GI.biz Editorial: Arriving In Third Place

The European prices and dates for the PlayStation 3 are confirmed at last - for the second time - and they are pretty much exactly what everyone expected, which is to say that in some key respects, the news is just as bad as we all feared. Despite the plummeting value of the US Dollar and the Japanese Yen, Sony has stuck to its original pricing plan for Euros and Pounds, leaving European consumers paying prices which are absolutely mind-boggling when converted into dollars - even after the Value Added Tax which is incorporated in the European pricing is removed.

British consumers get a particularly raw deal, with a price significantly higher than their European brethren are paying - one which, crucially, pops the PS3 in at over 400 pounds, a psychologically significant marker which is likely to impact on sales unless something is done about it in the medium term. Despite Sony's oft-repeated pledge not to drop the price of the system, it's likely that something will indeed be done; just as Microsoft quietly shaved a tenner off the price point of the Xbox 360 last autumn (an "officially unofficial" price drop, in a sense), so too it's to be expected that a combination of quiet readjustments and pressure on margins will probably yield a 399 pound PS3 by the end of 2007 - although the pressure this will put on margins right throughout the channel is unlikely to put smiles on many faces in retail or distribution.

Europeans who fancy getting their hands on the 20GB model of the PS3 will also be disappointed, since Sony has decided not to launch the cheaper version of the console in this market - not initially, at least. The company says it'll continue to monitor demand for the 20GB version, of course, and claims that it's only going with the 60GB version as the sole offering because that's what retail has told them to do. Whether that's entirely true or not (we've spoken to several retailers who seem bitterly disappointed at the decision to launch a single SKU and not offer a lower priced proposition), it's obvious where the decision has its basis. Sony are no doubt mindful of the fiasco at the launch of the Xbox 360, when Microsoft chose to ship a large number of crippled Core systems as part of its day one allocation - leaving frustrated consumers who wanted the premium system stuck with buying a Core, and then battling over short stocks of the hard drive add-on.

Sony is obviously keen to avoid this situation, and clearly feels that the first adopters of the PS3 will be the kind of people who'll want the all-singing, all-dancing 60GB model - even if the addition of a HDMI port to the 20GB model means that realistically, the only singing and dancing which the lower-spec system can't accomplish is wireless Internet access. The hard drive size question seems largely irrelevant at this point; there probably won't be enough seriously interesting content out there to fill a 20GB drive for months, and besides, you can buy an off-the-shelf drive and slot it into the PS3 for a fraction of the price differential between the two models of the console. The lower spec PS3 is no Xbox 360 Core system - in fact, it's by far the most attractive option in terms of value - but on this point, at least, we can see Sony's reasoning, and it's true that early adopters will almost certainly prefer the hi-spec model. What we don't see is why there's no clear timeline for the introduction of the 20GB model; if Sony is to make an impact next Christmas, with the first wave of early adopters already sated and software still trickling onto the shelves, it needs to have that more attractive value proposition on shelves with plenty of time to spare.

On a more positive note, however, it's worth mentioning that once again Sony Europe's unfortunate bumping from the global release plan has at least yielded a launch which is a little less anemic than the US and Japanese launches were in several key respects. For a start, European PS3s will undoubtedly ship with the latest version of the console's firmware, which means that consumers here will never be faced with the unpleasant graphical glitches which plagued the backwards compatibility modes of the console until the launch of updated firmware recently - but more importantly, the range of software available, both at retail and in Sony's online PlayStation Store, will be significantly more impressive than it was before Christmas at the other launches.

Sony is promising 30 titles for the European launch, and while several of the third-party games on the list have already launched on the Xbox 360 in the last 12 months - some to enormous critical acclaim (Oblivion), some to utter derision (Sonic the Hedgehog) - the line-up is still an incredibly strong one, doubly so if you don't own an Xbox 360. That's a point which is largely overlooked in discussions about the PS3's early line-up; to a hardcore gamer or someone in the industry, it looks like having a line-up filled with Xbox 360 titles is a point of weakness, but to consumers who are less involved in the games "scene" but still interested in Sony's latest, the sudden availability of surprisingly well-polished next-gen software at launch is a hugely attractive prospect. The fact that it's already been on Xbox 360 doesn't matter to anyone who doesn't own an Xbox 360.

However, the point remains that the number of people who are prepared to spend over 500 pounds buying a console and a few games is finite - and it remains to be seen just how finite it actually is. While dedicated gaming consumers may well turn to the Xbox 360 as a more economical proposition for next-gen gaming, and the Wii will undoubtedly continue to make waves among consumers looking for something a bit different to do with their leisure time, the most serious challenge that Sony needs to overcome is, ironically, the power of PlayStation. Commentators have said for years that the PlayStation brand will be enough to see Sony through this generation - and to some extent, that may indeed be true. However, there's a flip-side to that argument - which is that the PlayStation brand is not the sole dominion of the PlayStation 3.

Across Europe - and around the world - there are millions of gamers still playing on the PlayStation 2, an installed base larger than the PS1 had when its successor launched, and by all measures, an installed base much more satisfied with the experiences they're getting from their console than the PS1's players were in 2001. This is the true hurdle facing not only Sony, but Microsoft as well - convincing people that they actually need to replace the PS2 underneath their televisions with a new box that offers better experiences. It will happen, of course, but the more satisfied consumers are with their existing system, the lower the bar to entry to the next generation needs to be for them to decide to make the upgrade.

In the PS3's case - and, frankly, in the Xbox 360's case, although not necessarily for the same reasons - that bar is nowhere near sufficiently low. When the industry transitioned from PlayStation to PS2, many consumers stuck with the previous generation for a couple of years before making the switch - an overlap which Sony was keen to exploit, although third-party publishers found themselves leaving money on the table by abandoning the PSone too early. This time around, though, the effect looks like it may be even more pronounced. It's by no means empirical, of course, but a straw poll of friends and relatives who own PS2s reveals that few of them are interested in upgrading to the PS3 within the next 12 months; they all accept that they will probably do so eventually, but intend to leave it for several years until the machine is significantly cheaper and some of the best games are on budget ranges. It will be little consolation to Sony that even fewer of them are interested in the Xbox 360 at all - not least since Microsoft's head-start will allow it to reach critical price-cut points much earlier than its rival, which may well spur interest even among gamers whose sole experience of the medium to date has been the PlayStation family.

In a sense, of course, this is a good problem to have - there are companies in other industries who would give their right arms to have a user-base that continues to strongly support an existing platform even after a new platform is announced or launched. However, if the effect is too pronounced (and the ongoing reports of sluggish stock movement of the PS3 in the United States and Japan suggests that it may well be), then Sony faces a serious problem in getting the PS3 to a credible installed base in the first couple of years. The console needs critical mass, not only to convince the industry to throw its backing fully behind Sony's efforts, but also to convince the stock markets and financial institutions that Sony can actually maintain its lead in this crucial sector. Despite the obvious financial benefits of the continued success of the PlayStation 2, Sony's biggest problem in the next 12 months is going to be overcoming its own success - and convincing its existing customers that the vastly expensive move to the next generation is actually worth it.