Digital Home Thoughts: Sony's New Marketing Strategy May Mean Doom for PS3

"...two things are clear: 1) the high price of the PlayStation 3 is going to slow overall industry growth, especially for software and 2) if Sony does not change its current strategy for the PS3 the system will probably end up in third place in installed base. Microsoft and Nintendo have been handed that golden opportunity and both companies have a chance to make their systems the market leader. However, it looks like under any scenario the video game market is going to be severely fragmented, with several incompatible platforms having strong market share and even the possibility of a platform doing well in one region and struggling in another. As we have mentioned in past briefs, the big concern with Sony is not only the PlayStation 3 launch price, but the signs that Sony has gotten itself into a business model that is not conducive to the mass market video game audience. There has been a lot of talk about positioning the PS3 as not just a video game system, or even entertainment system, but instead as a computer system."

Sony is positioning the PS3 as a computer, not as a gaming system, according to Sony Chief Ken Kutaragi. Their new marketing strategy eschews the traditional gaming console method of releasing a new system every 2-3 years. Instead, they're hoping for a more modular approach, which they hope will allow the PS3 to remain current while MS and Nintendo struggle to put out their next-next-gen consoles, around 2008. In the meantime though, MS and Nintendo have an opportunity to snatch the user base right out from under Sony, especially if MS's Argo project is successful. This holiday season will be telling, and will probably determine the short-term winner of this gaming console war. We'll just have to wait to see if Sony's more long-term approach will pay off or kill the PS3 before it can even leave the ground.