"Plan B" for PS3?

In a worst-case scenario, in which Blu-ray becomes a disastrous failure in the market, iSuppli's Chris Crotty believes the PS3 has an escape clause. Like the Wii, he believes, PS3's fundamental game console technology doesn't need an entertainment media tie-in to be successful. "If a year from November, people express that they're more interested in [PS3] as a game machine than a Blu-ray player, and for some reason Blu-ray died," he remarked, "[Sony] could take it out. There's other ways they could put something else in there."

Again, Parks' Michael Cai disagrees, citing the lack of historical precedent for any CE device manufacturer to cut back on features in order to drive product adoption. "Obviously, [Sony's] hope is driving the ecosystem for Blu-ray," Cai remarked. "So they want to form a virtuous circle, but if it turns into a vicious circle, then that would be their biggest fear. If it does become a virtuous circle, then the equipment and component costs would become cheaper and cheaper for the PS3."

When a manufacturer has an "ecosystem" ideal, its hopes are that the success of one segment of its product line is supported by another segment - for instance, Microsoft's operating systems by Microsoft's applications software, and vice versa. Sony's belief appears to be that Blu-ray's success could trigger eventual PS3 price drops, as component prices become cheaper and more mass produced. This would enable Sony by 2008 to slash PS3 prices the way it slashed PS2 prices earlier this year.

The problem is, as Cai sees it, PS3 is a component of the Blu-ray ecosystem. So for that price slash to remain feasible, Blu-ray has to succeed pretty strongly and pretty soon, which means that Sony will have to start slashing Blu-ray player prices first. With four-digit price tags characterizing the current Blu-ray models, there's a lot of room to slash. Even if BD player prices end up being half what they are now - for instance, in the $600 - $750 price range - Cai believes they won't reach a "bottom" that could trigger similar cuts in the PS3. BD player volume, you see, must reach a certain level before BD component manufacturers (ironically including Sony) will want to cut costs; and until they do that, Sony can't turn around and cut PS3 prices.

"All these different factors will play together," predicted Cai, "and I guess I wouldn't go as far as saying Sony will definitely be doomed, but I would say we won't see the market share they've had with the current generation."

If Sony loses any market share at all, there will be some who proclaim that fact a defeat for Sony in and of itself. So it doesn't help matters much that game developers are pulling back on their initial support for the PS3, as evidenced by a compiled by the enthusiast blog Technophilia, many of which we saw previewed just last May at E3. Is that list evidence that developers see a rough road ahead for PS3, precipitated by Blu-ray? No, says Chris Crotty.

"If nothing else, the PlayStation 3 is guaranteed a minimum of 33.3% market share for video game consoles," stated Crotty. "That would be saying that the Wii, the Xbox 360, and the PS3 split the market perfectly, [although] that's kind of unlikely. PlayStation historically has done better than their competitors, so if you're a game developer - and this is a growing market - you want that one-third...What I've heard is that, the game developers are a little frustrated because developing for the PS3 is expensive and complicated because of the Cell [processor]."

Developers with cancellations or postponements may be missing those early adopters, whose numbers Sony hopes meet or exceed two million. Will there be enough mass market adoption of the PS3 to ensure a market for these developers in 2007 or beyond? Crotty remains hopeful, especially with what he sees as an inevitable price drop. "Granted, you're always going to have the early adopters who are going to spend more," he said, "but the price is going to come down over time. And what you're getting for that $599 is pretty impressive, right? You're getting this very powerful game machine, and you're getting a next-generation DVD player."

Just last March, that seemed to be an unbeatable combo - two great tastes, to borrow a phrase, that taste great together. While expert opinion hasn't entirely shifted to the dark side, there is indeed a shift in the wind - just enough to put PlayStation 3's ardent supporters on the defensive. On the one hand is the belief that PS3 must survive first and foremost as a game console; on the other is the observation that Sony considers PS3 a critical component of the Blu-ray ecosystem. Historical precedent weighs in Sony's favor in terms of game machines that have succeeded in their own right, and to Sony's detriment with respect to game consoles that tried to masquerade as something else. As we've seen, the PS3's future isn't dependent entirely on Blu-ray's success - in fact, there's a scenario that, when played out, leaves PS3 hindered by such success, unable to drop its prices if stand-alone players aren't slashed first.

If there's any common ground among all sides in this dispute, it's the observation that PS3 and Blu-ray are forces in themselves, which in this one incarnation are tied together. Their forward momentum must not only be significant but also the same direction if either is to gain ground in its respective market, and survive the otherwise uncertain future ahead.

See pictures of the PS3 and other Blu-ray Disc players ...