Uplink 7

“The Wii-PS3 Co-Launch Issue”

December 2006

Contents:

• Wii Are Family

• PS3 Launch

• Next-gen Console Guide

• Microsoft Moshed by Mario Madness

• PS3 Online

Introduction

Welcome to the holiday edition of Uplink, replete with multi-launch mayhem, eggnog-addled sales charts and a winter blizzard (or summer monsoon, for readers in the southern hemisphere) of game market analysis. In addition to the latest coverage of the near-simultaneous PS3 and Wii launch extravaganzas, we’ve got the lowdown on Sony’s PS3 online plans, plus a postmortem on Microsoft’s surprising slide from solid second to disappointing third in the console race – the flip side of Nintendo’s reemergence as a powerhouse console contender.

Uplink predicted last March that, barring a drastic management overhaul at Microsoft, Sony and Nintendo were going to run away with the next-gen crown. To see how it happened, read on!

Wii Are Family

There’s only one platinum rule in the videogame industry: never, ever count Nintendo out. Atari, Sega and Sony all learned this the hard way, and now Microsoft is re-learning the same lesson. Nintendo’s GameCube was a fine platform with respectable sales, but it never took off the way the PS2 did. Faced with declining market share and seemingly outclassed by the PS3 and the 360 on the technology front, Nintendo went back to the well and did what they do best: reinvent gaming.

Nintendo’s Wii console combines dazzling simplicity with plebian affordability. Rather than focus on high-end graphics, it delivered a new kind of collective gaming experience which didn’t require expensive circuitry. While the hardware inside the Wii isn’t as powerful as those of the 360 or PS3 (though vastly more powerful than the GameCube, thanks to the combined efforts of an entire design team at IBM and another one at ATI), it doesn’t need to be. The Wii runs just fine on current-generation televisions, which means you don’t need to upgrade to a high-definition TV, a virtual necessity with the 360 and PS3. In a phrase, Nintendo delivered next-gen gaming at last-gen prices.

Most of all, the Wii’s motion-sensitive controller is one the most significant innovations in game culture since the invention of mouse-and-keyboard gaming in the early 1990s. The controller is divided into two sections: a pointer, which looks a bit like a TV remote control, and a nunchuck, one for each hand.[1] You move both controllers to create whatever onscreen action you desire: a slashing motion slashes, a forehand smash smashes, a plunge plunges, etc.

The console is stylish, tiny, energy-efficient, and even self-loads its game discs (there’s no tray, you slide it partway in and the mechanism takes over). It’s easy to install – just plug it in and start playing. Instead of obscure button combinations and cluttered menus, you use the controller to click through open panes called WiiChannels. Planned obsolescence has been replaced by planned preservation: the Wii will play all existing GameCube games, and online downloads from Nintendo’s vast software library are cheap and plentiful.

You can even create your own player-characters on the MiiChannel (pun intended). Each “Mii” is a unique cartoon avatar, which you create and modify as you wish. Finally, Nintendo ensured the system was released with a raft of quality games which take full advantage of the motion-sensing controller, including Wii Sports and the simply stunning Legend of Zelda: Twilight Princess (Ubisoft’s uproarious Rayman Raving Rabbids also deserves honorable mention).

Nintendo also took care to ensure the Wii would be a family-friendly Web-device. Connecting to the Web and Nintendo’s server network is simple and painless, and there are a raft of optional controls to make sure parents can monitor their children’s game usage, keep track of text-messaging, and control online purchases. In a game industry with a checkered history of greedhead commercialism and the shameless exploitation of children, Nintendo deserves kudos for being a responsible corporate citizen.

The response from consumers has been sensational. From its mid-November launch to December 26, 2006, well over 3 million Wii consoles were sold worldwide (compare this to 7 million 360s sold over the course of thirteen months), and demand continues to far outstrip supply. Gamers were dodging, whacking, and mid-air punching with their controllers so vigorously that more than a few users developed mild cases of “Wii elbow”. A few even found a way to sever the wrist-strap around the Wii-remote (the strap was quite sturdy, but Nintendo promptly recalled it and issued a reinforced version anyway).

