SONY PLAYSTATION 4: AIM AND FIRE article

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SONY PLAYSTATION 4: AIM AND FIRE

KazuoHirai,presidentandgroupCEOofSonyComputerEntertainmentInc.(Sony),

makersoftheSonyPlayStation(PS),steppedofftheTokyostreetintothecrowdedpublicarcade.

Hewatchedchildren,withtheirparents'help,pluginhandheldadaptersandbeginswoopingtheir

armstomovecharactersonlargedisplaysandheberatedhimselfagainfornothavinginvested

more resources in developing thistype of technology before Nintendo had debuted theWii.Sony

haddominatedtheprevioustwogenerationsofgamingsystemswiththePSandPS2,butwaslate

tothegameinincorporatingcomprehensivemotiontechnologyintoitsuserexperienceforthe

PS3.Wiiwith its family-oriented sporting and arcade-style actiongameshad alreadygrabbed

marketshareHiraithoughtshouldbelongtoSony.AndMicrosoft'sXbox360withKinecthad

snatchedupmoreof"his"customerbasewithitsgroundbreaking,full-bodymotion-sensorcamera

thatalloweduserstoanimatetheirowngamingcharactersusingtheirbodiessometimesinlieu

of any controller at all.

ThenextbattleinthegamingconsolewarshadbegunandHiraiwasanxious.Howcould

heensurethatSonywasnotanalso-ran?Nintendowasthefirsttomarketwithaseventh-

generationmachine,releasingtheWiiUinNovember2012.MicrosoftdebutedtheXboxOnea

mereweekafterSonyhadreleaseditsPS4inNovemberof2013.NotonlydidHiraihavetoworry

aboutNintendoandMicrosoft,buthealsohadtheconstantfeelingthatanewcomercouldarisein

thegamingsectoratalmostanytime.Sonyhaditselfsprungontothesceneasanewcomerinthe

mid-1990sandhadbeentheclearwinnerinboththefourthandfifthgenerationsofgaming

systems.Sowhycouldn'tanotherplayerwithawinningstrategyandsomenewapplicationof

technologypulloutaheadnext?ThefirstgenerationhadbeenledbyAtari;Nintendohad

dominatedthesecondgeneration;SegaandNintendobattledforsupremacyduringthethird

generation,onlytobeupstagedbySonyinthenexttwogenerations.Thelastgeneration,thesixth,

had seen Nintendo retake first place.

There were more changes on the horizon, too. Given the rise of online gaming andmobile

computing,itwasn'tevenclearthatthefutureofgamingplatformswasagameconsoleinthe

livingroomorthatthe"gamebox"nexttotheTVwouldcometorepresentsomething

completelydifferent. Hirai wasdetermined not to let Sony drift out of thegaming industry, yet he

wasn't clear about the direction in which he ought to push hisengineers. Was Sony doingenough

toinnovate?Thisquestionhungintheairunresolvedashewalkedoutofthebrightandnoisy

arcade and back intothe busy Tokyo street.

Structure of the Gaming Industry

Thegamingindustryhadalwaysbeenfraughtwithcompetitivebattlesandshort

technologylifecycles.Newgenerationsappearedroughlyeveryfivetosevenyears.Forgame

consolemakers,eachgenerationentailedalargecapitalinvestmentinconsoledevelopmentand

production.Earlyproductioncostsoftenoutstrippedthepriceperunit,makingearlylosses

inevitable.Onlyafterasignificantnumberofconsoleshadbeensoldwouldaconsolemakerdrive

downproductioncostsandbegintoearnaprofitoneachmachine.High,fixeddevelopmentcosts

wereanotherfactor.Severalyearsoftenhadtoelapseafteralaunchbeforeanewgenerationof

consolesturnedaprofit.Asecondimportantindustrydynamicwasanormal,sequentialreduction

inpriceahigherinitialpricepointattractedhard-coregamerswhocouldn'twaitforthenext

advancementsintechnology,thenthepricepointwasloweredovertimetoattractothermarket

segmentssuchasneworcasualgamers.Infact,whilethesellingpricemightdropovertime,the

company's profit margins might actuallyincrease as it capturedeconomies of scale.₁

Anotherfactorofimportanceininterpretingthelifetimesuccessofagivenconsolewas

theattachratethenumberofsoftwaretitles,orgames,ownedbytheaverageconsoleowner.

