Indeed, Sony's attempt to replicate the PS2's DVD-integration success has backfired. "The PS3 was supposed to have ended this fight, but it didn't work that way," says Rob Enderle, President and Principal Analyst at the Enderle Group. "Instead of the PlayStation 3 helping Blu-ray, Blu-ray ended up damn near tanking PlayStation 3."
According to Enderle, Sony's decision to include Blu-ray in the PS3 had a double-whammy effect on the PS3's market penetration by pushing the system's release back into late 2006 and increasing its price to a consumer-unfriendly $599. "Sony is clearly off balance right now. ... It's like the basketball player who wanted to play baseball - his basketball game fell apart and he was lousy at baseball. You've got to focus. The other competitors in this space aren't going to take a year off because you want to play around in two different marketplaces at the same time."
Microsoft, for its part, didn't think the movie wars were worth the wait. "I think Microsoft had to make some strategic decisions about 'Do we want to ship the Xbox 360 and take advantage of that early launch, or do we want to wait for HD DVD to ramp up?'" Kaufhold says. "They made the right decisions for themselves at the time. The decisions that you'd make for a videogame console are just quite a bit different from the decisions you'd make for launching a next generation optical disc."
While Microsoft did limp into the movie format battle with an HD DVD player add-on in late 2006, the Xbox 360 accessory failed to set the market on fire. Roughly 150,000 Xbox 360 HD DVD players have been sold to the over 13 million Xbox 360 owners worldwide.
The slow performance has led some to question how invested Microsoft really is in the high-definition disc battle. "I think the player was done to show a commitment to HD DVD, but it isn't really strategic to the Xbox, because you can't play games off it," Enderle said. "The HD DVD player is a one-time sale of a piece of hardware. It's kind of like selling a joystick - they like selling joysticks, but if they had their druthers they'd rather sell a couple games, because that's pure profit."
With standalone HD DVD players quickly dropping below $200, Enderle doesn't see Microsoft's commitment to the add-on lasting much longer. "If suddenly HD DVD players started showing up for $150, as they will in a few months, Microsoft's going to look at that and say, 'We don't really want to sell this, we're not making a whole lot of money off it right now anyway.'"