Oh, Kutaragi-san, you so crazay!

Oh, Kutaragi-san, you so crazay!

It's stuff like this that makes me think someone needs to crack open Sony's Ken Kutaragi and flip the breaker.

That's why we call him Krazy Ken.

I pity the guy. He'll probably get fired if he doesn't show a face of manic optimism.

I think Sony is in a rut of strangely bad PR. They just can't seem to stop with the media missteps. The PS3 price announcements at E3 started off a string of odd, and very public pronouncements from Ken Kutaragi, Kaz Hirai, and Phil Harrison that left industry pundits, the games press and gamers scratching their heads. But don't forget that they still have the largest number of third-party developers out there. And, they have incumbency and a strong worldwide brand. The proof will be in the software, and there undoubtedly will be some stunning exclusive titles coming out for the PS3.

Sony's biggest challenge right now is that they are trying to change consumer perceptions of what a game console is: a problem that just might prove to be more difficult in itself than managing tricky manufacturing processes and a worldwide hardware launch. They want their box to have a ten-year life cycle. It is exceedingly expensive and difficult to launch new hardware. And for many reasons, companies are extremely vulnerable in periods of hardware transition (the market for their existing base shrinks as people wait for the next round of technology; there is a tremendous economic outlay to manufacture, distribute, and support the new hardware; etc.) They'd much rather aim their technology window as far afoot as they can and make incremental upgrades -- more in line with what one might see with PCs -- than launch a whole new platform every five years. See this article by analyst, David Cole on next-gen.biz for some somewhat biased, but interesting commentary.

There are other incidental factors at work here, as well. Recall that Sony attempted to classify the PS2 as a Linux-based PC so that it would qualify for a lower tax status in the European Union (though they failed that bid in June of this year.)

As for their brazen statements in the press about the high cost of their hardware and software, simply stated, they need to communicate that the PS3 is a premium option. They don't want to, or more accurately, literally can't afford to sell that many of them. They need to take a leadership stance: "We have the best technology, the most premium box, and the most expensive software, and we're proud of it." After all, if you can shift your thinking a little bit, it is true that you are getting quite a bit for what you're paying.

Because of the unexpectedly high cost of hardware production, it's not looking like it would be that beneficial to sell through lots of PS3s until manufacturing economies of scale and efficiencies kick in. (According to this article in Forbes, they have enlisted not just one, but two third-party manufacturers to help them ramp up their PS3 production to their goal of 2M units worldwide by launch.) I think SCE also would have preferred to wait until their third-party development partners figured out the hardware and provided them with a bigger and broader launch library. But MS forced their hand with an earlier-than-anticipated Xbox 360 launch.

Even Sony most probably didn't count on their manufacturing woes to be so daunting. With this in mind, imagine how much SCE is going to have to eat on each sale of a PS3, even in the $650+ price range. Couple this with the rapidly declining support for the PSP and UMD games and movies from developers, Hollywood studios, and big box retailers and slow category growth overall, and you have a recipe for depressed economic reserves to drive support of the PS3 (and BluRay.) Contrast this to Microsoft's relatively deep pockets to drive support of the 360. In light of these factors, a cautious approach and honest statements of the expense of the PS3 and its software become a little easier to understand.

In the meanwhile, they'll continue to push the PS2 to the mainstream for as long as they possibly can, and hope that their incumbency, strong brand, solid support from the Japanese market, broad 3rd-party dev support and gorgeous titles carry them through a challenging launch. For the record, I think they'll come out okay, if a little scathed.


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