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Sony, Microsoft and Nintendo announced their next-generation videogame consoles in May 2005. As these new consoles, namely the PlayStation 3(PS3), Xbox 360, and Revolution, are evolving into digital entertainment hubs, it will have implications for consumers, game manufacturers, game developers and the ICT industry at large.
The manufacturers plan to expand their target audience of next-generation consoles to beyond the traditional gamers. Sony and Microsoft are using technological convergence as the key to expanding the market.
Their new consoles are designed to be feature-packed and powerful entertainment platforms for the entire family (Miller 2005, p.7). The consoles will be able to network with other devices such as digital cameras and MP3 players. They can also function as DVD player and set-top box for Internet Protocol Television (IPTV) (Cross 2005, p.91).
Nintendo, meanwhile, is planning to use innovative controllers and simpler games to reach out to non-gamers, like elderly people who want to sharpen their mental faculties (The Economist 2005).
The consoles’ high-end graphic output and advance networking capabilities implicate the consumers and the ICT industry in another manner. In order to enjoy the full potential of these new consoles, consumers will need the peripheral support such as broadband internet connection and high-definition television (HDTVs). The success of these new consoles could boost the take-up rate of broadband and HDTV, or alternatively, be hindered by their popularity (Hsu 2005, p.62).
The competition in the videogame market has implications for console manufacturers beyond that of the key industry players. The success of the PS3 is vital not only to the future of Sony’s videogame business but also to the company as a whole. Videogames are a major source of profit for Sony, accounting for about a third of its operating income.
Sony is also counting on the PS3 to jumpstart key technologies it has spend years and billions of dollars developing, namely a new chip call “Cell�?, the Blu-ray DVD technology and the Super Audio CD (SACD). Sony developed Cell together with IBM and Toshiba Corp. If the PS3 does well, it could be the first of a series of Cell-based audio-visual devices that would stream movies, music and other kinds of digital entertainment throughout the home. (Dvorak and Wingfield, 2005, p.D3).
On the other hand, Sony’s proprietary Blu-ray disc technology for the PS3 is up against Toshiba’s High Definition DVD (HD-DVD) to be the next-generation movie format leader. With the vested interest in Blu-ray, Sony is likely to swallow high drive costs to keep prices down. (Cross 2005, p.91).
The next-generation consoles will also have an impact on the game developers. The smaller developers might not have the capability to handle the cost and complexity of making games for the new consoles. The average development cost for a blockbuster videogame these days is already in the millions of dollars, and the costs will rise with the arrival of PS3 and Xbox 360. Many of the small, independent game companies today may be forced to consolidate or be acquired in order to compete in this new gaming environment. Alternatively, Sony suggests that they can specialize in developing lower-end titles for the PlayStation Portable (PSP) (Lewis 2005, p.126).
On the other hand, Nintendo’s Revolution will have modest hardware and graphic capabilities compared to Sony and Microsoft. This could also provide a niche market for small developers that cannot afford the huge budget required for PS3 and Xbox 360 development (Sheffield 2005, p.4).
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Dvorak, P. and Wingfield, N. (2005) 'Sony Offers Peak at PlayStation 3 as Videogame Battle Heats Up', The Wall Street Journal (Eastern Edition), May 17, p.3.
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(No Author) The Economist. London: Oct 1, 2005. Vol. 377, Iss. 8446; pg. 66
Choo KeeFong 04:03, 28 Oct 2005 (EST)