Thevideogamingconsolesystemcouldbethoughtofasjustthat:asystem.Bothhardwareand

softwarewereneededtoplayagame.Foreachsoftwaretitlesoldforagivenconsoleplatform,

theconsolemakerreceivedaroyaltypaymentofupwardsof20%ofthepriceofthegame.

Software titles retailed foran average of $50 and varied depending on the popularity of thegame.

Somegames,suchasSuperMarioBrothersorSonic,weredevelopedinternallybytheconsole

maker.Typically,thesetitleswouldonlybeavailableonthatconsolemaker'ssystems.Other

softwaretitlesweredevelopedbyexternalsoftwarehousesandwereexclusivetoaparticular

hardwareplatformforaperiodoftime,butmightlateralsobedevelopedforanotherplatform

albeitpossiblywithdifferentreleasedates,content,and/orfunctionality.Somegameswere

developed formultipleplatforms at the sametime.The effectof"superstar"gamessuch asSuper

MarioBrothersorGrandTheftAutocouldnotonlylaunchentiresoftwarefranchisesbutalsohelp

to boost sales of the hardware associated with that game:

Theintroductionofasuperstarincreasesvideogameconsolesalesbyanaverage

of14%(167,000units)overaperiodoffivemonths...Hardwarefirmsshould

maintainasteadyflowofsuperstarintroductionsbecausethepositiveeffectofa

superstarlastsonlyfivemonthsand,ifneedbe,makesidepaymentstosoftware

firmsbecausesuperstarsdramaticallyincreasehardwaresales.Hardwarefirms'

exclusivityoversuperstarsdoesnotprovideanextraboosttotheirownsales,but

it takes away an opportunity for competing systems to increase their sales.₂

Overtheyears,thequestforthenextblockbustergamehadbecomemoreandmore

expensiveforsoftwaredevelopers.In2005,thecostrangedfrom$3millionto$6million,₃andby

2010,anext-generation,multiplatformgamecouldrequireupto$28milliontobringtomarket.₄

Manydevelopmenteffortsrivaledorexceededthecostofmakingablockbustermovie.The

popular gameGrandTheftAuto4by Rockstar Gamesrequiredthree years and over $100million

todevelop.₅Withgamesaswithmovies,thedistributionofsalesfiguresacrossallgamesina

categorywashighlyskewed.Thebighitscouldbringinbillionsofdollars.GrandTheftAuto4

grossedmorethan$500millioninitsfirstweekandwentontosellover22millioncopies.₆But

mostgameswerenotsosuccessful,anditwasnotuncommonfordevelopmentstudiostoposthigh

losses.Gamedevelopmentstudiosfrequentlyemployedfull-timedevelopers,unlikemovie

studios, which tended to hire temporary workers as needed to help stay profitable.₇

Withsuchlargeinvestmentsatstake,thechoiceofwhichplatformorplatformstodevelop

agameforwascritical.Researchshowedthat,inthedecisionbysoftwaredeveloperstoalignwith

oneplatformoranother,theattractivenessofagivenplatformwashighlycorrelatedwithfour

variables:

Developers were morelikely to release titles for the dominantplatformin a market.

Developers were morelikely to release a title for a newer platform.

Developerswerelesslikelytolaunchproductsonaplatforminwhichotherdevelopers

and titles had strong presences.

