How Sony Can Boost PS3 Sales

As this holiday’s video game sales are tallied up, one thing is already clear: As an article in the Wall Street Journal notes, Sony’s PlayStation 3 remains in a fairly distant third place, still eclipsed by Microsoft’s Xbox 360 and Nintendo’s Wii. While it’s probably too drastic for Sony to walk away from the PS3, I definitely think they need some bold and creative changes to make their console competitive, namely to acquiesce to market realities while leveraging two underutilized assets. Here’s how:

Release a discounted, broadband-centric model of the PS3 WITHOUT a Blu-ray:
Sony’s high-definition Blu-ray decisively won the standards war, but the market’s been slow to give them a victory parade. For now, the PS3’s Blu-ray player doesn’t seem to be a huge selling point, but for Sony, it’s a huge investment. (Merrill Lynch estimated the Blu-ray will cost the company $100-$350 per unit over the console’s first three years.) The short-term solution is to manufacture a new PS3 line that comes without a Blu-ray. Sony could sell it for considerably less than the current $400 MSRP. While the standard PS3 will still be for sale, this cheaper model (call it “PS3 Net”) could come with several consumer-selected Sony games pre-installed in the hard drive (see below), and take advantage of high-speed broadband, especially in Japan, for downloading games, movies, and other content via the PlayStation Network. (And PS3 Net owners can still buy an external Blu-ray drive later.)

Slow the Wii’s growth by revamping the Playstation 2:
From Sony’s perspective, the console wars are a battle of opportunity cost, as every consumer who buys a Wii or Xbox 360 is unlikely to buy a Playstation 3. At the moment, that’s roughly 68 million next-gen console owners, according to VGChartz. However, combined Wii/360 ownership is still dwarfed by the 9-year-old Playstation 2, whose install base topped 140 million as of last summer and due to its affordable $130 MSRP, is still selling extremely well. To prevent all these PS2 owners from transitioning to a competitor, Sony should market several add-on packages to keep it current, especially against the Wii: A PS2-bundled with Eye Toy and other rhythm/motion game peripherals with new software, for example, and another bundle which adds wireless Internet connectivity, web browsing and downloadable content. Features like these will convince PS2 owners to stay in the Sony family while they wait for the PS3 price to drop.

Expand the PS3’s audience with a fully leveraged Little Big Planet:
With its cute-ugly characters and whimsical settings, this season’s PS3 exclusive Little Big Planet is far and away the console’s best chance to expand its audience beyond a core fan base of hardcore gamer dudes to kids and women gamers, two audiences the Wii has so far owned. With its creation and network-sharing tools, the game also turns the PS3 into the best platform among consoles for user-generated content. To capitalize on these advantages, Sony should sell a discounted version of the PS3 (see above) packaged with Little Big Planet, with additional enhancements such as a virtual currency/content marketplace, and a mini-MMO space linked to Sony’s new (but in my view, troubled) virtual world, Home.

But how feasible are these suggestions? I ran them by a developer friend who recently left the PlayStation group; he gave me his perspective on condition of anonymity. He liked the Little Big Planet idea most, adding that Sony “should focus more on a marketplace for casual and hobbyist games on the PlayStation Network,” a bit like Xbox Live’s XNA Creators Club, but using Apple’s iTunes app store/iPhone developer program as a model.

As for releasing a PS3 without Blu-ray, that strategy “makes sense and also has a probability of 0.0%,” he told me via email. “Sony is a huge company and there are many things that Sony Electronics and Sony Computer Entertainment would LIKE to do but cannot because of being in the same group as Sony Music and Sony Pictures.”

Similarly, he didn’t think a revived PS2 would do the company much good: “Nothing Sony does is going to slow the Wii’s growth, and if they get in that game, they are making a mistake,” he wrote. “They need to finish the game they started.”

Judging by his reaction, that might be Sony’s biggest problem. Even if the company was willing to make some daring course corrections now, it may be too late to change the heading of such a large corporate ship.

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