Interviews with Nintendo developers and articles in the industry press make it abundantly clear that the Wii’s success was no accident.[2] Nintendo deliberately went out of its way to eliminate every single aspect of the videogame culture which mystified, repelled, or simply annoyed the general public. Nintendo’s developer-dominated internal culture, or what the sociologists would classify as a fine example of a localized information socialism, fostered the kind of open development process which other companies can only dream of. Nintendo listened carefully to the gaming public, omitted the extraneous (i.e. DVD playback) and built in the necessary (Wi-fi connectivity), and delivered what it promised: a holiday console for all seasons.

– DRR

Endnotes

1. Web accessed December 20, 2006: http://wii.nintendo.com/controller.jsp

2. This openness and transparency extends to the development process. Nintendo’s extensive archive of Wii developer interviews is listed below (accessed December 20, 2006):
http://wii.nintendo.com/iwata_asks_vol1_p1.jsp
http://wii.nintendo.com/iwata_asks_vol2_p1.jsp
http://wii.nintendo.com/iwata_asks_vol3_p1.jsp
http://wii.nintendo.com/iwata_asks_vol4_p1.jsp
http://wii.nintendo.com/iwata_asks_vol5_p1.jsp
http://wii.nintendo.com/iwata_asks_vol6_p1.jsp

PS3 Launch Extravaganza

If Nintendo’s Wii delivered the heart of next-gen gaming, then Sony’s PS3 delivered its soul – or more precisely, its Neon Genesis Evangelion-style S2 engine.[1] Knowing full well there weren’t enough PS3 units to go around this Christmas, Sony launched a relatively restrained marketing campaign for the PS3, focusing mostly on hardcore gamers and technophiles. Still, demand for consoles was off the charts – and with reason.

The PS3 console is drop-dead gorgeous. Its sleek, mirror-black surface is offset by a smoothly oblong case, which makes the console look good in any position, and blend into any configuration of hardware or electronics.

The consoles are not only whisper-quiet, they have no clunky, external power-brick, just a slim standard plug. The power-brick is inside the unit, an ingenious design move. They don’t suffer from overheating or noise issues (a major problem with the 360), and Nikkei Electronics reports the units are less power-hungry than originally feared. The controls are touch-sensitive, a very nice feature, and just like the Wii, the disc mechanism is self-loading – there are no flimsy plastic trays, just slide the disc partway in and the drive smoothly does the rest. The Blu-Ray drive works as advertised, delivering a gorgeous HD picture.

The word from gadget geeks, PC enthusiasts, and homebrew hackers is that the PS3 looks as good inside as it does outside. The console is an engineering marvel, with solid construction and top-notch components. While supplies were tight – Sony managed to deliver only half of its initial launch estimates, though regular shipments are now coming on-stream – the firm wisely refused to compromise on quality, and initial defects were surprisingly rare, considering how complicated the system is.

While there were relatively few standout games for the PS3 launch, aside from Insomniac’s splendid Resistance, faithful standbys Madden 07, Call of Duty 3 and NBA 07 were on hand to pick up the slack. In terms of backwards compatibility, nearly all previous games run fine, although 200 of the slightly more than 8,000 PS2 games in existence will require a future software patch. PS3 owners can look forwards to future blockbusters Metal Gear Solid 4 and Devil May Cry 4, as well as a whole new universe of MMOs, downloadable games and online media (unlike cinema, where sequels usually get worse, videogame franchises often improve over time).

The PS3’s interface is a nice blend of simplicity and functionality. While not as intuitive as Nintendo’s Wii, the cross-media bar system packs a huge wallop into a tiny space, and the video, audio, streaming, and digital photo functions are a joy to hear and behold. Just plug in a keyboard and mouse into the USB ports, and you can browse the Web. While there were the usual launch-day issues and hiccups, most notably with older HDTVs which didn’t output at the right resolution and the slow start of the PS3’s online store, the hardware truly is the powerhouse Sony said it would be.

