Tuesday, December 12, 2006

We Want a Wii!

In looking over the kids' Christmas lists this year, the Nintendo Wii doesn't appear near the top. My kids seem to be anomalies, however. Joseph Pereira and Nick Wingfield have a Wall Street Journal article (subscription may be required) on how the Wii has become the hottest-selling gift this year. That's great for Nintendo and a catastrophe for Sony.

The Wii, which retails for $250, has emerged as this year's biggest must-have game console for Christmas. Long lines form hours before electronics retailers put them on sale -- usually no more than a few dozen at a time, if that, and often only every other week. In fact, the Wii -- pronounced we -- has proved more popular and harder to nab than Sony Corp.'s higher-tech, higher-price and highly touted PlayStation 3, which has superior graphics and a built-in, next-generation DVD player. The Sony machine comes in two models, priced at $500 and $600.
When the pricing for the different systems came out, all I could think of was that Sony was making a huge gamble. Parents who want to buy the latest game system for their kids usually get what the kid asks for, but in this case, a $250 price difference is huge. It will get even larger if a recession hits and people have to reduce spending. Remember, the game console market is worldwide, so you're not talking about the US economy only. A recession in Korea drives Korean buyers to the Wii and away from the Sony.

Second, the production delays have been a catastrophe for Sony against the XBox. XBox live locks gamers into the XBox platform. It's no longer two standalone systems fighting it out, it's two communities competing. As MySpace has shown, it's the quantity of connections available, not the quality of the product. Visiting MySpace pages is the aesthetic equivalent of falling down a flight of stairs into flooded basement. It looks and smells horrible, but it's filled with stuff and you can't get rid of it.

How's that for an off-the-wall analogy? Here's a few more tidbits from the article.

Many analysts and industry executives credit Nintendo for pulling off a smoother launch than Sony, delivering a system with few technical glitches and a strong catalog of games. Sony's machine, which includes a new, high-definition DVD format called Blu-ray, ballooned its price tag, making it one of the costliest game consoles ever...

Game publisher THQ Inc. of Agoura Hills, Calif., predicted Sony would ship so few PS3s initially that it would be difficult to make money on games around its November launch. So THQ decided not to release any PS3 games until next year. The publisher was more bullish about the Wii, releasing four titles for its launch last month, says Brian Farrell, THQ's CEO.
Remember, you don't play the console, you play the games. Game manufacturers have to make money selling games. There's a fixed cost to making games and if you don't sell enough copies of the game, you automatically lose money. If there aren't enough consoles out there for your game, you're doomed before you start.

Since Sony has missed the Christmas season with the PS3, I wonder if they'll be able to catch up during the year. I'm sure there's a big drop in game console purchases after December as families struggle to pay Christmas bills. As time goes by, the launch of the next generation of XBox gets closer and closer and the time to sell PS3s gets shorter. While the PS3 may be everything it's been hyped to be, I wouldn't be betting on Sony financially right now.


Justin said...

Actually the next-gen X-Box came out a year ago. My brother has one, they're pretty sweet.

Sony had some of the same issues when they released the PS2. It may have hurt them some at first, but it worked out over time.

And, oh yea, Wii > PS3 just for the controllers.

K T Cat said...

Hi, Justin!

What I meant to say was the next generation of the XBox family. I know that the 360 has been out for a while.

I think that this is how Microsoft beats you. Their first offering is always inferior, but their development cycle is shorter than yours and they eventually run by you.

By the way, Sony isn't doing it's game developers any favors. At $500 a pop, that's bound to depress sales. The game developers make money per unit. A more expensive console means fewer units which means fewer game sales.

Anonymous said...

I refuse to pay a dime more than $250 for the Wii system and anyone that does needs to be slapped firmly. Why let people exploit you out of your money when you can just wait a month or so and get one at list price. How stupid.

Anonymous said...

Visiting MySpace pages is the aesthetic equivalent of falling down a flight of stairs into flooded basement. It looks and smells horrible, but it's filled with stuff and you can't get rid of it.

So very, very true. I only signed up because one of my friends got a site there. Ugh, ick, blech is about all I can say.

Justin said...

I have a myspace... I regret signing up.

A short dev cycle by Microsoft??? XP was released in October 2001. Five years is a long time for an OS and, as it should be, Vista is a huge improvement.

Anyways, the trick with gaming systems is to wait. It's best to wait until after a few production runs before you buy just to kick the bugs out of the system. Don't believe me? PS3's had reports of overheating and early 360's had a lot of problems.

K T Cat said...

Cheesehead, I'm with you on MySpace. I found it to be little more than an endless supply of boring, soft core porn.

Justin, I totally agree with you about waiting.

I wouldn't throw OS's into the same bag as game platforms. It's pretty clear that Microsoft has stolen a march on Sony and it's almost gauranteed now that the next generation of the XBox line will beat the PS4 to the market by at least a year.