Despite being the most impressive technical specimen on the market, with unique Blu-Ray playback features and custom-built IBM (NYSE: IBM ) chips that also can power supercomputers, the PS3 has failed to impress a nitpicky gaming market. Microsoft's (Nasdaq: MSFT ) Xbox 360 and the Nintendo (OTC BB: NTDOY.PK) Wii keep running circles around the PS3, saleswise. The system's unique hardware also makes it harder and more expensive for game designers to bring their wares to the PS3.
The PS3 was always meant to last for a very long time. It took about five years for Sony to start making a profit from the PlayStation 2, and the PS3 was supposed to follow the same path as a media-center powerhouse with gaming roots. Three years into the system's life cycle, Sony's gaming division is still bleeding cash every quarter. And now the industry itself is starting to lose patience with Sony.
"Games generate a better return on invested capital on the Xbox than on the PlayStation," says Activision Blizzard (Nasdaq: ATVI ) CEO Bobby Kotick. "They have to cut the price, because if they don't, the attach rates [of game sales for the PS3] are likely to slow. If we are being realistic, we might have to stop supporting Sony."
Ouch. Kotick is wielding a big stick, because Activision has leapfrogged Electronic Arts (Nasdaq: ERTS ) to become the biggest video game producer in the world. And he ain't speaking softly to Sony.
Reports of new upgrades to the PS3 ecosystem are coming in, but they seem to indicate the wrong kind of changes. The systems are getting bigger and stronger, but not necessarily cheaper. Sony couldn't have predicted the global economic downturn any more than you, I, or the competition -- but the company sure could have handled it better.
Unless the PS3 finds some way to entice more consumers to pay up for its classy but expensive wares, Kotick might take Guitar Hero, Tony Hawk, Call Of Duty, and a host of other crowd-pleasing franchises -- and go home. And if the biggest producer can't afford to make PS3 titles, the smaller players could soon follow suit. By the time Take-Two Interactive (Nasdaq: TTWO ) announces an Xbox-only Grand Theft Auto title, it'll be too late.
The time to act is now, Sony. Give me cheaper systems or give me death. For your sake, I hope that the rumors of a less expensive PS3 Slim model are correct.
Game on, Fool: