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When a $599 PS3 was "probably too cheap"

10 years ago this month, Sony stole the show at E3 2006 for all the wrong reasons, the upcoming Final Fantasy XV was first announced, and the console transition claimed some victims

The games industry moves pretty fast, and there's a tendency for all involved to look constantly to what's next without so much worrying about what came before. That said, even an industry so entrenched in the now can learn from its past. So to refresh our collective memory and perhaps offer some perspective on our field's history, will run a monthly feature highlighting happenings in gaming from exactly a decade ago.

$599 US Dollars

The 2006 Electronic Entertainment Expo was a massive show for the industry. Microsoft had capitalized on the Xbox 360's year-long head start in the generation, and came in to E3 with a blockbuster lineup of games including Gears of War, Halo 3, and Fable 2, with the news that one iconic PlayStation franchise, Grand Theft Auto, would be going multiplatform with its next installment. Nintendo was also riding high, with the Wii's revolutionary controller and non-Revolutionary name now fully unveiled to a keenly interested world and drawing massive lines on the show floor.

But arguably the biggest story of the show, and certainly the one that generated the most ink on at the time, was the PlayStation 3's pricing strategy, which we'll kindly call "aggressive." Like Microsoft, Sony was employing a two-tier hardware model for its console. Unlike Microsoft, the basic unit was going to launch at $499 (€499), with the full-featured version hitting $599 (€599).

The reaction to the price was as negative as Sony's response was indifferent, with Sony Computer Entertainment International president Ken Kutaragi asked to justify the price point time and again. In one interview, he explained, "No game machines are comparable to the PS3, which is neither a genuine game console, home electronics [product] nor a personal computer. It is a new kind of product." In another, he called the price "probably too cheap." In yet another, he reasoned, "it is more than a toy. It is a PlayStation 3. And it is the only PlayStation 3. I hope that those who understand this will gladly purchase it." This sort of aloof defensiveness probably should have been expected, considering the year before he said Sony's ideal situation with the console was "for consumers to think to themselves, 'OK, I'll work more hours and buy it.'"

Unfortunately for Sony, the PS3's pricing became the story of its show, in part because there wasn't much else to talk about. The PS3 launch lineup was anchored by Insomniac's Resistance: Fall of Man, but was painfully thin on exclusives beyond that. As a result, titles like Genji: Days of the Blade were asked to justify the hype load, with memorably underwhelming results.

Falling into the Generation Gap

For all the next-gen excitement and optimism at E3, the games industry was struggling in 2006. In retrospect, the new generation of consoles was probably arriving a little too soon (no doubt accelerated due to the arrival of affordable HD TVs). After all, the original Xbox launched in 2001, and was replaced by the Xbox 360 just four years later. In contrast, there was a six-year gap between the last consoles of the 360/Wii/PS3 generation and the Wii U launch that heralded the current generation.

Virtually all the publishers were feeling the pinch in one way or another. Activision blamed its losses on a difficult and slow hardware transition. Midway chalked up its own to the higher cost of developing games in high definition. Electronic Arts and THQ both cited dramatic increases in R&D spending in their own quarterly reports. And even though Capcom finished up a banner year thanks to Resident Evil 4, Monster Hunter 2, and Phoenix Wright: Ace Attorney, it still shut down Studio 8 (the team behind the excellent Maximo 3D spin-offs of the Ghosts n' Goblins series) while warning of "an urgent need for software makers to address the problem of increasing development costs."

May was a particularly rough month for Take-Two, as the publisher took two of its own studios to the chopping block. First up was Indie Built, developers of the Xbox 360 launch title Amped 3. (The studio was previously known as Access Software, creators of the Links series of golf simulators and the Tex Murphy line of adventure games.) Uncertainty regarding the console transition was given as the primary reason for the closure. Take-Two would also close Rockstar Vienna later in the month, while all eyes were focused on E3. Of course, shutting down a studio and laying off more than 100 people in the process is the sort of thing people are bound to notice. Once again, the generational transition was blamed for the move.

