those sales contribute significantly to Sony's revitalization of its traditional consumer electronics business. Don't think HDTV is that big a deal compared to next generation gaming? Think again: current projections by Parks Associates estimates that the HDTV market is worth $36 billion this year and growing 71% a year. The gaming business including all games, on the other hand, is only worth $13 billion currently.
Now Sony sells its Playstation 3 hardware at a loss currently, just as Microsoft does with its XBox 360 system. Both companies need a subsidy from some other part of the business to do that over any long period of time. For Microsoft, that subsidy comes from 1) the sales and licensing of games (which aren't enough to keep XBox from losing more than six billion dollars over the last five years) and 2) Windows and Office profits, which are also being tapped for other initiatives like Microsoft Live and Zune development. For Sony, the subsidy comes from 1) ongoing profits from Playstation 2 and PSP sales, 2) the sales and licensing of multiple platforms of games, 3) the royalties from Blu-ray movies and disks as noted above, and 4) some incremental sales of HDTVs as noted above. With DVD movie revenues projected to exceed $50 billion in 2009 and those being just one of four factors, Blu-ray success will solidify those subsidy streams for the foreseeable future. And since Blu-ray player and disk manufacturing will be 10 times larger in volume than HD-DVD, there's little question that Blu-ray will gain huge manufacturing cost advantages and higher profits over time. The result: Sony's Blu-ray strategy means that costs to manufacture the Playstation 3 itself will eventually come down substantially, despite it today having much higher parts costs than its competitors. And that positions Sony's PS3 to be significantly ahead of its competitors in the gaming business two to three years hence, when Microsoft and Nintendo will have to retool and relaunch their platforms to gain high-definition storage for games.
The bottom line: Sony's PS3 serves multiple Sony goals, only one of which is being the big platform in the the gaming console market. It doesn't have to outsell the Nintendo Wii or the XBox 360 for it to be successful; it only has to establish itself as a viable high-definition platform for next-generation developers, gamers, and movie watchers. With the DVD movie business several times larger in value than the gaming business today, setting a standard in next generation DVDs will reap bigger rewards than next-generation gaming for years to come -- and will give Sony a subsidy war chest for gaming that even Microsoft will struggle to match.
Look at the PS1, it introduced CD for gaming and it was actively around for 5years and then second place for a few more (and I think still available in some parts of the world.
Look at the PS2, it introduced DVD for gaming and it was actively around for 5 years and it is still available
Look at Nintendo's other consoles, look at xbox very short lived never at the tech forefront. The xbox came out a year after the PS2 and the 360 a year before the PS3 and the xbox was stopped before the 360 came out.
Sony has always introduced consoles that are before their time in functionality and power but that have a long life span. Adding a BD drive does help BD, but it is just as important to gaming if Sony wants to continue their 5-10 year plan (5 years of being the main system and 5 years of overlap with the replacement). The DVD is already at the limit of what is good enough for gaming, the console needed the next level.
Thats what I like about Sony. They think 10 years from now rather then 2 - 5 years from now. In the end like they were with the other two PS consoles, they will come out on top.
Look at the PS1, it introduced CD for gaming and it was actively around for 5years and then second place for a few more (and I think still available in some parts of the world.
Look at the PS2, it introduced DVD for gaming and it was actively around for 5 years and it is still available
Look at Nintendo's other consoles, look at xbox very short lived never at the tech forefront. The xbox came out a year after the PS2 and the 360 a year before the PS3 and the xbox was stopped before the 360 came out.
Sony has always introduced consoles that are before their time in functionality and power but that have a long life span. Adding a BD drive does help BD, but it is just as important to gaming if Sony wants to continue their 5-10 year plan (5 years of being the main system and 5 years of overlap with the replacement). The DVD is already at the limit of what is good enough for gaming, the console needed the next level.
Ah Sony revionist FUD.
1, PS1 was HARDLY the first system to use cds. It was predated YEARS earlier by the TurboGrafx 16 and the Sega CD, as well as PC gaming. Hell the Sega Saturn was out before the ps1 and it used CD's as well!
2. DVD was available for gaming on PC before the ps2 shipped. In fact, dvd drives were standard at that time. Not every game shipped on a DVD, but then again, neither did every ps2 game.
1, PS1 was HARDLY the first system to use cds. It was predated YEARS earlier by the TurboGrafx 16 and the Sega CD, as well as PC gaming. Hell the Sega Saturn was out before the ps1 and it used CD's as well!
2. DVD was available for gaming on PC before the ps2 shipped. In fact, dvd drives were standard at that time. Not every game shipped on a DVD, but then again, neither did every ps2 game.
the ps1 was the first console to widely use it. i'd hardly call turbografx, sega cd, or the saturn (not to mention a few other failed systems of the era) a success.
it was available, but again..not widely used. standalone dvd players were still pretty expensive at its launch. not like blu-ray and the ps3 today, but the ps2 still helped move the format along
sony didn't risk anything with the ps1 and cd's and the ps2 with dvd's tho. they totally risked the company with blu-ray and the ps3
the ps1 was the first console to widely use it. i'd hardly call turbografx, sega cd, or the saturn (not to mention a few other failed systems of the era) a success.
it was available, but again..not widely used. standalone dvd players were still pretty expensive at its launch. not like blu-ray and the ps3 today, but the ps2 still helped move the format along
sony didn't risk anything with the ps1 and cd's and the ps2 with dvd's tho. they totally risked the company with blu-ray and the ps3
Well thats my point, they used an ESTABLISHED tech for these systems, it wasnt brand new like BD was for ps3. There was no gamble at all in using CD as it had been used for years previously, and for dvd, it was the same, just bigger storage space, and already tested on PC.
1, PS1 was HARDLY the first system to use cds. It was predated YEARS earlier by the TurboGrafx 16 and the Sega CD, as well as PC gaming. Hell the Sega Saturn was out before the ps1 and it used CD's as well!
2. DVD was available for gaming on PC before the ps2 shipped. In fact, dvd drives were standard at that time. Not every game shipped on a DVD, but then again, neither did every ps2 game.
People need to realise that in business, and life in general,its not about who does it FIRST, its about who does it BEST.
The Playsation 1 was the first hugely successful CD based console.You can name all the ancient cd based consoles you want (CD-I, TurboGrafx16, 3d0, Sega Cd, Sega Saturn) but all those consoles combined sold a tiny fraction of what the Playstation 1 did.
Also, we're talking about consoles here. No reason to talk about PCs.
People need to realise that in business, and life in general,its not about who does it FIRST, its about who does it BEST.
The Playsation 1 was the first hugely successful CD based console.You can name all the ancient cd based consoles you want (CD-I, TurboGrafx16, 3d0, Sega Cd, Sega Saturn) but all those consoles combined sold a tiny fraction of what the Playstation 1 did.
Also, we're talking about consoles here. No reason to talk about PCs.
No one is debating the PS1 vs those other consoles, that would be folly, however, the post he was replying to said: "Look at the PS1, it introduced CD for gaming"
Which isn't a statement of value/consequences, but a statement of chronology.
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Why Sony risked it's gaming division for Blu Ray
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