Two Reasons for PS3 Failure

The PS3 is already a partial failure in every analysts mind. The only question is how you define failure. Many in SW define failure as an absolute...pulled from the market. I'd say there isn't one analyst anywhere who thinks that is going to happen....there will be no absolute failure.

However, business does not normally define failure in such absolute terms. In this case, you have the market leader with a huge install base and a massive % of the total market. Doubtful that many thought the PS3 would retain all of that share; however, I'd say there isn't a single analyst that predicted such huge market share loss so quickly. And that is a big failure on Sony's part.

Many people are questioning whether Sony can even pull out an absolute win. Frankly that is shocking and would have been laughed at 2 short years ago. Sony might still end up with the number 1 spot in absolute sales. Fanboys will/might rejoice. Meanwhile the business world will view that as one of the largest product/market share collapses in the shortest time - ever. And that is the best case. The worst case is almost unimaginable - yet might happen. The collapse is astonishing really, when viewed in the cold hard light of business competition.

And there are two core reasons:

1. Blu Ray - which might yet help the PS3 eek out the absolute win.Unfortunately, it delayed PS3 six months and added $150 to the cost (or more). Thus launching late and at a high price point. These conditions won't last forever...but they have allowed the competition a windowof opportunity which they have taken advantage of. Sony could have followed a MS strategy and made the BD an accessory/add-on. IMO they were fools not to do so, especially since they also went with a HDD strategy on every unit which overcomes the storage space issue. So not only did they launch late and high, but BD itself has been much slower to achieve widespread acceptance. Ouch.

2. Cell - which is a great technological achievement/talking point. And which might yet result in the best looking games at the end of the generation. Unfortunately, it requires rethinking your development strategy and changing skill sets. This is bad enough when you control all the resources...but when you are dependent upon 3rd parties it is potential disaster. Which of course is exactly what has happened/is happening. Putting newer technology in the hands of the mainstream is not a particularly wise strategy for the market leader. It is a strategy better followed by a niche player. Instead they are trying to get large pieces of the entire market to learn new ways of doing things - which requires time. Meaning delayed/expensive to make games. Of course, this issue will diminish with time and experience - but meanwhile you provide your competitors an opportunity.

Andthe funny thing about competitors is that when you give them time and opportunity - they usually take it. And in the world of technology adoption that is very dangerous...because once something strikes a chord and becomes the'in thing' it tends to snowball and the market can move very quickly. Wii anyone?

A first class meltdown brought on by bad strategy. Even an absolute win is a huge collapse of marketshare for Sony...and that seems certain to happen at best.