The visual quality of the PS3 really needs to be seen in person on a high-definition screen to be truly believed. If the Wii is “play once, must-buy” item, then the PS3 is a “see once, must-buy” device. In fact, the two consoles complement each other nicely: the Wii excels on current-generation TVs, while you really need an HDTV or HDTV-compatible monitor to get the most out of the PS3. Inexpensive HDTVs can already be found for $800, and the price will drop further in the next six months, which means the golden age of HD gaming will soon be on us.

One of the most fascinating aspects of the PS3 launch was its coverage in the mainstream US media, which speaks volumes about the polarization of US society. Gamers and fans mobbed stores, hoping to score one of the first shipments, and almost all initial reports of the console ranged from the glowing to the positive. Yet the mainstream news ran sensationalized stories about hoodlums beating up or shooting fans to steal their PS3s. The NY Times ran an especially embarrassing article, an ill-considered rant which blasted Sony because its online service isn’t the same as Microsoft’s. Sony’s stock was pounded and Microsoft was praised to the skies by Wall Street analyst after Wall Street analyst, though Michael Pachter, who tracks the videogame industry for Wedbush Morgan, deserves honorable mention for pointing out that sales of the 360 haven’t lived up to Microsoft’s marketing hype.

If you think Sony was even the slightest bit worried about any of this, think again. In fact, their game division must have been crowing with delight at all the free publicity. The sleek black design, oblong shape and sheer power of the PS3 did something no consumer technology had ever done before: delight the gaming masses while scaring the hell out of the US ruling class. The US press reacted to the PS3 much like the British elites of the 1910s reacted to the first mass-produced American automobiles. In its shiny mirror-black surface, they sense their own waning power, lack of vision and declining technological prowess. The less the US Empire has an economic future, the less it can envision any future at all.

Too bad for the Empire. The PS3, like the multinational forces of production it embodies, is here to stay, and will be a smash success. Strap yourself in, because you ain’t seen nothing yet!

– DRR

Endnotes

1. Hideaki Anno’s Neon Genesis Evangelion (1995) was the greatest Japanese animation or “anime” series of the 1990s, and one of the finest TV series ever made. Anno took the stereotypical giant-robots-fight-space-aliens premise and turned it on its head. The S2 engine is an internal power-source which allowed the giant robots of the series, called Evangelions or “Evas”, to move autonomously – one of the great metaphors for the rise of a multinational media culture in the East Asian region. For a full-length analysis of Anno’s masterpiece, check your local university library for Dennis Redmond, The World is Watching, SIUP: 2003, Chapters 6 and 7. If you don’t have access to a university library, the relevant chapters are here:
http://www.efn.org/~dredmond/VC6.txt
http://www.efn.org/~dredmond/VC7.txt

Next-gen Console Guide

Now that the three next-generation consoles are here, which is worth buying? (Full disclosure: this author has no financial interest in any of the relevant companies.) Right now, the PS3 and Wii both outclass the 360, though for very different reasons. The Wii costs the least while delivering the most user-friendly and fun device. The 360 is a fine console with excellent games, but is hampered by some inexplicable Microsoft management failures. The PS3 is the most expensive, but delivers unsurpassed value, thanks to its gargantuan library of games, Blu-Ray drive and long-term media potential.

The PS3 may seem pricey, but you have to remember, the console will last for ten years, and you won’t need to plug anything else in. The 360 needs a separate $150 HD-DVD connector to really shine, a key weakness which will come back to bite Microsoft very, very hard. Also, the PS3 is hardware agnostic – you can plug in virtually anything, from a new hard-drive to an EyeToy, while the 360 requires more expensive, Microsoft-branded proprietary equipment.

If you’re strapped for cash, here’s a hint: you don’t really need the high-end $599 PS3 model. It has a few extra bells and whistles, but you’re really paying for WiFi and a larger hard drive (60BG instead of 20GB), which you won’t need for another year or so. The price of storage media falls like a rock, so you’ll be able to buy a 100GB drive a year from now and plug it into the $499 model of the PS3.