A Decade in Development

Regardless of uncertainties and generational transitions and soaring development costs, there were still hearty (or foolhardy) developers setting up shop in the midst of the chaos. Some of them even survived and this month will celebrate their 10th anniversary. First there's Prope, the brainchild of Sonic the Hedgehog developer Yuji Naka and creator of Let's Tap, Ivy the Kiwi?, and Rodea the Sky Soldier. Then there's Media Molecule, the Sony studio behind LittleBigPlanet, Tearaway, and the upcoming Dreams.

And as long as we're marking a decade in development here, we need to give a shoutout to Final Fantasy XIII Versus, which was announced at E3 2006 as part of Square Enix's ambitious plans for the flagship franchise that would see multiple connected games released under the "Fabula Nova Crystallis" heading. Unfortunately, Final Fantasy Versus XIII flirted with development hell (and at the very least did a stint in development purgatory), dragging on for years while fans wondered if it would ever release. In 2013 Square Enix decided it would be better to just start calling it Final Fantasy XV instead. After more than a decade, that game is set for release on September 30 of this year.

Instant Recall

  • Activision acquired Guitar Hero publisher RedOctane in what we would later find out was a $100 million deal. "The success we are seeing today is a strong indicator that Guitar Hero and the many potential extensions, new platform exploitations and international versions appear to be somewhat transition proof," said Activision's Ron Doornink at the time. Sadly, Guitar Hero would not prove to be Activision-proof.
  • Somehow, The Elder Scrolls IV: Oblivion received a T-for-Teen rating on its initial release, despite carrying descriptors for Violence, Blood and Gore, Sexual Themes, Language, and Use of Alcohol. However, once a mod for the PC game was released that added topless women to the game, the ESRB (still suffering from the previous year's Hot Coffee burns) quickly decided it should be rated M-for-Mature.

One Last Thing...

There's always more interesting news and hindsight-assisted perspective than we can fit in these columns, so we've started up a new Twitter account for those who'd like an occasional blast from the past in their feed. Everything on there will be posted exactly 10 years to the minute after its original publication date, so be sure to follow @GIbiz10YearsAgo to keep up with all the latest events that are a full decade out of date.

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Latest comments (5)

Nathan Fouts President, Mommy's Best Games5 years ago
And yet 11 years before that, in 1995, came the incredible E3 press conference in which Sony destroyed any excitement for Sega's higher-priced Saturn, with their own PS1 launch price announcement.

Had they forgotten this? How big of a move it was? PS3 launch was a heady time though...
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João Namorado Project Manager, Portugal Telecom5 years ago
@Nathan Fouts: Exactly! And Microsoft forgot about the E3 2006 problems of the PS3 when they priced the Xbox One 100$ above the PS4.

History repeating. Over and over again. I wrote about this a few weeks ago regarding the price of VR and the apparent "this is so good you should give us whatever amount of money we ask" attitude. I'm not saying the technology is not worth the price, it's just that the price might be more than most consumers are willing or able to pay.
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Andrew Jakobs Lead Programmer 5 years ago
And yet, with a much MUCH higher price, and 1(US/JP) to 1.5(EU) year later on the market, the PS3 still beat the Xbox 360 hands down..
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Paul Jace Merchandiser 5 years ago
considering the year before he said Sony's ideal situation with the console was "for consumers to think to themselves, 'OK, I'll work more hours and buy it.'"
As I remember it he said something along the lines of: "If consumers think the PS3 is too expensive then they should feel that they should go out and get a second job in order to be able to afford it."

Which was pretty much one of the worst PR statements ever made. But Kutaragi had no shortage of those back then.

Edited 1 times. Last edit by Paul Jace on 5th May 2016 2:18am

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Greg Wilcox Creator, Destroy All Fanboys! 5 years ago
...considering the year before he said Sony's ideal situation with the console was "for consumers to think to themselves, 'OK, I'll work more hours and buy it.'"
And guess what? That's EXACTLY how the first few people I knew who got their PS3 got theirs. I even met a guy who redeemed cans and bottles to pay for his (and it only took him about a month and a half to collect all that plastic, glass, and metal. A nickel at a time adds up, yikes!).

I had no issues with the PR and hype around the PS3 at all. I did have an issue with how it was written about back then, though. I guess this was the "deal with it" of that console generation, but consumers dealt with it by actually buying all those consoles over time. :D
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