All of the sales figures that I've seen recently show that the PS3 is selling at a similar rate to the Xbox 360 (which is selling at a slower rate than the original Xbox). Add to that the general response from developers at the GDC about the price of the PS3, Sony's apparent reluctance to increase the market demographic (which is in complete contrast to the PS2), the general malaise within the entire Sony company, and now the resignation of the 'Face of Playstation' and I think SCE might be in for some rough times.
Paradoxically, I think that the recent 'victory' of Blu-Ray will also impact badly on the sales of the PS3, which until now has been enjoying the advantage of being the most keenly priced Blu-Ray player on the market. However, I can see that changing very quickly now that all of the other CE producers only have to produce one type of HD player.
It's entirely my own conjecture, and I've said it many time before in other threads, but I'm fearful for SCE. I think that they've completely misread the direction that gaming was going and are now suffering - today's news being the most highly visible example to date.
You're missing the point a bit. This is a tortoise/hare scenario. I find it a really interesting story.
The Xbox is a mostly defensive product. Microsoft basically owns PC gaming via the Windows platform. As Mac users, we are pretty familiar with this state of affairs. Microsoft had to get into the console business to protect its gaming software platform from competitors, since people have been talking for years how the future of (a lot of gaming) is consoles. The 360 also represents Microsoft's push into the living room and their desire to see all your computer related entertainment needs operate via Microsoft software. Why else do you think Microsoft would throw away billions of dollars trying to get into the console market?
The Xbox was an excellent product: the technical superior of the Playstation 2 in almost every respect. Yet Sony had such a head start with the PS2 that the original Xbox was simply obliterated and cost Microsoft a fortune (the PS2 is still selling and making Sony truckloads of cash). The lesson Microsoft learned from that debacle was "release first".
It was pretty clear what the next gen consoles would be like: hi def graphics, multimedia capabilities and online gaming. Most people also thought that next generation optical media was a given. Microsoft could have waited until HD DVD was ready and released the Xbox 360 with an integrated drive, but that would have meant a more expensive console along with a release that at best would have been a few months ahead of the PS3. Given Sony's dominance in the console market, Microsoft could not afford that since, as noted above, they
had to release first in order to have any chance at not taking another hiding.
So Microsoft's strategy was simple: release a cheaper console as soon as possible and build up sales and a good game library as quickly as possible, so that by the time the more expensive (because of blu ray) PS3 arrives the market perception will be that there is already a winner and network externalities and price would ensure that the PS3 would never really get off the ground. In order to do this they had to sacrifice next gen optical and quality control. The result is the plague of RRODs that have plagued the 360.
Microsoft were desperate to make it appear that the game was already over by the time the PS3 shipped. That is why they stuffed the channel in 2006 so that they could say they had shipped 10 million consoles. The truth is that many of those consoles sat in storage and Microsoft actually shipped less consoles in 2007 than it did the year before. Microsoft created a glut of consoles in 2006/early 2006 purely to give the impression that the PS3 was already beaten.
Again, this strategy would only work if the 360 could sell at a massively higher rate from launch than the PS3 did. If both consoles sold at roughly the same rate from launch, then as long as Sony could keep things like that the tortoise would eventually catch the hare as prices came down and the superior hardware of the PS3 became a more attractive deal. Look at it this way: if you graph the cumulative sales of each console from launch, the 360 line had to stay well above the PS3 line in order for it to work. It would have to look like the Wii sales graph plotted next to the PS3 from launch.
But this didn't happen. Even though the 360 had no next gen competitor and the PS3 had a competitor with a year's head start and a library of excellent games, the PS3 has actually sold more in its first year than the 360 did. The longer this fight goes on, the more the advantage swings to Sony (more games, blu ray, etc.).
Why did this happen? Well, in large part Nintendo is to blame. Nintendo were smart and knew that they didn't have a hope in hell of competing in the hi def gaming wars, so they made a much cheaper console which was so innovative that buying one was a low risk move for gamers and an attractive move for consumers who wouldn't usually game (even the elderly are playing them). Nintendo has basically cornered the lower end of the market with its cheaper console. That means people who are looking for the cheaper new console will buy a Wii rather than a 360 (and they have... in spades). This is one reason why 360 shipments declined in 2007.
The second factor is blu ray. From early on it was evident that blu ray was the stronger format. The longer the format war went on, the better for Microsoft. Now that it is over, there is even more reason to buy a PS3. There will be other blu ray players, but they will be nowhere near as good a value as a PS3 to a gamer. The 360 is more expensive once you add wireless and XBL. Microsoft's trick was to make the 360 look cheaper by transferring the cost to add ons and subscription based online. People weren't fooled.
Right now you can buy a cheap innovative console from Nintendo, or a high tech super hi def machine from Sony, or you can buy something that is a little cheaper than a PS3, but doesn't have next gen optical. Nintendo has squeezed MS out of the low end of the market and Sony is now squeezing them out of the high end.
You don't have to take my word for this: just look at the sales graphs.
But it isn't so bad for MS. They are in a much better position with the 360 than they were with the original Xbox. At least in North America the 360 is somewhat of a force, so they are in a much better position for the next round of the console wars than they were for the last one. As it stands, they will have a better game library for most of this year and XBL will be better than PSN until Home is released (and believe me, that will make XBL look pretty tame because the PSN and Home will be free).
