Sony Declares Mission Accomplished: George W. Bush Edition

David Reeves, head of SCEE announced Sony's VE Day over Microsoft at the PlayStation Day event in London:
"I am delighted to be able announce today that we have sold more PlayStation 3s throughout Europe than Xbox 360 - even though they launched sixteen months before PS3,"

The much anticipated announcement came a few months earlier than expected. Publishers have been eyeing the increased European sales for a few months and using words like "still born," "moribund" and "hit the wall" to describe 360's European performance. Apparently, David Reeves and the publishers didn't read Microsoft's announcement from one month earlier:
Xbox 360 is the number one next-gen console in EMEA, owning 42% of the market in terms of life-to-date revenue. Xbox 360 continues to enjoy the highest software attach rate of any game console in Europe with more than 7.0 games sold per console (PS3: 3.8; Wii 3.5) after 27 months on the market.

Microsoft's statement sounds an awful lot like those post release movie ads "Number one comedy movie with a predominantly red poster and a dog named wonderlips," but it really is meaningful. Measuring life to date revenue, Microsoft is number one. I assume this number is a combination of hardware and software, as even though my sadly lacking math skills would indicate, on a hardware only basis, Sony's revenue would be higher.

This scenario is troubling to developers and publishers. Two of the three major territories matter to the West. No one in the West thinks they will significant software sales in Japan, so no one really creates games with Japan in mind. But the aggregated sales of the US and Europe are critical to the success of top line titles. In every previous cycle, the market winner was decided by now and publishers could lead on a single platform. This cycle remains in doubt. A year ago, the publishers didn't really give a shit about PS3. All the meetings were driven by the 360. It looked like the failure of PS3 would be a self fulfilling prophecy, established by the game publishers. Consumers would have no reason to buy a console without software. The European market defied convention. The Sony brand and Blu-ray proposition is so much stronger than Microsoft, the platform took off without games. Today, publishers are looking at both, and a number are talking about PS3 as a lead sku. I don't know how it will ultimately play out, but it kind of feels like Sony is the winner yet.

Two major factors keep Microsoft in the game; tie ratio and on line. Microsoft's tie ration is over 7 and by some reports 7.5 to one. This means the average 360 owner is buying 7.5 games per console, or just under twice the number of games per Sony console. Tie rations fall over the life of the console, but the decline may hit both consoles equally. As a publisher, I really don't care how many consoles are installed if people are using them to watch movies instead of play games. I want to make games for the buyers. If Sony's tie ratio does not increase, their installed PS3 margin will have to increase significantly to lure publishers to make them a lead sku.

Microsoft is far and away the on line winner. Microsoft's console strategy contemplated on line from the early days of the first Xbox. They built out their own infrastructure, control the system and superior interface. Sony's latest revamp is much better than the launch network, but they are still playing catch up in terms of usability and subscribers. In Europe, the consoles are simply not getting connected. The connected infrastructure not only provides consumers a way to extend their game play through multiplayer, it contributes incremental revenue to the publishers with sales of add on packs and levels.

When I look at the two consoles as a publisher, I still make more money on the 360.

But what about the future? If I knew, would I really be sitting here writing right now? We can take a look at some of the factors influencing the console war for the balance of the year. Sony will be launching its on line music and video service, and a number of exclusive titles, including MGS 4, Haze, Resistance 2, Gran Turismo 5, and 12 million unit selling Singstar in the US, against Microsoft's exclusive GTA IV content (Microsoft should keep renewing Peter Moore's Fruit of the Month Club membership for that one), Gears of War 2 and Ninja Gaiden.

Sony is obviously not going away and is building great momentum, but I wouldn't declare a winner just yet.


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