Developerswerelesslikelytoreleasetitlesforaplatformthatwasalreadytightly

connected to only a few developers.₈

History of the Gaming Industry

ThefirstcommerciallysuccessfulgameconsoleplayerintheUnitedStateswastheAtari

VideoComputerSystem(VCS),laterknownastheAtari2600.Releasedin1977,theAtari

consistedofaboxandacontrollerandusedaTVasthedisplaydevice.Itfeaturedcartridge-based

gamessuchasPac-Man,Frogger,andPolePosition,andcost$199.TheAtariVCSinspireda

rashofentrantsintothegameconsolemarket,includingtheMagnavoxOdyssey,Intellivision,and

Colecovision. By 1983, Atari was the clear market leader.

Ayearlater,however,theU.S.marketcollapsed.₉Dismissedasafad,themarketbecame

saturatedandthatyear'stotalindustrysalesplummetedtounder$100million.Meanwhile,two

Japanese companies, Sega and Nintendo, were developing a new generation of machines using8-

bitprocessors.Segawashistoricallyapinballmachineandjukeboxmanufacturer.Nintendohad

enteredthecoin-operatedvideogamemarketwithitsdebutofthewildlypopularDonkeyKongin

1981,inwhichthecharacterMariofirstappeared.In1983,NintendoandSegaintroducedtheir

firsthomegamingconsoles,theFamicomandtheSG-100,respectively,intheJapanesemarketat

anintroductorypriceof$199.₁₀TheFamicomwasahugesuccess,basedlargelyonthepopularity

of itsSuperMarioBrothersgame,aDonkey Kongspin-off, so Nintendo released the Famicomin

theUnitedStatesin1986underthenameNintendoEntertainmentSystem(NES).₁₁TheNES

quicklybecameaU.S.cultphenomenonwithexclusiveorinternallydevelopedblockbustertitles

suchasSuperMarioBrothers,TheLegendofZelda,andMetroid.By1988,Nintendowasthe

dominant force in the growing gaming industry.

Meanwhile, the competition waseagerly working on new third-generation systems.These

machineswereheraldedbyNEC's1987releaseofthefirst16-bitsystem,theTurboGrafx-16,and

weredefinedbynewstandardsingraphics.Videographicsnowoperatedatincreasedresolution,

whichmadenewimagingpossibilitiesavailabletogamesoftwaredevelopers.Thisnew

technologyinvigoratedthestalled,over-inventoried8-bitgamingindustryandopenedthewayfor

NintendoandSegatoeachintroducea16-bitsystemoftheirown:theSuperfamicomandtheMega

Drive,respectively.Sega'sMegaDrivewasthefirsttomarket,debutingin1988inJapanandin

1989intheUnitedStatesandEuropeunderthenameGenesis.(TheSuperNintendoEntertainment

System[SNES]wasnotreleasedintheUnitedStatesuntil1991.)Sega'sconsolewasasteep

competitorfortheSNESdueinparttoSonictheHedgehog,agameintendedtocompetewith

thefamily-orientedSuperMarioBrothers,andMortalKombatIandII,whichsparkeda

congressionalhearingonthecensorshipofviolenceingamesmarketedtochildren.₁₂Peripherals

cameintofocusasanareaofcompetitioninthisgenerationaswell;CD(opticalmediaport)and

memoryadd-onsthatboostedperformancebutrequiredseparategamepurchaseswereintroduced,

aswellasavariedselectionofcontrollers.₁₃By1993,SegaandNintendowerestillfightingfor

marketdominance,withSegacontrollingroughly60%oftheU.S.market.Nintendodidn'tedge

out ahead of Sega until 1995₁₄by somestandards, afterthe generation was effectively over.The

entire time,the gaming marketcontinued to expand.

