Feb 24, 2007

Merrill Lynch Weighs in on Wii Predictions

And predicts the Wii a winner by the end of this hardware cycle. A very interesting claim by one the best known investment firms on earth, considering that nearly every game industry-focused market analyst seems to be jumping on the Wii-doomsday bandwagon.

The maverick prediction from Merrill Lynch may have more to do with their ability to produce independent market research... rather than depend on round-about funding from interested parties such as... uh... Sony.

No proof of any of that sort of stuff of course... but were I a Sony exec... I'd be doing everything possible to maintain third-party game developer confidence in my system. And that would certainly not place me above such tactics as paying off "research firms" to make "predictions" on which system would be around for the long-haul.

Not convinced Sony is capable of such dishonesty? Take a boo at this little blog, apparently created by some average Joe and his "cousin Pete" to convince their parents to buy them a Playstation Portable system for Christmas.

Read about Sony getting busted for making the phony blog here.

What this humble industry observer finds so hilarious, is how many times the big players make the same mistakes over and over again. Its as if new executives keep taking over the helms of the companies after the old ones jet off with their multi-million dollar buyouts and stock option selloffs, and the replacements refuse to peruse through the pages of the company's history.

ScreenDigest, the "research firm" predicting the triumph of the PS3 states the following reason as the main plank of their argument:

"...unlike Nintendo Wii, PS3 as well as Xbox 360 offer access to another type of entertainment, other than gaming."

The "other type of entertainment" ScreenDigest is referring to is the larger hard drives on the PS3 and XBOX, possibly enabling movie file and MP3 playback. As well as their Blu-ray and HD-DVD drives respectively.

So many flags pop up at this argument. The first thing these "analysts" should have done is look up a wikipedia article on the demise of some previous "multi-media systems, such as the infamously powerful-for-its age, 3D0.

The marketing strategy for this powerhouse, in competition with then, industry titans, Sega and Nintendo, was identical to what we're now hearing from Sony:
"For a significant period of the products life cycle, 3DO's official stance on pricing was that the 3DO was not a video game console, it was a high-end audio-visual system and was priced accordingly, so no price adjustment was needed."

What makes the situation even more precarious for the PS3, is that a price drop would be nearly unfathomable in the next few years without a serious downgrade in hardware capabilities. The PS3 is already said to be selling for as much as $300-$400 below cost. And even this only brings it into the price range of a medium priced PC.

Which brings us to the second reason the "multi-purpose-game-console" model never works. The market demographic Sony is targeting with their console is definitely the type of gamer who has some kind of a PC. It's also the kind of person, who many years past, discovered that their PC was in fact, a marvelous multi-media device. Many of them have likely even gone so far as to move at least one of their PC's out of the office or bedroom, and into the living room, or wherever they watch movies or listen to music.

So why do these game-company execs never ask themselves the question... what can our console do that a PC hasn't already been doing for years?

And when the price of said console begins to enter the realm of the PC, which the PS3 certainly has done, like the 3DO and Phillips CDI before it... that's precisely the question consumers begin to ask themselves.

Sure the PS3 graphics are great... but there's a very good reason why those graphics haven't really generated the excitement Sony would have liked them to - high end PC's have been producing similar graphics since before the PS3 launch, and by now, with some of ATI's crossfire cards, as well as NVIDIA's dual polygon munchers, a brand new, smokin' hot gaming rig with a good solid dual core processor is capable of spitting out eye-candy surpassing even the might PS3. This is of course, inevitable as it always has been. Regardless of what the consoles come up with in their latest generation, the PC market simply moves exponentially faster, and it's impossible to keep up in terms of hardware muscle.

Nintendo seems to have finally figured this out, and has focused on decent gameplay, rather than eye-candy, and it's paying off.

And as for non-gaming related activities, I've had no problem getting Divx movies to play off the SD flash card which can be inserted in the Wii. I've also had a great time streaming music straight of the web through the Wii's surprisingly functional Opera web browser. I've sent email, read forums, posted on this blog, played online games, and watched youtube on my Wii

All of this of course, is separate from Nintendo's own Wii-based news channel, sourced by the Associated Press, in addition to their weather channel updated continually by the weather channel.

Not only can I store photos on my Wii, I can plug my camera into it, and run slide shows right off my camera. After that, of course, I can add music to the slide shows, or edit the photos with a scaled down photo editor... all on my "game" console.

Then of course, there's the whole issue of the controller itself... which looks far more like a media-center remote than the clunky two-hander packed in with the PS3.

So many other factors demonstrate the versatility of the Wii, and the hilarity of Sony's attempt to market the PS3 as the new magic media box. Primary among them, is the size of the two consoles, and perhaps more importantly, the noise generated by both of them. The PS3, a hulking behemoth which in many ways, puts the godzilla-coffin housing the original XBox to shame, emits so much fan and HD noise that you better hope your sound system can drown it out. An entire sub-industry has propped up in the past few years in the PC market based solely around balancing the noise generated by the increasing number of fans required to cool CPU's as they get faster and hotter. That Sony would abandon all concern over this issue for their "media-box" is more than simply a trivial oversight.

The Wii on the other hand, might be mistaken for an external hard drive from afar. Its optical drive makes a bit of noise while loading games, but its fan is virtually silent. This is in part due to the low power consumption of the Wii, and the lower, but more stable hardware capabilities, which simply generates less heat.

Of course, none of that will have whole lot to do with the success of the Wii. Ultimately, the price of the unit, in conjunction with the consistency and quality of its games will determine that. The additional frills are designed to entice users to turn the Wii on more times per day, and for that function, they'll likely continue to be successful as long as Nintendo continues to be creative with what they add.

Regardless of how great PS3 games are... development will cease if developers can turn a profit because the console's install base is stunted, because either not enough people could afford to buy the unit, or not enough could see a reason why they should.

But then again, we wouldn't want Trip Hawkins to be the only one to have learned this the hard way, would we?

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