Here’s a chart summarizing the value each console delivers:

Console	Sony Playstation3 ($499 model)	Microsoft Xbox360	Nintendo Wii
What you get	A great console, Blu-Ray player, 20 GB hard drive, 98% backwards compatibility (soon to be 100%), tremendous games	A great console, 20 GB hard drive, limited backwards compatibility, tremendous games	A great console, excellent backwards compatibility, truly amazing control system and interface, and topnotch games
What you pay for	$499 for basic model covers everything, free online service	$399 for basic model, $150 for HD-DVD drive, $49.99 annual subscription for XboxLive service = $598.99	$249 for basic model, free online service
Extras	Any brand will plug in, and yes, you can even run Linux on it	Will only run Microsoft-approved peripherals and Microsoft operating system	Won’t run other media, but peripherals will be cheap and plentiful
The brick factor	Top-notch style, runs cool, quiet as a mouse	Nice-looking console, runs a bit hot and noisy	Stylish, small, energy-efficient
Cost	Pay now, save a bundle later	Pay now, pay through the nose later	Affordable now
Bottom line	Sony hits the grandslam	Microsoft hits a leadoff double, but needs to change course to avoid ending up third	Nintendo rocks the House of Gaming

– DRR

Microsoft Moshed by Mario Madness

The Wii has become the smash sensation of this holiday season, breaking all previous console sales records, while the PS3 is powering up smoothly for a monster 2007. But which console actually led the market during most of 2006? The answer might surprise you: a six-year-old workhorse call the Playstation 2. Here are the numbers for the US market:

US Console Sales November 2005-November 2005
Data: NPD press releases, and http://forum.pcvsconsole.com/viewthread.php?tid=11067

Month	Year	PS3	PS2	Xbox	Wii	GameCube	Xbox360
November	2005	---	531,000	197,000	---	272,000	326,000
December	2005	---	1,500,000	415,000	---	606,423	281,441
January	2006	---	272,000	89,000	---	66,000	249,000
February	2006	---	299,000	88,000	---	67,000	161,000
March	2006	---	273,000	83,000	--	63,000	192,000
April	2006	---	206,995	38,987	---	38,028	295,381
May	2006	---	231,616	26,353	--	33,040	220,877
June	2006	---	312,000	24,000	---	51,000	206,000
July	2006	---	241,000	12,000	---	44,000	206,000
August	2006	---	262,000	9,000	---	41,000	204,000
September	2006	---	306,517	6,495	---	42,286	259,458
October	2006	---	235,000	3,500	---	32,000	218,000
November	2006	197,000	664,000	n/a	476,000	n/a	511,000

Add them up, and you’ll find the aging PS2 outsold the vastly more powerful 360 in twelve out of thirteen months in Microsoft’s core market. In fact, the PS2 outsold the discontinued Xbox by a three-to-one margin and the 360 by a three-to-two margin.

Are things better for Microsoft outside of the US? Nope, they’re even worse. European sales of the PS2 have run about 400,000 per month in 2006, well over double the rate of 360 sales. During its first year on the Japanese market, Microsoft sold a grand total of 170,000 Xbox 360s, while the PS2 sold 100,000 per month.

From its launch in November 2005 to November 2006, the 360 sold about 6 million consoles (3.8 million in North America, 240,000 in Japan, 1.87 million in Europe).[1] This is respectable, but hasn’t come even close to touching the PS2, which sold 15.2 million units during the same time period. In fact, sales of the 360 have almost precisely matched sales of the original Xbox back in 2001, suggesting Microsoft has failed to branch out from its core market.

Uplink noted all the way back in April 2006 that Microsoft’s official target of 10 million console sales by the end of 2006 was wildly unrealistic. The 360 is on track to hit somewhere around 8 million in lifetime unit sales by the end of the year, but Bill Gates’ dream of extending his PC monopoly to the console market has been definitively crushed.

