Sony Computer Entertainment has led in video game market share since the PlayStation in 1995, and dominated with the PS2. That kind of power holds third-party publishers captive — they had no choice but to support the PS3. That kind of power also means SCE could take chances.
With two big wins under its belt, Sony wanted to sell the PlayStation3 at a premium price. To do that Sony needed premium technology, in addition to its dominant market share, so that consumers would accept aggressive pricing. Eschewing cheaper off-the-shelf components, Sony invested $4.4 billion (500 billion yen) for the three business years ending March 31, 2007, into semiconductor development for the PS3's proprietary Cell processor and other key devices like the system's high-definition Blu-ray drive.
"Our ideal is for consumers to think to themselves, 'OK, I'll work more hours and buy it.' We want people to feel that they want it, no matter what," SCE chairman Ken Kutaragi said in 2005.
That philosophy culminated in $499 and $599 PS3 suggested retails here in the United States, and the belief that the technology inside is worth much more.
"If Mr. Jobs adds an Apple logo to the PS3, I think users will say it can be sold at $2,000," Kutaragi told Japanese computer magazine PC Watch in June 2006.
The fact remains that no video game system priced above $399 has ever been a sales success, but PS2's 55 percent market share may pave the way for the higher-priced PS3.
With the PlayStation 3, retailers would do best to cultivate the high-end gamer and technology consumer who will appreciate the console's exclusivity. According to SCE senior director of corporate communications Dave Karraker, Sony shipped, and retailers sold, more of the $599 PS3 than the $499 model. Plus, PS3 availability will remain tight for months. Electronic Arts chief executive Larry Probst told the Reuters news service on Nov. 29 that retailers received only 200,000 units for the Nov. 17 launch, and that he expects but 500,000 and 800,000 units will have reached the United States by Dec. 31.
"The big challenge with the PS3 is explaining to consumers why it is worth so much more than the competition. To this end I think high-end displays running the latest biggest and baddest, most graphically jaw-dropping titles are crucial," Cole advises.
The PS3's Cell architecture significantly differs from those used in other game systems. The best looking PlayStation3 games are those created specifically for the console. Don't expect multi-platform games from third-party publishers to take advantage of the PS3's power. Not with the Xbox 360's year lead on the shelf, and installed base of 10 million units worldwide. PS3 exclusives such as "Resistance: Fall of Man," and "Untold Legends: Dark Kingdom," will show off what the system can do. But if all the customer wants to do is play EA Sports games like "Madden 2007" in HD, they'll be plenty happy with an Xbox 360 for less money.