Thistimeperiodalsosawtheemergenceofarelatedgamingindustrytrendhandheld

gameplayers.Thefirstcommerciallysuccessfulhandheldgamingdevice,Nintendo'sGameBoy

($99),wasintroducedin1989andmayhavebeenasupportingfactorinNintendo'sresilience

duringthethird-generationscramble.₁₅Someobserversattributedthelong35-hourbatterylifeand

theincludedgameTetristotheGameBoy'ssuccess.₁₆Otherhandheldsfollowed,butnonehad

achievedthefollowingandsuccessoftheGameBoyandGameBoyAdvance,whichtogethersold

closeto200millionunitsworldwide.Thatnumberhadnotbeenapproachedsincebyanyother

producer,althoughsuccessorsNintendoDSandDSLitecameclosest,withacombined120

million unitssold aftertheir 2006 release.₁₇

By 1994, attention shifted to fourth-generation machines based on 32-bit processors.Sega

wasthefirsttomarketwiththeSegaSaturn.Forthefirsttime,aCD-ROMdrivewasusedinstead

ofthecartridge-basedsystemsoftheprevioustwodecades.₁₈Inasurprisemove,consumer

electronicsgiantSonyenteredthemarketwiththePlayStationayearlater,alsousingCD-ROM

technology.Nintendo, scrambling, decided to jump a generation,releasing the Nintendo 64, a64-

bitmachineusingcartridges,in1996.By1999,despitethetechnologicaladvantagesofthe

Nintendosystem,Sonytookcontrol,witha43%marketsharecomparedwithNintendo(28.4%)

and Sega (28.6%). SeeFigure1for market share data from1995to 2000. In contrast toNintendo

and Sega, which had emphasizedinternally developed software titles, Sony aimed toattractthird-

partygamedevelopers,offeringtotakereducedroyaltiesandplacingfewerrestrictionsoncontent

and quality.

Figure 1. Market share by majorconsole manufacturer (32-bit consoles),1995-2000.₁₉

70

60

50

40

Sony

30

Sega Nintendo

20

10

0

199519961997199819992000

InattemptstochallengeSony'ssupremacy,NintendolaunchedtheGameCubeandSega

theDreamcast.Thenewfifthgenerationwastransformedanddefinedyetagainbynewgraphics

capabilitythistimealeapto128bits.SegaenteredtheU.S.marketfirstin1999withthe

Dreamcast.Sonyfollowedin2000withtheSonyPlayStation2(PS2).Nintendo'sGameCube

debutedayearlaterfortheholidayseasonof2001.Inanothersurprisetotheindustry,software

giantMicrosoftenteredthefraywiththeXbox.Itwasoriginallyintendedtobeavailableforthe

2001holidayseason,butproductiondelaysledtoaJanuary2002launch.TheSonyPS2andthe

Xboxwereofferedat$299,whiletheDreamcastandGameCubewentforamoremodest$199.

SeeFigure2forapproximateunitsalesforthethreemajorconsolemanufacturersforallconsoles

(allgenerations)from2000to2006andFigure3fortotalhomevideogamesalesfrom1977to

2000.MajorgameswereSega'sSonicAdventure,Sony'sGrandTheftAuto:SanAndreas,

Nintendo'sSuper Smash Bros. Melee, andMicrosoft'sHalo.

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Figure 2. Gameconsole unit sales (including handhelds),2000-06.₂₀

70

60

50

40

Microsoft

Nintendo

30

Sony 20

10

0

2000200120022003200420052006

Figure 3: U.S. homevideo gamesales,1977-2000.₂₁

6000

5000

4000

3000

2000

1000

0

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By2003,themarketshareofallhomeswithfifth-generationmachineswas60%forSony's

PS2,21%forMicrosoft'sXbox,and17%forNintendo'sGameCube.Sega,whichfailedtocapture

customers'imaginationwiththeDreamcast,exitedthegameconsolemarketaltogether,instead

focusingondevelopingsoftwaretitles.Forthefirsttime,anewgameplayerwasbackward

compatibleabletoplaylast-generationconsolegamesallowingownersofSonyPlayStationto

upgrade to PS2but still play all their old games.