It’s all rather astonishing, when you consider Microsoft had an excellent console on the market, an unrivaled marketing machine, and an entire year to clean Sony’s clock. What went wrong?

Microsoft made three key mistakes. Each is self-inflicted, and each is closely tied to the ongoing economic decline of the US Empire.

Mistake 1: Microsoft executives refused to take Nintendo seriously as a competitor, laughing off the Wii as a “children’s toy”. To anyone who knows the history of the videogame industry, and Nintendo’s role as perennial phoenix, this is stunning. By contrast, Sony was so worried about Nintendo, they scrambled to add motion sensing to their PS3 controller, and dramatically revised their marketing campaign to emphasize casual and social gaming. But when you sift through Microsoft’s press releases, it’s clear they had no contingency plan for a successful Nintendo console. Microsoft simply assumed the 360 would automatically own second place in the console market. Now Nintendo has upset the applecart, selling well over 3.4 million consoles in less than two months. The Wii already has a scintillating software library, including Wii Sports, Rayman Raving Rabbits, Legend of Zelda: Twilight Princess and a raft of downloadable classics, and the games will only get better.

Mistake 2: Microsoft dumped the Xbox like yesterday’s coffee, providing little in the way of ongoing hits or backwards compatibility. The reason was sheer greed – the hard-drive in the Xbox was expensive, so management dumped the console to save a fast buck.[2] By contrast, PS2 owners continue to feast on swoon-inducing gems like Okami, Final Fantasy 12, Guitar Hero and Bully, and can look forwards to God of War 2 next year.[3]

What may seem like a rational business decision is actually a strategic error of brain-numbing proportions. The reason is that the PS2 and the Wii are going sell like hotcakes in the global semi-periphery. The economies of China, Vietnam, Argentina and Russia are booming, and they’re just beginning to become major videogame markets. In effect, Microsoft has written off the single most dynamic sector of the global market for the next six years.

Mistake 3: Microsoft drastically underestimated Sony’s manufacturing prowess. Microsoft’s strategy seems to have been (1) create a powerful but cheaper console, making Sony eat the cost of powering up Blu-ray, and (2) rely on Wintel-style marketing FUD (“fear, uncertainty, doubt”) to baffle, buffalo or just plain bamboozle consumers.[4]

Sony responded to the first issue by combining quality with affordability. Early hardware is always sold at a loss, and most analysts estimate Sony’s initial losses at $200 per console, about the same as the 360 during its initial launch. But those costs will drop like a rock – Sony is a past master of cost reduction, which means the price of the more popular, low-end PS3 could easily drop to $399 by mid-2007 and $299 by mid-2008.[5]

Microsoft’s FUD campaign never got off the ground, for obvious reasons. Sony isn’t some fat, bloated PC monopolist. It’s a lean, mean media firm which cut its teeth in the lethal underworld of consumer electronics manufacturing. Sony didn’t bother to produce a heavily upgraded PS2 and rely on media spin. Instead, it created a powerhouse media commons. Download games and music, play movies, sort through digital photos, turn your console into a Linux box and never pay for another desktop computer for ten years – you can do it all on the PS3.

In the end, Microsoft delivered an updated version of the original Xbox. That’s not good enough for the next-gen competition, and if Microsoft doesn’t add an HD-DVD drive to its console and deliver some quality games, it’s going to be crushed between PS3 at the high end and Wii at the low end.

– DRR

Endnotes

1. Note that much of the marketing hype in the videogame business uses console shipments to retailers instead of final consumer sales. Fansite VGCharts has the most accurate estimates for worldwide numbers on actual next-gen console sales. I’ve carefully checked their numbers against available NPD data, Japan’s Media Create and various other sources, and they tally: http://www.vgcharts.org/ngwars.php

2. To be more precise, the original Xbox had high manufacturing costs, due to its internal hard disk drive, which meant Microsoft always lost money on the hardware. Nor did Microsoft ever bother to release a slimmed-down, cheapened console, a move which gave Sony’s PS2 a new lease on life. That said, Microsoft has stepped up quality control for the 360 consoles, and extended the console warranty to a full year.

