Is this Sony’s final nail in the coffin?

The PS4 is a great piece of hardware on paper – but actually, Sony said so itself: it’s a super charged PC. This signals that the era of innovative gaming hardware has finally come to an end for the console manufacturers. Sure, there are peripherals such as the Move controller but for what it’s worth, the PS4 as well as the new Xbox (720?) will be based on good old x86 architecture. This isn’t Sony’s fault of course – it’s simply a fact that chip advances by Intel and AMD for high performance workstations and servers have continued to scale Moore’s mountain. There is now so much horsepower available, even in small desktops, that the need to recycle desktop computers has decreased and this has the whole PC industry in crisis mode – in many ways, this industry is a victim of its own success. This is most evident in the financials: the whole industry is suffering from eroding margins because consumers have long reached an acceptable performance plateau that works for email, web browsing, excel and the occasional video game – even on low-powered laptops – so the need for speed has evaporated to a large degree. To illustrate this more clearly with numbers: around 2003 1 GFLOPS (giga floating point operations per seconds) cost around $100. Today, that same GFLOPS costs $0.75 or less than a dollar. That’s a 100 times increase in terms of bang for the buck in 9 years (on a side note: this is nothing when looking at the increases that took place in GFLOPS for GPU’s). So far, however, most consumer software has not seen any significant benefit (with the exception of video games) despite the increases in raw CPU/GPU performance, memory and storage. However, we have seen new hardware emerge in the form of the smart phone and tablets. This new category easily out-perform desktop computers that were 6-7 years ago the performance standard. Others have picked up on this trend too and it’s clear that several companies have targeted their attention at the gaming segment of the population. Apple is rumored to enter the casual gaming space but more importantly, so is NVidia with its project shield, and so is Valve with it’s steam box and then there are also several projects that try to fill a niche, for example: OUYA or Game Stick
But it gets worse (for Sony) – not only is the console now competing with desktop PC’s and the other various entrants, the advent of the casual gamer is what really should worry Sony: this new human being is not interested in spending $60 for a video game, he or she also wants that game to be fun, simple and less-time consuming. In other words, truly something you do on the go or when 5 minutes needed to be filled with mind-numbing activity. How does Sony’s new PS4 address these challenges? Not at all – the statement that Sony has crafted says: “the focus is no longer on the console at home but on the gamer itself” – in short, I can now fill that 5 minute window playing a $60 game instead of A $2 game. Something just doesn’t add up here. But in all fairness, the casual gamer is a new – err old .. oldish or older type of the human being construct. It grew up in the 80’s and has no concept of FPS games. That’s an oversimplification of the casual gamer, of course – there are plenty of younger people who also fall into the casual gamer category and have not really had a need or desire to play video games until the moment when they bought a smart phone. In short, one could argue that this is not really Sony’s target group to begin with – except that it’s the only group that’s still growing. The true console gamer is now a near-zero sum casualty – and there are three contenders that fight over an overall declining market: Nintendo, Sony and Microsoft.

Amazingly, Sony decided to push the temporal envelope and announce the PS4 before Microsoft had a chance to play its trump card. These two-month will, sadly, not matter. What will matter, however, is that Microsoft is going back in the world of X86 with its new console and unlike Sony, it has a very rich history in this particular hardware segment. It does make me wonder if Microsoft’s new XBOX will simply run Windows 8 – and all current PC games could just run on it (what the original Xbox was intended to do). But while these two fight it out in the console-arena (and Nintendo is looking on, not sure in which direction to flee), something else will hurt Sony: the lack of a cohesive and coherent ecosystem.

And here we have really arrived at what the main challenge is for Sony – it’s not the hardware, nor is it the software – it will be the ability to make Sony a destination for gamers again. Not just the hardcore crowd but also the casual gamer – in that sense its content (as usual) but its also how Sony positions itself as a destination or platform and that’s the crux of it: we saw Sony announce that PlayStation 4 – but that almost doesn’t matter; it’s completely irrelevant what hardware is thrown into the market when everyone has access to the same hardware – what Sony should do is work out what exactly it’s strategic advantages is and then bring that to market; in other words, the hardware is not going to be profitable – and the software is probably fighting, as we speak, with declining markets. What’s left to be relevant is on how many platforms one can play these games. But none of that matters if the games continue to be priced at $60.