Sony's software brilliance still isn't enough
Hardware pricing remains the elephant in the room, says Rob Fahey
Sony came to Gamescom with a lot to prove. In spite of a general consensus that the company had narrowly bested its platform holder competitors with its showing at E3 a few months ago, 2012 has not been a positive year for the company. Sales of the PlayStation 3 have slackened, while Vita has had the weakest launch of any PlayStation hardware platform ever. Sony's games division, traditionally a bright spot on the company's financials, turned a loss. If 2012 is going to be rescued, it's going to have to happen in the Christmas quarter.
The expectation was that Sony would begin its efforts to salvage a tough year by announcing a new model of PlayStation 3 hardware - slimmer and cheaper than the existing console. A PlayStation Vita price cut might also be on the cards, although that kind of embarrassing climbdown announcement is more traditionally carried out at a dour press conference in Tokyo involving a lot of bowed heads, rather than on a festive event stage like Gamescom.
"Pricing and hardware never troubled the stage. Instead, the company put software front and centre, with a strong, confident presentation which was rich with new IP"
In the end, though, Sony took an altogether different - and arguably more aggressive - approach to Gamescom. Pricing and hardware never troubled the stage. Instead, the company put software front and centre, with a strong, confident presentation which was rich with new IP. E3's over-long and rather botched Wonderbook presentation was redeemed with a set of announcements and video demos that suggest that the company could really be on to something in the kids market. Vita, embarrassingly neglected at E3, was given centre stage and an intriguing new Media Molecule title.
This was a conference presentation which had a strong sense of being carefully orchestrated by Sony Worldwide Studios, in so much as it was all about software. Certain strategic aspects of Sony's overall approach were visible in the mix - connecting Vita to PS3 is clearly seen as a major USP for both devices, while the extension of PlayStation Plus to Vita is a welcome move that serves to reinforce Sony's commitment to the (now thoroughly excellent) Plus service. In general, though, the casual observer would come away with the impression that Sony has only one strategy for success - "make great games".
Which is absolutely fair enough, and indeed a very laudable approach. As a gamer, it was glorious to see that Sony's ability to create and support titles rich in imagination, whimsy and creativity is still thriving - there's not a single title among Tearaway, Rain and Puppeteer that I don't expect to buy. "Show us the games" is a constant refrain when we watch conferences laden with corporate nonsense - and as a consequence, I end up feeling deeply churlish for being the voice in the corner saying "actually, that might not quite be enough".
"People buy consoles to play games, and Sony is quite right to identify the creation of those exclusive games as a vital part of any strategy to get people to buy its hardware"
Yet that's the truth. The work that Worldwide Studios and its partners is doing in creating exciting new games for PS3 and Vita is vital, and it's incredibly important to note the company's courage in defying industry conventional wisdom by creating well-funded new IP for a platform that's about to enter its seventh year on the market. People buy consoles to play games, and Sony is quite right to identify the creation of those exclusive games as a vital part of any strategy to get people to buy its hardware.
People also make buying decisions based on price, though, and the reality is that the PlayStation 3 has yet to crack the kind of mass-market price points which made its predecessor systems so dominant. Nearly six years since the launch of the console, its base model still retails for $249 in the USA, or £199 in the UK. By way of comparison, at an equivalent point in its lifespan, the PS2 was selling at $129 in the USA, while the PSone was already at a $99 price point.
Consumers may not be going out to research historical price-cutting activity in the console market, but they're smart. They know that console prices bottom out around the $100 to $130 range, and they know that the PlayStation 3 has been around for six years. The fact that the console launched at a (frankly ludicrous) $500 price point doesn't matter. It's six years old, and people don't want to pay $249 for a six year old piece of hardware - especially not people for whom gaming has become an increasingly cheap hobby in recent years, thanks to the rise of mobile gaming and other such trends.
"People don't want to pay $249 for a six year old piece of hardware - especially not people for whom gaming has become an increasingly cheap hobby in recent years."
So right now, no matter how great Sony's software looks, the company is in a waiting game with its potential consumers. The market knows instinctively that the price of the PS3 must fall - and having watched the 3DS bloody itself with a deep price cut after only a few tough months on the market, consumers know that the Vita can't hold its present price point either. Sony can offer all the goodies it wants in software terms, but if consumers are utterly convinced that they'll be able to enjoy those things for hundreds of dollars less in a few scant months, they'll hold on to their money.
A few weeks ago, I wrote that following the leaks of pictures of Sony's new PS3 hardware, a failure to reveal the new system and a steep price-cut at GamesCom would result in huge disappointment. It's wonderful to be wrong, because I was reckoning without the strength and breadth of the software line-up which the company would be able to unveil at the show. For the games media, no price cut is remotely as exciting as a batch of great new games, and quite rightly so.
"In the end, I expect that market realities will win out. Sony will drop its hardware prices this autumn, because it must."
Yet reading editorial after editorial this week suggesting that Sony's conference showing has "rescued" its consoles from tough market conditions, I can't help but feel that this is a naive assessment. It's not enough - tough decisions still need to be made at the dull corporate end of things if Sony is going to turn 2012 around. Make no mistake about how tough those decisions really are; the incredibly strong Yen ties Sony's hands, meaning that any price cut overseas cuts twice as deeply in Sony's financial results.
In the end, I expect that market realities will win out. Sony will drop its hardware prices this autumn, because it must. Neither Vita nor PS3 can continue on the market for long at their current price points, regardless of the impact this will have on Sony's financials. The good news, though, is that the excellent work being done by Sony's first- and third-party developers should amplify the sales impact of any price cut - creating yet more pent-up demand which will be released by the lower price point. GamesCom's strong showing will give Sony a bump in the market - there's no question of that - but first, the pricing decision the market is waiting for is going to have to be made, no matter how much it hurts.
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