GenerationSix

Thesixthgenerationwas,interestingly,notdefinedbyajumpinbit-categorythenorm

remained128bits,whichcontinuedtooffergameandconsoledevelopersanoptimal

price/performancetradeoffgivenemerginghigh-definition(HD)technology.Determinednotto

belatetothegame,MicrosoftwasthefirstmoverwiththelaunchoftheXbox360in2005,which

soldfor$299(baseunitonly).AmongthetopexclusiveXbox360gameswerethosetargetedto

hard-coregamersandadults,withtitleslikeHalo3,GearsofWar,andMassEffect.Thesewere

wellreceivedandconsideredtobesolidgameofferings.Theytendedtoskewtowardmoremature

audiences(21yearsandolder),agrowingsegmentofthegameplayermarket.Onecoupfor

MicrosoftwastheXboxversionofGrandTheftAuto,whichhaduntilthenbeenexclusiveto

Sony's PlayStation.

TheXbox360wasthefirstconsoletonativelyrenderinhighdefinition(HD)a

technologythatproducedclearergraphicsandmorelifelikemotionthanhadconsolesfrom

previous generations. Consumershad the option to purchase themachinewithanHD-DVDdrive

for$399.HD-DVDwasanewstandarddevelopedbyaconsortiumledbyToshibaforhigh-

definitionmovies.Atthetimeofthe Xbox360's launch,HD-DVDwasinabattleforsupremacy

againstSony'sBlu-raystandard.MovieexecutiveswerewaryofarepeatoftheVHS-Betamax

standardsbattleinvideocassettetapesinthe1980sthatforcedthemtoproducemediaintwo

formats(untiltheVHSstandardwon).ShaneKim,generalmanagerofMicrosoftGameStudios,

saidinmid-2006,"IunderstandwhyBlu-rayisgoodforSony.I'mnotsureyetwhyBlu-rayis

goodforgamersandforcustomers...We'recompletelybehindHD-DVD.We'regoingtodo

everything we can as a company toestablish HD-DVD as thestandard."₂₂

ThePS3wasSony'sanswertotheXbox360.Releasedayearlaterinlate2006,itwas

significantlymoreexpensiveoutoftheboxat$499fora20GBharddriveand$599for60GB,but

thatincludedaBlu-raydiscplayer,abuilt-inbroadbandInternetconnection,andalifetime

membershipinthePlayStationNetwork(PSN)onlinegamingcommunity.Microsoftcharged

extraforahigh-speednetworkconnectionhardwareupgradeandamonthlyfeeforonlinegaming

accessthroughitsXboxLiveplatform.ThePS3wasclearlythemorepowerfulsystem.Itscell

microprocessor was themost advanced on themarketmore so eventhan those availableinPCs.

Availablegameswereconsideredamixedbag,withGrandTheftAutonolongeranexclusive

offering, but instead containing exclusive contentand functionalityspecifictothe PS3. The third-

SonymodifiedtheexistingPScontrollertoincorporatemotionsensing.Arumblefunction

wasdevelopedbutdidn'tmakeitintothePS3controller;however,amotion-sensingfunctionand

pressure-sensitivebuttonswereincludedalbeitwithoutacadreofpopularsportinggamesand

othersoftwarethatfullyleveragedthesecapabilities.Hirai saidwhen asked about the lack ofPS3

gamestakingfulladvantageofthenewfunctions:"Wewantedtokeep[themotionsensorinour

controller]underwrapsaslongaspossible.Welimitedittooneinternalstudio...toincorporate

[the new functions] intoWarhawk."₂₄

IndustryanalystsandcorrespondentsdidpredictsomepushbackforSonybasedonthe

price.Per-unitmanufacturingcostsalonewerebetween$800and$850whenthePS3wasreleased

in2006soevenatthe$599fullyloadedpricetag,Sonywaslosingmoneyoneachconsolesale.₂₅

MerrillLynchtechnologyanalystspeggedthecosttaillikethis:"Inparticularwethinktheproblem

pointsaretheSonyCellprocessorandtheBlu-raydrive.Ourupdatedanalysisindicatesthatthe

initialbillofmaterialsforPS3couldapproach$800,fallingto$320threeyearsfromlaunch."₂₆

Hirai said of the PS3, its price point, and functionality:

Inabsolutedollarterms,isithigherthan[thePS2's]$300?Yes,itis.ButIalso

thinkthatwehaveahistoryofmakingsurethatourconsoleshavea10-yearlife

cycle...Theconsoleisdesignedtoplayvideogames,watchBlu-raymovies,and

also download content fromthe Internet.

