Is it still true that if you have a 720P HDTV your stuck with 480P for Blueray video? Or has Sony fixed this issue? What about the 1080P Sony sets that say they accept 1080P through VGA in the owners manual yet really do not? I know I would never buy a Sony HDTV or a PS3 due to these issues.

I will first admit that I am a lawyer and make a good salary and have all three consoles which I play on my Samsung 50" plasma in a nice condo in downtown Houston. My purpose for writing this piece is because I'm not sure what Sony's gameplan is, but it sure does feel like they are MS with the original Xbox this time around trying to implant a foothold for the future. I'm not sure that I blame them, but I think it has the potential to alienate plenty of PS3 fans. I don't count, because I am too far removed from average income to
care about the cost or expenditure with my salary.

So, let us begin by examining the CNN article which I think makes some interesting points:

http://money.cnn.com/magazi...

What is not clear here is exactly how much bleeding is too much for Sony (why I ask this be clear by the end of this piece)? It is clear that the PS3 is not going away, but it is also clear that the PS3 kinda sits where the Xbox original sat not long ago when it first went on sale. If you recall, Xbox never really made a dime off their first units. But for Halo and MS's willingness to establish the brand, the Xbox should have gone the way of Sega. Basically, MS sold original Xbox with superior specs but inferior games on the whole (there are some great titles out there) much like Sony has started off.

I wonder if it is possible that this is what Sony is doing now? Are they experimenting or gambling with their fan-base and hard-core gamers to implement Blu-Ray? Let's face it, there is a high likelihood that the full advantages of Blu-Ray may not be taken advantage of in the PS3 (just like Xbox fully, at least initiall, didn't with their superior specs). Is it possible that Sony is using the PS3 to hedge their bets? After all, let's be honest....just like Xbox losing all of that money in development, $200 per unit is a ton to be giving up. The question, at this point should be, what all needs to go right for the PS3 to make money and not merely be a method of just implanting Blu-Ray to sell Sony content (where I believe the real money is made) and preparing to fight another day (can you say PS4 will be unbelievable... I can't even imagine just how awesome it would be).

Just looking at the numbers....Sony is making money on LCD's, but the prices are falling too fast to sustain healthy margins. If you want stats, do a yahoo search for an article on the quickly falling gross margins of major plasma tv manufacturers....it's there in an unbiased wall street journal study.

Looking at Blu-Ray players, if they are anything like DVD players, the price on those units will also fall fast assisting the PS3 to profitability. However, if the unit prices of various Blu-Ray units falls too fast, Sony's margins once again get squeezed. Another number to look at is the disparity of how many PS3 ship versus sold. I've been looking at the PS3 tracker on bensbargains.net and the PS3, in any model at $600 is pretty easy to order and obtain. If those sit too long, then you end up with mad retailers who start begging for Sony to issue some type of mail-in rebate....thus again squeezing Sony's ability to even make a profit on the PS3. This is a real danger, because some folks who were early adopters certainly bought PS3's just to watch movies (since they were the cheapest Blu-Ray player one could buy) with the caveat that it can also play games.

This leads me to my next point that those folks aren't buying games which Sony needs to recover costs eaten on the console. Aaahh, but you say, they are buying movies which really begs the question that I am ultimately getting at.....since Sony owns the studio (can control the costs and make a healthy gross margin on content), isn't content the only arena where they can ensure viable competitive business advantage.

Finally, we need to discuss overall costs in general. The high cost of development of games on blu-ray is a severe disadvantage....certainly developers will want Sony taking less in return for taking the risk to develop truly kick-butt games for PS3. The only way they would allow Sony to require the same as MS is if the number of units sold are similar. The cost of the unit itself is also high for the average consumer. Granted, a fully decked out X360 will match the cost, but one is not required to lay it all out at once...so it is effectively cheaper at the point of sale. The PS3's set cost is $600, and there is no changing that in the short-term (at least a year by historical standards...any wishing to the contrary only means Sony has serious problems moving their consoles and Xbox who has room to maneuver would counter immediately as well would Ninetendo (remember they make money on every unit right from the start)....I'm a fan of all consoles so no bias just common sense business principles. This brings up the concern of whether, or maybe when, if Sony can does Sony have to drop the cost of the PS3 to get a larger base.

All of this is said to say this simply: Sony's got the deck stacked against them in this round. Sony will survive and it will sell, if only, by many games being ported over for all three consoles. For developers, there is an inherent benefit to having three viable (meaning enough so that they can make a profit) systems to make games for and have a little competition so they can make good deals...exclusivity or a dominant console would likely hurt the developers profit margin.

As a final thought, it appears on review that the only aspect where Sony can maintain sustainable competitive advantage is by being the content provider. While there is a possibility of making money with all other avenues, the cards are stacked against them and gross margins are likely to get more narrow not wider or be sustained. I can't help but wonder will they be like Xbox and never really use the system to its ultimate potential because they were trying to establish a moon shot. Did they throw PS3 gamers under the bus to sustain their gross margins on content?

I really don't know. Maybe someone would like to discuss. :-)

First, I'm a M$ fan (3 360's in the house) who was going to wait for the PS3 until they pushed it back their final time. That being said, I don't like how he didn't mention any sources of these development houses.

"They are faced with optimistically twice the cost to write a game for the PS3 as the 360 and only a fifth the market to sell it in to."

Twice the cost? How so? Source? As a computer scientist and from articles I've read, I understand the 360 is supposed to be easier to program (3 general purpose cores vs. PS3's one core and 7 SPEs), twice the cost is a little hard to swallow--please quantify. If the artwork and sound is done, and the basic engines already optimized for the particular machine (assuming they use an existing engine--but makes HUGE business sense). In the end, I agree that developers will end up targeting the 360 and the PS3 will get a port if anything.

I'm not saying its not accurate, and believe it is to an extent, some sources would be nice. I understand the corporate risk they would have at being named, but as a journalist he should be able to give some frame of reference besides his generic uses in the article--it applies to his credibility, so its in his interest to communicate somehow.

gCM