If Sony is to be believed, the verdict is already in: HD-DVD is a non-starter, and their cross-Japanese Toshibian rivals are toast. They may very well be right: Blu-ray is certainly outperforming HD-DVD in terms of sales and support, and may be headed for the victory stand when it’s all said and done. But in order to get there, Sony may be setting themselves up not only for only a glimmer of glory, but also a high-Richter disaster that could send the giant’s movie and gaming divisions reeling.
In order to move units, it’s not uncommon for video game manufacturers to initially push consoles at a loss. The PS3, while priced at Neo Geo-level prices, is still, by all available indications, costing Sony a loss of a few Benjamins per unit. Still, the PS3 plays Blu-ray movies, and at five or six hundred dollars a pop, is far cheaper than any other Blu-ray player currently on the market. Obviously, as has been widely reported, this means that it really makes no sense to shell out a thousand bucks for a player when you can just buy a PS3 (assuming you can find one in stock), and simply ignore the fact that it plays games if you are so inclined.
Sony’s strategy is obviously to get movie fans into the video game aisle, assuming that, if they already have the game machine, they’ll surely buy some games (the true money generator for video game companies.) Meanwhile, they are surely hoping that PS3 fans, already possessing the movie player, will shell out cash for some fine Blu-ray titles — hopefully giving Blu-ray a crossover appeal that will allow it to eradicate HD-DVD. As an aside, I remember that a number of my friends bought a PS2 solely to play DVDs back in the dark ages of video, replacing aged and breaking VHS players with crisp and clear 480p resolution.
Sounds great: PS3 fanboys will push Blu-ray into the black, and high-def movie buffs will give the PS3 the market share it needs. If Sony is right, they’ve got themselves a little circle of success here.
The only problem is that they are very likely wrong.
Such cross-platform dependence is virtually unheard of. I can’t think of another case where the success of a video game console and a movie media format were so closely intertwined. And while I can certainly applaud Sony for the chutzpah of putting all of their eggs into a single glossy black basket, this is untrodden territory that relies on everything in the marketplace working just right.
The few months following the release of a next-gen console essentially determine whether it is a success or failure. The number of PS3s that Sony has been able to put on shelves in this time is dangerously low — a key fact that has allowed Nintendo (and Microsoft) to get a huge leg up in market share. Now, couple these dangerously low supplies with the fact that a number of people purchasing them may be primarily purchasing the systems for movie-watching purposes, with absolutely no intention of buying a single game (especially since PS3 games aren’t cheap) and you have a sizable percentage of your user base essentially unconcerned with your key money-driver: game sales. Because Sony’s PS3 shipments were so small, every single console matters. If even a small number of these are owned by movie buffs who purchase very few (or even no) games, they are in trouble.
And it gets worse. Because the PS3 is cheaper than stand-alone Blu-ray players, a smart movie buff will scoop it up, if only for the movie-watching capabilities, essentially making their stand-alone players seem like an absolutely ridiculous and unnecessary product, and assuring that a large portion of their inventory goes unsold (even if you have to wait a bit for your local Best Buy to get a PS3 in stock, isn’t it worth it to shave $500 off the price of your Blu-ray player?) Unsold merchandise, especially unsold merchandise that costs a grand, is bad business.
Now, the window of time a movie format is dominant ain’t big, and is getting smaller. VHS was huge for many, many years. DVDs: a shorter time. The Blu-ray/HD-DVD winner will almost certainly dominant for an even shorter time before something bigger and better comes out (most likely through media-less data transmission.) So, assuming Blu-ray wins, as Sony is praying, they may only reap the benefits for a very short time, while feeling the associated losses for a much, much, longer period. Losses that not even the inventors of the Walkman can survive.
Seth Porges writes on future technology and its role in personal electronics for his column, The Futurist. It appears every Thursday and an archive of past columns is available here.