PS3 Lays an Egg for Blu-Ray

December 20th, 2006 | Posted in It's All Geek to Me!

A few weeks ago a wrote this post about the high definition DVD format war and how it’s shaping up. Briefly, two competing formats are trying to become the next DVD standard. In one corner you have Blu-Ray, backed by Sony and numerous other hardware companies and movie studios. In the other corner you have HD-DVD backed by Toshiba, Universal and a few others.

Sony is the main backer of Blu-Ray. They pioneered the technology and are the driving force behind it’s marketing and roll out. In case you aren’t familiar with Sony, they have been down this road before. In the mid-seventies Sony introduced the Betamax tape format to the public consumer, beating JVC‘s VHS format to the marketplace. Sony’s handling of that technology is a classic study in bad marketing and even led to the coining of the phrase “to Betamax”, which means to overwhelm a technology format in the marketplace by allowing multiple, competing, licensed manufacturers to produce machines of a competing technology. In a nutshell, Sony was arrogant enough to think they could dictate the consumer standard for home video technology and control the production, price and reap the profits from all licensed makers of their Betamax players. The results were that they had high quality player/recorders that were very expensive. JVC freely allowed licensing of the technology to almost any company who wanted to make VHS recorders, which resulted in almost 4 times the number of manufacturers and a resulting competitive marketplace that drove prices down on VHS for the consumer. Sony also refused to develop a “Long Play” facet of their technology, arguing that picture quality would be too low whereas VHS makers like RCA felt consumers would trade lesser picture quality for the ability to record four hours instead of just two on a single tape. Sony mishandled Betamax badly, overconfident in their ability to tell consumers what they wanted to buy. The end result was that VHS became the standard for 25 years, and Betamax became a punch-line. Sony has repeatedly mishandled similar technologies like the MiniDisc, a technology meant to replace recordable cassettes. With Blu-Ray, Sony may be once again swinging and missing.

One of the biggest hopes for the Blu-Ray format was the release of Sony’s Playstation 3, the next generation of their market-dominant gaming console. Sony insisted on making the PS3 with a Blu-Ray drive, even though actual use of the storage capacity of that drive for gaming is a year or more down the road. Their thinking was to put a Blu-Ray drive, and therefore a Blu-Ray movie player, in the living rooms of everyone who would upgrade to the PS3. Sony and the movie studios who have declared themselves “Blu-Ray exclusive” figured that this would create an instant, giant base of Blu-Ray players that would leapfrog them over the already on the marketplace HD-DVD players. An logical, but flawed, assumption.

PS3’s debut has been a colossal bust for two main reasons: supply and price. First, they blew it with consoles production and instead of the two million units they promised would be available by the end of the year in the US, optimistic projections are for 400,000 and right now (Dec. 20th) they are at about half that. Some might say that increases “buzz” and the scarcity makes it more enticing by creating an artificial image of high demand. I think that consumers are tired of having to make superhuman efforts to spend their money on something. I think they just want to go into a store and buy what they want. If it isn’t there, they are just going to move on. In this case, it means buying one of the other game consoles which are in good supply and ready to purchase. In November the PS3 sold only 197,000 units in the US. The Nintendo Wii sold 476,000 units that sames month… of course that’s new and supply is not an issue so those kinds of numbers might be expected. More startling for Sony is the fact that November saw 511,000 units of Microsoft’s Xbox 360 sell. This is a game console that has been out for over a year now, with over 8 million sold and 10 million projected by early next year. Not good for Sony, as few of those other game console buyers will also purchase the PS3 when supply finally comes around.

The second reason is price. Blu-Ray drives are expensive to produce, and the diodes used are in short supply. Because Sony insisted on the Blu-Ray PS3, a new 60 GB console is a whopping $600.00. That is more than twice the price of a Wii and almost twice that of a comparable Xbox. That is hugely expensive, and cuts a large segment of the market out… mainly casual gamers. Combine that with the fact that there are almost no PS3 dependent games out (ones that won’t work on PS2 and/or are not available for Xbox) and the fact that it doesn’t offer any better a gaming experience that the hi def Xbox does, there is little reason for anyone but serious PS gamers to jump on board… even if they find one to buy. It has also been noted that PS3’s are not as hard to find as they ought to be in the short supply they are, with shipments into stores getting on shelves rather than filling advanced waiting list orders, and eBay auctions going for only a little more than retail cost, if that.

To further screw up the PS3’s Blu-Ray impact, the movie they chose to bundle with the game is the underwhelming Talledaga Nights: The Ballad of Ricky Bobby. Somehow I do not think seeing Will Farrell running around in his tighty whities a particularly awe-inspiring image for showcasing high definition, but that might be just me.

