Race For A New Game Machine

Sony’s PlayStation 3 is nothing short of a greek tragedy. There haven been many companies before it suffer similar fates, Magnavox, Atari, and even Nintendo but none have squander their opportunity like Son.  But now David Shippy, the “brains”  behind the cell processor which powers the PlayStation 3 tells the story of how Sony was part of one of the biggest business failures of all time.  

In a new booked called The Race For A New Game Machine, he describes how the project went off the rails, ending up with IBM engineers creating the processing chips for two rival video game consoles. In the process IBM sold parts of the cell processor design to Microsoft for their Xbox 360 and Microsoft benefited from over $400 million in R&D funded by IBM, Sony, and Toshiba. The R&D teams worked in the same building and in some cases Shippy met with Microsoft engineers right after meeting with Sony engineers. Ultimately Microsoft benefited a great deal from Sony’s work on the cell processor. Microsoft launched their Xbox 360 a year before Sony launched their PlayStation 3 and the rest is history.

Game Over For PlayStation 3

The game is over for Sony (SNE) and its PlayStation 3. Sony’s sales plunge 19 points compared to sales in November 2007. Sony’s strategy has been flawed from the beginning. 

Sony made two big bets with PlayStation 3. First was the cell processor which promised to be a breakthrough in computing power and bridge the gap between x86 architecture and specialized hardware. It proved to be challenging to develop for. The second big bet was on the Blu-rayDVD format. This bet was a mixed blessing. The shift from standard DVD to HD DVD has been much slower than other industry format changes. Sony ultimately won the format battle with Toshiba but they might have lost the war. The Blu-ray drive which is included in every Sony Playstation 3 causes the price of the PlayStation 3 to be $200 more than other consoles like the Xbox 360.

PlayStation 3’s run rate has a compounding negative impact on Sony. Game developers are less likely to build blockbuster titles something the PlayStation 3 has lacked.  Even more important are the third party royalties that come with licensing the PlayStation 3 platform and contribute a majority of profit to Sony’s gaming business. The PlayStation 3 has become a big boat anchor on Sony’s bottom line. Read more

Netflix Xbox 360 Service Rocks But Needs Some Work

I finally got a chance to play around with the new Xbox Live experience and specifically the new Netflix app. Ever since Microsoft announced the Netflix partnership I was eager to see it in action. I have to say I was really impressed with this new service. But there were a few parts that seemed disconnected. 

The best part of the product is just watching movies. Netflix (NFLX) has standard definition movies and a limited selection of HD movies. I went on a 30 Rock marathon watching the HD version of season 1 and 2. The video quality was very good on a 1080p Samsung LCD. The speed of using the service was also impressive. Movies loaded fast and the navigation was pretty intuitive. But there were some areas that need improvement.   Read more