If Sony's (NYSE: SNE ) failures in this generation of the gaming console wars amount to a Shakespearean tragedy, I think the best analogy would be King Lear. Sony's tragic flaws, like Lear's, boil down to overconfidence borne of past success, and an unwillingness to listen to critics who told the company something other than what it wanted to hear. While Sony's downfall hasn't been as epic as Lear's, it sure hasn't been a pretty sight.
Nintendo and Microsoft keep chugging along
You don't need to be an expert on the console market to see that the stunning success of Nintendo's Wii, with its revolutionary motion controller, caught Sony completely off-guard. At a time when Sony, flush from the PS2's dominance, was convinced that it could drive the "sweet spot" of the console market to a higher price point thanks to the PS3's cutting-edge hardware and built-in Blu-ray drive, Nintendo had the crazy idea of offering a cheaper, less powerful solution that could appeal to kids and casual gamers through its use of innovative technology. And surprise, surprise, the cheaper stuff proved more popular.
And while the Wii's success has been a devastating blow to Sony, the continued popularity of Microsoft's (Nasdaq: MSFT ) Xbox 360 must really sting. The 360, unlike the Wii, targets the same avid gamers that Sony traditionally viewed as a cash cow, and the PS2 had managed to outsell the original Xbox by more than a 5:1 ratio. Yet the combination of an earlier release date, a lower price tag, and developer frustration over the PS3's difficult programming environment has let the 360 more than hold its own: As of the beginning of this year, it had 39 million total unit shipments, compared with the PS3's 33.5 million (the Wii, for the record, had 67.45 million). Considering the TKO that Blu-ray has scored in the next-generation DVD wars, those numbers are pretty incredible.
Why the Move isn't the answer
Now, when an enormous chunk of this generation's console sales have already been accounted for, Sony is trying to give the PS3 a second wind with the launch of its own motion controller solution, which it calls the PlayStation Move. Sony's hope is that the Move's more advanced controller, along with its ability to make use of a motion-sensing camera (the PlayStation Eye) and the PS3's superior graphics, will turbocharge its market share.
Sorry, but I'm having trouble buying it. As it is, the cheapest PS3 model retails for $100 more than the Wii, and Sony might be charging close to $100 for a Move/Eye bundle when it arrives sometime in "late 2010." Good luck convincing the casual gamers who have flocked to the Wii to spend that much extra money, and good luck convincing big-name developers such as Electronic Arts (Nasdaq: ERTS ) , Activision Blizzard (Nasdaq: ATVI ) , and Take-Two Interactive (Nasdaq: TTWO ) to quickly release a flood of new games that, initially at least, can only be played by a small percentage of the PS3 user base.
What's more, Microsoft's Project Natal, which is due out around the same time, has the potential to run circles around the Move in terms of both price and performance. Instead of requiring individual motion controllers, Natal uses a single, advanced motion sensor accessory that completely tracks the body movements of multiple players, and can also recognize their voices. While Sony desperately tried to counter Nintendo, Microsoft decided to think a step ahead, and the payoff could be huge.
Unlike King Lear, Sony will probably live to see another day in spite of its fateful missteps. Maybe in the next generation of the console wars, the company will find itself on much better footing as a result of having learned from its errors. Just don't expect the Move to produce a reversal of fortune in the current struggle.