OPINION: New strategy
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- An erudite analysis in my opinion. ...
Milt R. Smith – 06/10/07 - what an idiotic article...
Dave – 06/09/07
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By Paul Sweeting -- Video Business, 6/8/2007
JUNE 8 | THE “STREAMLINING” that has been cutting its way through Sony Computer Entertainment around the world reached the
Paul Sweeting is editor of Content Agenda
Word of the cutbacks began to trickle out Wednesday, with various reports putting the number of employees getting pink slips anywhere from 50 to 100. Sony Computer Entertainment America employed a total of about 1,500 before the layoffs.
The
In a carefully worded statement, SCEA spokesman Dave Karraker tried to downplay any connection between the layoffs and the $1.9 billion loss posted by the games division last year, without quite denying it.
“This move is not wholly related to any one product in our portfolio,” Karraker said. “More accurately, it is reflective of shifts in the marketplace and in consumers' wants and needs, such as the rise of digital content delivery and networked services. In order to maintain our market leadership, the management of SCEA has found it necessary to analyze the business and restructure the company as necessary.”
Uh, right.
But, I don’t know why Sony would want to deny it in the first place. While you hate to see anyone get laid off (especially when it was senior management that screwed up), it’s about time someone there woke up and smelled the burning coffee.
They misjudged the market, they’ve been outflanked by the competition and they’re losing share in a key business segment and profit driver. They need a new strategy.
SONY BASICALLY has two choices: It can forget about trying to compete against the Wii and concentrate on positioning the PS3 as an integrated home media hub that happens to play games. Or it can cut the price of the PS3 dramatically and try to reclaim some share and drive more software sales.
So far, the company has sent conflicting signals.
In his statement confirming the layoffs, Karraker certainly makes it sound as if Sony is leaning toward the first option. The statement never actually mentions the videogame market, but instead refers to “the rise of digital content delivery and networked services.”
That would fit with the phase out of the lowest-priced PS3 model and the recent move toward models with larger hard drives that could hold more digitally delivered content.
But there are other signs that point to other possibilities.
Dropping the low-end PS3 SKU, in fact, could be seen as part a broader move to separate the PS3 strategy from Sony’s Blu-ray Disc strategy, which would give the games division more room to maneuver competitively.
Among other things, phasing out the $499 PS3 model cleared the field for Sony and others to introduce more competitively priced Blu-ray players as that format faces off with HD DVD.
Implicit in Sony’s decision to price its stand-alone Blu-ray player under the cheapest available PS3 model, however, is an acknowledgement that Blu-ray needs to compete on its own without the Trojan Horse of PS3.
The flip side of that acknowledgement, of course, is that PS3 also needs to compete on its own without the cost of a Blu-ray drive.
COULD IT be done? The biggest technical obstacle would be that all PS3 games right now are released only on Blu-ray discs, which would make them unplayable on the model that lacked such a drive.
But there’s no reason most current PS3 games need to be on a Blu-ray disc. Most would fit fine on a standard dual-layer DVD, and most third-party developers would be just as happy not to have to pay to replicate their games on Blu-ray.
Sony could always offer an outboard Blu-ray drive as an upgrade—as Microsoft does now with HD DVD and Xbox—when the games become too complex to fit on a DVD.
The biggest non-technical obstacle would be the perceived loss of face for Sony, which might be too much for a Japanese company to overcome.
But investors would probably be happy to see a more competitive product in a market segment that has, until recently, been Sony’s most reliable driver of profits.
