This holiday season, few consumer electronics categories are being watched more closely than that of video game consoles.
Both Sony and Nintendo plan to release their next- generation consoles, the PlayStation 3 and Wii, respectively. Yet, with prices as high as $600, the PS3 is clearly aiming for the high end, while the Wii is targeting more casual gamers with prices expected to be well below $300.
Meanwhile, both companies must contend with Microsoft and its Xbox 360, which has a yearlong head start and therefore a commanding lead in the next-generation race. Still, Sony has always maintained that its console cycles are 10 years, rather than the five considered the industry standard. That's why, even as the market readies for the PS3 launch, the PlayStation 2 is still selling like gangbusters. And it should continue to do so for some time, as Sony has committed to the PS2 for at least another four years.
In a few weeks, much of the video game industry will descend upon Tokyo for the annual Tokyo Game Show. But for the time being, the focus is on Germany, where the Leipzig Game Convention is being held. So, for companies like Sony, Microsoft, and Nintendo, and publishers like Electronic Arts and Activision, there is no break in sight. Sony Computer Entertainment of America president Kaz Hirai talked with CNET News.com about the forthcoming PS3 launch (parts of this article refer to comments Hirai made earlier this month in an interview with GameSpot).
CNET: Can you provide an update on the PlayStation 3?
Hirai: The PlayStation 3 will launch in the North American market on November 17. Things are pretty much moving according to plan.
CNET: How does a scaled-down Electronic Entertainment Expo affect a company like yours? Was it a good thing to institute some changes in the format, or were you happy with the way it had been?
Hirai: E3 has about a 10-year, 11-year history, if I'm not mistaken. I think it's grown to a point where it became just such a massive show that we needed to take a look at what we were trying to accomplish with the show. We needed to see how effectively we can accomplish those goals. I think it was pretty much across the board in agreement that we should revise or relook at how E3 is structured.
CNET: Beyond the pricing and availability of the PlayStation 3, one of the big pieces of news from this year's E3 was more information about Nintendo's new console, the Wii. There were rumors that the Wii would be priced for less than $250. How did that affect the PlayStation 3?
Hirai: The pricing that we announced for the PlayStation 3 is a price that ultimately offers fantastic value to the consumers. I think that we are offering a very good value for the consumers. We look at our products having a 10-year life cycle, which we've proven with the PlayStation. Therefore, the PlayStation 3 is going to be a console that's going to be with you again for 10 years. We're not going to ask the consumers to suddenly buy another PlayStation console in five years' time and basically have their investment go by the wayside. So for all those reasons, I think at $599 we're offering a very good value to the consumers.
CNET: Are you saying that there won't be a PlayStation 4 within five years?
Hirai: Well, I think that if you look at the history of the way we've managed our console business, we always try to hit a 10-year life cycle. I can't speculate on when we might come out with a new console after PlayStation 3. But my message is that once you become a family in the PlayStation family of products, you become a family member. We make sure that we take care of you.
CNET: Going back to the question of the Nintendo console, it seems like its pricing is significantly lower than what the PlayStation 3, or the Xbox 360, will cost. Any concern that Nintendo's Wii pricing will undercut the market as people decide which console they want to buy?
Hirai: Some consumers will compare features or software offerings and decide that they may want to go with a different console. You also have to realize that we have a very strong, market-leading console called the PlayStation 2, which is at a very affordable price right now. Consumers will also understand that if you buy a PlayStation 2 right now, and you make some software investments, when you feel it's right to move onto PlayStation 3, those software titles aren't going to go by the wayside. Consumers will take that into consideration. I don't think price is the only determining factor when consumers make a choice in looking at their console purchase decisions.
CNET: Is there a danger that some consumers will buy PlayStation 3 just for the Blu-ray player and not the games?
Hirai: Consumers are going to look at the totality of what we offer in the PlayStation 3. Even if there was a consumer who decided to buy the PlayStation 3 perhaps as a Blu-ray player, I think that they will quickly realize the potential and the entertainment value of the fantastic content in true [high definition]. Any consumer would be hard pressed really not to try that functionality out.
CNET: Given the differences in pricing, which is fairly significant between Microsoft's Xbox 360 and the PlayStation 3, are there any chances of a PlayStation 3 down the line that doesn't have Blu-ray built in?
Hirai: The PlayStation 3 uses the Blu-ray as its storage medium for both games and for movies as well. We wanted to take advantage of the storage capacity that Blu-ray offers in terms of motion pictures and other content, but most importantly, for games as well. Our decision to include the Blu-ray player from day one in all of our PlayStation 3s was the right decision and, quite honestly, the only decision we can make.
Look at the massive amounts of data that's required to provide a truly immersive gaming experience in true HD. If you only have a DVD ROM drive, which can only go up to about 9GB or so, you're going to end up with a game that's going to have two or possibly even three discs. And then you're going to have to ask consumers to swap discs out or cache all the game onto the hard drive, which I think is an inconvenience--not to mention the fact that you're going to fill up a 20GB hard drive very quickly with some of these games. So trying to go without a Blu-ray drive in the PlayStation 3 really is a nonstarter.
CNET: There's been talk recently about production of the PlayStation 3--why hasn't production begun already?
Hirai: We haven't officially announced production on the PlayStation 3 just yet. But we are on track to deliver 2 million units for the launch period on a worldwide basis that we announced at E3. We are going to make sure that those units get out into the market.
CNET: It looks like there could be some shortages, particularly for the holiday season, even with the 2 million by the launch date and 4 million by the end of the year. So what do you say to consumers who are not going to be able to get ahold of one if they do want one?
Hirai: We are going to make every effort possible to make sure that we get as many units out into the market in the major territories as well as some of the smaller territories that we're launching in.
CNET: Have there been any sort of business lessons about filling customer demands and production issues from the things that Microsoft has dealt with regarding the Xbox 360?
Hirai: We don't really look at what our competition did or didn't do. We've had shortages in the past, and there is no guarantee that we will never have a shortage again in the future. But I think that we've learned many lessons over the years that allow us to look at production schedules, look at parts procurement, look at ways of shortening the lead time from the point of manufacture to ultimately getting the product into the retailers' shelves and into the hands of consumers. We're doing everything we can to make sure that we have the most efficient way of getting the product into the market.
CNET: By the time the holiday season moves around, Microsoft will have a yearlong head start. Not only does it have the head start in the console race, but it also has a year's advantage on coming out with new accessories really bolstering its online offerings. What is Sony's take? How can Sony keep up with that?
Hirai: If you look back in history, I think everybody realizes that we've never been first to bring a console to the market. PlayStation was not first and PlayStation 2 was not first to market. As a matter of fact, PlayStation Portable was not first to market in the portable space and PlayStation 3, as you mentioned, is not the first to market either.
It comes down to several things. One is the kind of software experience that the consumers will expect out of a next-generation console. I think we're going to be delivering that, both in terms of the lineup of PlayStation 3s as well as the fact that we're offering true HD gaming. We're also launching a console that doesn't require upgrades as you go along. Right out of the box it will play Blu-ray movies in true HD as well as old games. As far as accessories go, that's really a function of what kind of accessories you need to play or enjoy a particular game.
CNET: How many titles will you have by launch and how many by year's end?
Hirai: That's hard to try to pin down at this point. Everybody is looking at their entire portfolio of software offerings, and I think that the lineup of titles really is something that won't be locked down most likely until three to four weeks before launch.