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The pressure is mounting on Sony as the launch of the PS3 gets close. Projections from Merrill Lynch say that Sony will drop a whopping a $5 billion over the next 3 years competing against the Xbox 360.

Speculation is rife that Sony will showcase its first full working version of the Play (PS3) at the upcoming Taipei Game Show in Taiwan (February 16). Sony has already shown the PS3 in the US and Japan. In each instance, however, the boxes on display are believed to have been dummy cases, not fully operational prototypes. The Success of the PS3 is critical to the very future of Sony. The Company is currently in trouble and key products like the PS3 and LCD TV are the key to Sony’s future success.  While the rest of Sony has struggled, the PlayStation division has been a cash cow that the rest of the company has relied on it to prop up its failing consumer entertainment divisions. .

With Microsoft having already launched the Xbox 360 to overwhelming demand, many are wondering what the PS3 from Sony will truly look like. It wouldn’t be exaggerating to say that Sony is betting big on the PS3. With the next-gen Hi-Def format war still raging, Sony is betting a substantial portion of its future on Blu-Ray. While most analysts agree that HD-DVD will not likely win, some analysts are openly wondering whether Blu-Ray will as well. If it doesn’t, Sony could be in serious trouble. In order for Sony’s Trojan Horse Blu-Ray strategy to work, the PS3 has to succeed as a gaming console. It has to deliver pure horsepower and great graphics. Sony also has to deliver an online strategy that turns gamers on. Right now there are serious reservations as to Sony’s online strategy compared to Xbox Live.

 

 However, one aspect of gaming that is often ignored, but could become a major issue is load times. Ask any Sony PSP owner what annoys them most about the portable console and you will hear them say dreadful load times. Gamers are an impatient breed and if Sony frustrates hardcore gamers. It could greatly damage its reputation with the group that will comprise PS3 early adopters.

 Until now, it’s been widely assumed that the Blu-ray drive in the PS3 will be single-speed. If true, this choice could be disastrous. Blu-ray single speed transfers data at a constant rate of 36Mbps (Megabits per second) or 4.5 MBps (Megabytes per second). Sound impressive? Think again. DVD single speed is rated at a little over 1.32MBps max. A 12X DVD, such as the one in the Xbox 360, transfers data at rates between 8.2 and 16.5 MBps for an average of around 13MBps. This article from Gamespot provides all the details on transfer speeds, but simple math should show that there are some serious concerns looming with a single speed Blu-Ray drive. So, all things being equal, a 20 second load-time on the Xbox 360 would equate to just less than 60 seconds on the PS3!

 In order for Sony to bring load times into the same range as the Xbox 360, it would have to use at least a 2X drive (which would transfer a little faster than a 12X DVD’s minimum speed) or a 3X drive (which would closely resemble a 12X DVD’s average transfer rate). Since Blu-ray is a new technology, it’s a certainty that the faster speeds will increase the base cost of the PS3, which leads into the next point.

 The reality is that the PS3 will lose money for at least a few years. How much and for how long is debatable. Recent projections from Merrill Lynch Japan suggest that the PS3 could lose a massive a$2.4 billion in year a$2.0 million in year 2 and a$600 million in year 3. By comparison, Sony’s profits in the past three years have been about a$2.3 billion. If the PS3 doesn’t start turning a serious profit in year 4, Sony could find itself in serious trouble. There’s no indication if these losses also anticipate the costs involved with setting up the massive infrastructure for an Xbox Live competitor, which most people think Sony has to provide. If not, Sony’s losses could skyrocket. Sony could try to offset these losses by launching the PS3 with a higher price point, but anything above $550 is considered too high for wide adoption. Sony is also having to compete with HD-DVD, which is getting significant backing from Microsoft (and their A$45 billion in cash). Whereas Microsoft has little to lose if HD-DVD fails, Sony has everything to lose. Additionally, recent announcements at CES in January indicate that the least expensive Blu-Ray drives will start at $$1,500 while HD-DVD is hitting the market with players starting at a$600. Many analysts saw these changes as giving HD-DVD a second-wind that could ultimately hurt Sony more than it helps HD-DVD, which leads to another point.

 

 Tell Me Why I Need Blu-Ray More Than DVD?

 Unless you have an HDTV set, you’ll never see the difference between Blu-Ray and HD DVD. And considering that Hi-Def adoption is currently at 24% and more than half of consumers are waiting for price drops, the target market for Blu-Ray is not as lucrative as one might believe. When DVDs hit the market, there were several reasons to purchase them. For one, the quality far surpassed VHS. Additionally, menus and extra features made DVD content easier to access and gave it more value. Also, DVDs don’t degrade in quality over time, making them a better long-term investment. The jump from DVD to Blu-Ray (or HD-DVD) is not as significant, unless you’re an HDTV owner. Even then, the question remains: Is Blu-Ray content going to be compelling enough to make me say “I have to have it?”

Recent announcements suggest that Blu-Ray disc prices will come at a significant premium over existing DVD prices. With broadband adoption growing rapidly, one has to question whether a physical format has a life ahead of it at all. Bill Gates has publicly stated that he thinks the format war is the last we’ll see, because hi-def content will be soon be delivered over the Internet. HD-DVD may not win the war, but it doesn’t mean that Blu-ray will.

 

The PS3 has wide support right now. However, rumblings have been surfacing that the PS3 is hard to develop for, due to the complexity of a brand new processor with multiple cores. Similar criticisms arose with the PS2, and while Sony was able to overcome the same hurdles then, there is one major difference now that may keep history from repeating itself: the Xbox 360.  The original Xbox came into the game market a lot later than the PS2 so developers had to stick with Sony because it was the clear market leader. This afforded Sony liberties that it may not have had otherwise. Now, Microsoft has the head start. Additionally, the Microsoft unit has already been praised by the likes of John Carmack (creator of Doom, Quake, etc…) for its great development environment, while Hideo Kojima of Metal Gear Solid fame has expressed some concerns that development for the PS3 could be more difficult than for the Xbox 360. Sony must have strong 3rd party support so that licensing fees will help recoup the costs of putting the PS3 into the market. Just being Sony may not be enough anymore.

 While I don’t think we’ll see Sony close its doors for good, I have some concerns about the affect the PS3 could have on Sony’s financials over the next few years and into the future. Microsoft has created an impressive console with the Xbox 360 and while Sony has a strong history in the PlayStation line, there are key components for concern. Blu-Ray, an online service like Xbox Live and a hard development environment create additional areas for financial loss that may not be recouped. For the sake of competition and a strong market, let’s hope Sony can address these concerns adequately and while there is still time.

David Walker is an Oracle DBA/Developer who writes for Digital Home Magazine and EHome.

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