3. IGN editor Douglas Perry has the best overall critique of the lack of great games for the 360 here: http://xbox360.ign.com/articles/748/748098p1.html

4. Microsoft’s efforts have been downright embarrassing, including trundling in a Sony-made monitor to game journalists and haranguing them about nonexistent differences in visual quality. See: Daniel Terdiman. “Xbox 360 meets PS3, and it’s ready to rumble.” CNET News.com. December 11, 2006. Accessed December 7, 2006: http://news.com.com/Xbox+360+meets+PS3,+and+its+ready+to+rumble/2100-1043_3-6142722.html

5. Reputable analyst firm iSuppli estimated the PS3’s cost overrun could range as high as $300, though sharp-eyed critics have noted their price list assumes average market price for the Seagate 20GB drive (unlikely for an order book in the millions), an expensive case, and a rather plush markup on its power-supply. In all likelihood, the launch PS3s cost around $750 to make. However, within a year the Cell chip inside the machine will move to a smaller, cheaper die, the cost of the Samsung memory will drop by at least half, a software patch will replace the $27 chip which enables current PS3s to run PS2 games, and all other component costs should drop at least 40%, which will reduce the cost of producing a PS3 to $410 (which means the sales price could drop to $399 or even $299). By late 2009, the PS3 will be a mass market item, priced at no more than $199. Accessed December 7, 2006: http://www.isuppli.com/news/default.asp?id=6919

PS3 Online

One of the most interesting aspects of the PS3’s online platform (the Playstation Network or PSN) isn’t the service itself, which is still being rolled out and will not be fully functional until next March, but the ire Sony has drawn from the mainstream US media. Reviewers in those bastions of establishment opinion, the NY Times and Time, both trashed the PS3, and Time went so far as to write off the PS3 as one of the biggest busts in electronics history. The alleged reason was that its online service isn’t as seamless or universal as Microsoft’s XboxLive. Scratch the surface of rentier sophistication, though, and you’ll find bedrock layers of racism and imperialism in both articles – the xenophobic rage that Orientals are not only creating better game machines than Americans, but better games, too (never mind the fact that the PS3, the 360 and the Wii are all products of a multinational division of labor between US, Japanese, European, and East Asian engineers, programmers, designers and assemblers).

Rentier lunacy aside, there are good reasons why the PSN cannot and should not be what XboxLive is, namely an online club for a largely white, male and well-heeled group of US-based gamers. For one thing, the PSN is going to be a key portal for Sony’s worldwide media business, where you can browse, sample, and purchase clips, music, games, MMOs and discs. For another, the PS3’s Blu-Ray drive has made next-gen media storage affordable, opening up all sorts of possibilities for video production and distribution. Finally, while the instant messaging and chat services offered by XboxLive are seamless and robust, seamlessness has a price: do you want your eight-year-old listening in on death-matches full of racist and sexist epithets, or forking over personal information to the online equivalent of tourist traps? XboxLive is wonderful at what it does, but no single portal will ever be the sole gateway to the vast videogame universe. Game firms, online communities and hobbyists have created a gigantic ecology of services and spaces, and the PSN is clearly designed to coexist within that ecology.

Intriguingly, despite its past history of discouraging hacks of the PS2, Sony has given its official blessing to the homebrew crowd, going so far as to make a Yellow Dog Linux distribution for the PS3 available (hackers quickly installed YDL and open source browsers on their machines). Sony officials say the full version of the PSN will be unveiled next March, to coincide with the PS3’s European launch. The biggest change will be a firmware update to allow the PS3 to download items and media in the background while you play games or access other media on the console – currently, you have to wait until the download is complete, which can take some time.

The three-month wait is apparently strategic, not technical. Sony’s software studios have been gearing up for a massive expansion of the MMO and multiplayer game market, and the PS3 is also going to be the hub of a number of video and media software services. While multiplayer death-matches garner the hype, the real money is going to be made in everyday accessories, things as simple as online photo albums and video-sharing.

– DRR