Even given an eventual large number of PS3 sales (and that is no given until the supply is up and the price comes down) Sony and company is totally off the mark if they think every PS3 sales is a Blu-Ray movie player sale. Yes, it’s capable of playing the movies, but how many people use their PS2 to play DVD’s?? Not many… most people buy the game consoles to play games. I’d say a majority of the buyers of a PS3 won’t even have it hooked up to a hi def TV to take advantage of the Blu-Ray player anyway. My kid’s Xbox is hooked to an older TV in the basement. It’s a big TV but not a HDTV. Sony’s thinking is flawed all around.

BLU-Ray stand-alone players also have their problems. First, despite the promise of being a better technology with far more capacity, the bottom line is Blu-Ray isn’t ready for prime time yet. The high capacity disks are not needed nor very economically feasible right now, making them only as good or less than dual layer HD-DVDs. Higher costs for production and diode supply make the average Blu-Ray player about $1000.00, while a 2nd generation Toshiba HD-A2 is $499.00. Inexplicably, Sony and Blu-Ray stuck with the MPEG 2/4 DVD compression standard instead of the new VC1, and picture quality of Blu-Ray movies suffers as a result according to reviews. Meanwhile HD-DVD stand alone players are on their second generation (from Toshiba, with other manufacturers to follow soon) starting at $499.00. Microsoft is selling an HD-DVD add on drive for the Xbox 360 for only $199.00 bundled with the awesome King Kong HD-DVD movie. Unlike the PS3, Microsoft gave Xbox consumers an option of getting an HD drive or not (as such, EVERY add on drive purchase is for people who want to watch HD movies, as it has no other use). Finally HD-DVD movie quality has been getting equal or better reviews than Blu-Ray.

With all the missteps and Sony’s track record of not understanding how to get an new media format off the ground, I think the “war” has swung HD-DVD’s way. Sony is investing a lot of money into marketing and store placement… many believe stores like Best Buy are being paid to display Blu-Ray products more prominently and push them by bad mouthing HD-DVD to customers. There is no proof of this, but the phrase “I got ‘rayed” has been coined to describe the experience they have been having at brick and mortar electronics stores like Best Buy.

If I was a betting man, and I guess I am as I will be getting an HD-DVD player sometime in the near future, I’d go with HD-DVD. Sony just doesn’t get it.

Comments

  1. mengblom says:

    Hey, great analysis, Tom! Thanks for the overview. I had no idea what all the fuss about “blu-ray” was about, and it’s good to get some background on it. Yeah, it looks like (once again) Sony’s going down the Betamax path, to the collective apathy of the consumer electronics market.

    I had no idea Sony dropped the ball so badly on the PS3’s. Only 200,000 units so far? Geez…what a disaster.

  2. Tom says:

    Can’t tell if you are being sarcastic or not… 200,000 PS3’s in one month might sound like a lot, but considering this game console has been hyped for release for the past year, and that there are currently over 100 million PS2’s sold, that’s only a handful. Had they gotten their promised 2 million units produced, they probably would have sold them out over Christmas. Instead, hundreds of thousands of people bought an Xbox or a Wii instead.

    I still think Sony is nuts if they think Joe America is willing to pay $600 for a video game machine. There are gaming freaks out there who will not blink an eye at that price, but the PS2 sold 100 million plus consoles appealing to the casual gamer and families with a reasonable price and strong support from the original Playstation platform owners.

    I think eventually the price will drop to a level that will allow Joe America to jump on board, and the PS3 will still be the dominant game console… I just think it will be too late to make a difference in the Hi Def DVD format war…

  3. mengblom says:

    No, I was genuinely flabbergasted at the 200,000 figure. That’s insanely small for such an anticipated gizmo. Looks like Sony blew it…..again.

  4. Tom says:

    Minneapolis’s Kare 11 news last night had an “extra” on the Blu-Ray/HD DVD war. Typically they didn’t do more than gloss over the major points, but the got most of the details right. As part of the story they interviewed a Best Buy saleperson… if I had any doubt that Best Buy is being paid off to push Blu-Ray I don’t anymore. this guy blatantly lied about the differences in the technologies, squarely promoting the superiority of Blu-Ray over HD-DVD. The reporter got the details right later, but the BB guy was a Blu-Ray schill.

  5. jittles says:

    Pricing aside, the biggest hurdle for Sony (in my mind) is the fact that the name “Blu-Ray” has to be explained (by shills and honest reviewers alike). The term HD-DVD is self-explanatory and instantly understood. When the consumer then begins to look at things like price, features, and availability it becomes a tough row to hoe for Sony. I own the first two Playstations and won’t be buying the 3rd any time soon. There’s just no compelling reason to. I would be curious to know how many PS2’s are selling right now at that $129 price point. A great value.

    All that said, Sony has to know all this and I wouldn’t write them off just yet. They own or have a share in intellectual properties now that they didn’t have back in the 70’s. Betamax and Blu-ray is not an apples to apples to comparison.

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