...Blu-ray,giventhefactthatifyouhavetwolayersyoucangowith50gigabytes,

isjustleapsandboundsbeyondwhatDVDorHD-DVDbringstothetable.Ithink

HD-DVD happens to be just a marginal improvementover conventionalDVDs.

...Ihavebiggerfishtofry[thanworryingaboutMicrosoft'sone-yearheadstarton

thereleaseoftheXbox].We'veneverlaunchedasystemfirst,andwe'vealways

managedtoovertakethoseconsoles...itiswhatitis.It'snottoomuchofaconcern

forme.₂₇

Sony'sadvertisingbudgetforthePS3launchwas$150million,andthemarketing

campaign faced several hurdles:

...ThehighpricecouldbeaboontoSony'schiefgamingcompetitors,Microsoft

andNintendo.MicrosoftpointsoutthatforthepriceofthePS3,youcouldalmost

buy the mostexpensive Microsoft Xbox 360 ($399) plus the Nintendo Wii($249),

which hits the stores twodays afterSony's new console.

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ThatpresentsahugechallengeforTBWA[Sony'sadvertisingagencyforthePS3]

goingintotheChristmasseason.Thegoalisn'ttosellthePS3onthefirstdayof

thelaunchPlayStationfanswillprobablygrabeveryoneofthe400,000unitsoff

theshelves.Theagency'sjobistopersuadethosewholeavethestoreempty-

handedtowaittonotbuyXboxorWiievenifitmeansholdingoffuntilafter

ChristmasbeforeSonycanrampupitsmanufacturingenoughtosatisfythe

demand.₂₈

Withintwo weeksofthePS3release,Nintendo'snew Wiiarrivedinstoresat$250soon

todropcloserto$200andwithitcamethegame-changingtechnologyboostofgame-integrated

motion.Ironically,thedecisiontonotcompeteinthe"armsrace"ofprocessingpowerandrealistic,

immersivegamesinwhichMicrosoftandSonywereinvolvedprovedtobeanunlikelypathto

successforNintendo,whichinsteadplaceditsbetonsomethingaltogetherdifferent:asystemof

simplergamesthatreliedonactualphysicalmovementsnotjustthepressingofbuttonstoplay.

Wiicontrollersusedpioneeringmotion-sensingcontrollerswhosemovementscouldbeinterpreted

bytheWiiconsoleandintegratedintoon-screenplay.Nintendochosetoprioritizethelowerprice

pointandinnovativecontrollingdevices(whichincludeduptofourpaired,or"leashed"devices,

includingprimarycontrollers,nunchucks,and/orabalanceboardwithfourweightsensors)over

higher-end graphics capability.

Nintendo'sgamelineupstillincludedSuperMarioBrothersandMetroid,andthird-party

softwaredevelopmentsupportsoonfollowed.SomeanalystsobservedthattheWii,becauseit

reliedonoldergraphics capability,presentedfewerhurdlestopotentialdevelopersandmadethis

platformattractiveandpotentiallymorelucrativethanthehigher-endgamesdemandedbyPSand

Xboxplayers.₂₉Somegamersandanalystsspeculatedthatinmakingthistradeoff,Nintendowas

buildingonitspositioninthefamily-friendlymarket.ReggieFils-Aime,Nintendo'sexecutive

vicepresidentofsalesandmarketing,saidofNintendo'sdesignprocessthatthefirmconsidered

theconsumer'sneedsfirstwhenmakingdecisionsaboutresourceallocationinthedevelopment

process. He also definedNintendo's target consumer. He said:

"Willthisremotefeelgoodinmyhand?""WhattypesofgamescanIplay?"and

"WhatcanIenvisionNintendodoingwiththis?"That'sstepone...Steptwois

beginningtoappealtothemorerationalside,intermsofwhat'sthepricingand

what'sthelaunchdate.Stepthreewillbetrulyexcitingthecustomerbydetailing

the specific launch titles.

