Around the turn of the millennium, Sony Corporation
(NYSE:SNE) was the 800-pound gorilla of the video game world.
Its PlayStation and PlayStation 2 consoles were the dominant forces in the industry, beating the likes of Nintendo Co., Ltd
(OTCMKTS:NTDOY) and Sega into submission. In the best of times, Sony's gaming business accounted for over 60% of its operating profit. These days, the company's biggest profit center is actually its life insurance segment.
However, during Sony's heyday, Nintendo and Microsoft Corporation
(NASDAQ:MSFT) were busy hatching plans to topple the big giant, and that's exactly what happened during the current gaming console cycle.
Though it was outsold by the PS2 by more than a six-to-one margin, Microsoft had built a small following of gamers with the original Xbox, courtesy of its Xbox Live online multiplayer gaming experience as well as the Halo
This laid the framework for the success of 2005's Xbox 360, which, through a lower price and earlier launch date, managed to actually outsell the PlayStation 3.
While Microsoft ate away at Sony's market share among hardcore gamers, Nintendo attacked from the other side with the highly innovative Wii. Its motion control system -- friendly to everyone from toddlers to Grandma -- captivated the masses.
Fast forward to 2013, and the industry has seen yet another major shakeout -- smartphones and tablets from the likes of Apple Inc.
(NASDAQ:AAPL) have captured a huge number of the casual gamers that once played the Wii and Activision Blizzard, Inc.'s
(NASDAQ:ATVI) Guitar Hero.
Plus, gadgets like the iPhone and iPad have virtually destroyed the traditional handheld gaming market that was once dominated by Nintendo and Sony. (See: Nintendo Joins the Long List of Apple Victims
Heck, at this point, Nintendo's practically off the map. (See: Weak Wii U Sales Are Dragging Nintendo Down
Again, Microsoft was able to disrupt Sony through a significantly lower price and earlier launch date, and with other factors like a superior launch lineup, an easier software programming environment, and a more evolved online gaming experience.
The two versions of the original Xbox 360 were priced at $299/$399, while the PS3, due to its expensive Blu-ray drive, was much more expensive at $499/$599.
And now, we're seeing details indicating that Sony and Microsoft have flip-flopped strategies.
Microsoft is taking the high-end of the market with the Xbox One console. It will launch in November at $499, and will include a piece of hardware that will increase its cost of goods sold -- the new version of its Kinect motion control system.
Sony PS4 will come in 20% lower at $399, with its Eye system priced as a $59 add-on.
Now, the cost of entry may not necessarily matter much at launch.
Hardcore gamers -- the type of people who are willing to pay up for new consoles -- can be very loyal to their chosen platform's exclusive franchises. That would be stuff like Halo
on the Xbox side and Uncharted
So simply assuming that the PS4 will destroy the Xbox One at launch based upon a $100 price differential is far too simplistic.
However, that $100 price difference, combined with some customer-unfriendly Microsoft policies, may have a long-term impact on those gamers without serious loyalties -- as well as Xbox fans considering a switch to the other side.
First, the Xbox One must be connected to the Internet, and the user must "check in" every 24 hours, which has an odd Big Brother feel to it.
I have no problem with Microsoft banning users or even bricking consoles under certain conditions, but does it really have to go all NSA on us?
And what if people just want to play some Madden and never connect their consoles to the Web? Why force people into this, if not for the need to monitor and collect data on any number of activities?
Interestingly enough, Adobe Systems Incorporated
(NASDAQ:ADBE) instituted a similar policy with its Creative Cloud suite of products, which requires occasional online check-ins in order to function.
Additionally, Microsoft's policy on used games is downright confusing.
In its own words:
In our role as a game publisher, Microsoft Studios will enable you to give your games to friends or trade in your Xbox One games at participating retailers. Third-party publishers may opt in or out of supporting game resale and may set up business terms or transfer fees with retailers. Microsoft does not receive any compensation as part of this. In addition, third-party publishers can enable you to give games to friends. Loaning or renting games won’t be available at launch, but we are exploring the possibilities with our partners.
Given the wishy-washy language, we have no idea whether buying and selling used games is possible, and if so, how much it will cost. Why should we need permission to give legitimately bought copies of games away? I can understand enabling an individual copy of a game to work on only one console at a time, but this type of intervention seems over the top. Worst of all, the rules are likely to differ from publisher to publisher!
On Sony's side, it's taking what some are calling a populist approach, with no restrictions on disc-based games, and no Internet-connection requirement.
So who's going to win in the long term? The more corporate, 1%-friendly Xbox One, or the PlayStation 4, which is keeping power and choice in the hands of the people?
I was an Xbox fan from way back, but I have to say it.
Position in AAPL
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