We will have gamesand experiencesfor the core gamer[even without HD orBlu-

raygraphics]thatlookgreat,playgreat,andhavetremendousfunfactor...TheWii

willalsobringthemassmarket.It'llbringinbothyoungerandolderconsumers.

That's our strategy. Wewant both parts of the customer base.₃₀

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Nintendo,whichhadmorerecentlyoccupiedthethird-placepositioninthemarketalbeit

aprofitablethirdplace₃₁instigatednothingshortofarevolutioninthegamingindustry.Soon

afteritsrelease,theWiibecameacultphenomenon.Theinnovativecontrollerandsimplefamily-

friendlygamesexpandedthemarkettoyoungandoldalike.Grandparentsandtheirgrandchildren

couldbefoundsharinginthegamingexperience.By2010,Nintendohadtakenacommanding

leadinthesixth-generationrace,capturingcloseto50%ofallunitsalesandrelegatingthePS3

andXbox360toabattleoversecondplace.ByJune2011,over87millionWiishadbeen

purchased worldwide. (SeeFigure 4for market share data for 2006 to 2009.)

Figure 4. Estimated video console market share,2007-09.₃₂

60.00%

50.00%

40.00%

30.00%

Wii Xbox360

PS3

20.00%

10.00%

0.00%

200720082009

Sony andMicrosoft Respond

ThePS3ledoffwithgreatnumbersinlate2006andearly2007,butthefeedbackonline

andinthepresswasmixed,ifnotovertlynegative.Salesbegantolag.ElectronicGamingMonthly

featured a cover story that tried to uncover thereasons why:

Everyonefromhardcoregamerstothemainstreampresswasdoggingonthenewest

console in the PS family. Whathappened?

...GrumblingaboutthePS3'shighprice,lackofcontrollerrumble,andspotty

launchlineup[games]becamecommonplaceonInternetmessageboards...Plus,

thedecisiontomakePS3aTrojanhorseforSony'shigh-defBlu-raydisc

technologycouldbebackfiringunlessyouconvinceconsumersthatthisextra

³¹JamesSuroweicki,"In Praiseof ThirdPlace,"New Yorker, December 4, 2006,44.

³²Graphiccreatedby case writer using data fromMarketShareReporter2010,571;andGreyianStorm,"Home

ConsoleMarket Share(2010),"Gameolosophy,June 1,2010.

featureissomethingtheytrulywant,they'llonlyviewitasanaddedexpense.And

althoughthePlayStationNetworkoffersanonlinesolutionfarbeyondwhatwesaw

onthePS2,thepremiumfunctionalityofXboxLiveGoldstilloutclassesSony's

offering.Finally,anexodusofexclusives[gamingtitlesthatcouldonlybeplayed

on one console] could be the mostdangerous problemcurrently facingthe PS3.₃₃

InJanuary2008,oneindustryanalystestimatedthatthePS3per-unitcostcouldhave

droppedtoaround$400:"Costspermachine[havebeencut]toaround$400now,fromabove

$800justbeforeitwentonsaleinNovember,2006."₃₄ForbessaidofthePS3andtheproblems

industry pundits had observed with its launch:

HighdevelopmentcostsandmisseddeadlineshavealwaysplaguedthePlayStation

businessasSony'sengineerstinkerendlesslywitheachmodel.Thepowerful

PlayStation3,whichusesanIBM-Toshiba-Sonychipthatcando256billion

calculationsasecond,costs$400andwaslatecomingtomarket.Outside

videogameoutfitshavestilldesignedonlyalimitednumberofgamesforit.But

onePlayStation-onlygamereleasedinJune[2008],MetalGearSolid4,hasbeen

drivingsalesofthemachine.Sonyexpectstosell10millioninthisfiscalyear,

whileholdingpricessteady,enoughtoputthatbusinessintotheblack.Morgan

Stanley saysSony mighteasily sell 14.5million.₃₅

Sony's response to thisearly, shakyperformance was twofold. First, it furtherreducedthe

retailpriceofthePS3,movingdownfrom$400to$299possiblystilllosingmoneyoneach

console.₃₆Second,Sonyhadamuchstrongermarketpositioninternationallythanitdidinthe

UnitedStates,especiallyinJapan,wheretheXboxhadsoldlessthan250,000unitsby2008.₃₇

Meanwhile,SonyappearedtohavewontheBlu-ray-HD-DVDformatwar.In2008,WarnerBros.

announceditwouldswitchovertotheBlu-raycamp,leavingonlyParamountandUniversalstill

supportingHD-DVDandrumorhaditthatUniversalwasplanningtosupportboth,while

Paramount was seen as vacillating.₃₈

Then in the fall of2010in timefor the holidayseasonSony introduced the PSMove,

amotion-sensitivecontrollerthatallowedusersto"intuitivelyplayasiftheyarewithinthe

game".₃₉MicrosoftrespondedswiftlywithasecondreleaseoftheXboxon November4,2010

thistimefeaturingKinect,afull-bodymotion-sensingcamerathatcoulddetectandtranslateuser

movement without a handheld controller.₄₀Forbeswrote ofMicrosoft's move:

Kinectisa majorupdatetotheXbox360gameconsole.LiketheNintendoWiior

PlayStationMovesystems,Kinectletsyouinteractwithgamesandmenusvia

gesturesinsteadofbuttons.ThedifferencewithKinectisthatthereisno

controller.Youselectandplaygamesusingyourhands,fingers,elbowsand

voice.Aninfraredlaser,cameraandmicrophonearraytuckedintoablackoblong

sensor can track up to six people.₄₁

ByMarch2011,CDComputingNewsreportedthat"thenumberofPlayStationMove

supported/dedicatedsoftwaretitleshasreached155...includingtitlessuchasSportsChampions,

SingStarDanceandKillzone3."₄₂InAugustofthatyear,SonycutthePS3byanother$50globally

toboostsales,andanalystsassumedthattheyhadbeguntomakeaprofitoneachconsolesale.By

August 18, the PS3 had (finally)becomethe best-selling gamingconsole on Amazon.com.₄₃

The Seventh Generation and Beyond

TheseventhgenerationofgamingconsoleswaslaunchedwithNintendo'sreleaseofthe

WiiUinNovember2012.InNorthAmerica,theunitswerepricedat$299forabasicsetand$349

foradeluxeset.TheUincludedacontrollerfeaturinganembeddedtouchscreenthatcouldalso

beusedasamobilehandheldgamingunit,justlikeaNintendoDS.TheWiiUsupportedhigh-

definitiongraphicsafirstforNintendo.Furthermore,theunitwascompatiblewithgamesfrom

the previous generation of Wii.

SonyandMicrosoftdelayedintroducinganewmachineinNorthAmericauntilthe

followingholidayseason.Sonyreleasedfirst,onNovember15th,2013,withthePlayStation4

(PS4).MicrosoftlaunchedtheXboxOneaweek lateronNovember22nd.TheSonyPS4debuted

at$399inNorthAmerica.TheXboxOnecost$499whenbundledwithKinect.Neithermachine

wasbackwardcompatiblewithprevious-generationsoftware.Interestingly,bothcompanies

electedtodelayreleaseinJapanSonyreleasedinFebruary2014andMicrosoftannounceda

September 2014 release.