The Price We Pay For Power.

Absolute Power and the PS4

… is the price, right?

So, everyone has a take on the PlayStation 4 price.

There’s little doubt that Sony are pushing for technology that is bleeding-edge – and they need it. Take a look at what the PlayStation 4 is being designed for; a console that streams and powers games on the fly, that records and uploads with as little noticeable lag as is possible today, one that allows you to watch, connect and assimilate control of a persons game (although I promise if anyone does this to me, I will break your kneecaps. Seriously, I see this one becoming a right pain in the ass!). Not to mention powering some serious graphical capabilities as well as offering an extensive toolkit with room to grow. Even the DualShock 4 design is one of practical necessity; durable, hard-wearing, designed for comfort and reliability, with a touch-panel where the start and select buttons once were. The PlayStation 4 is not what I expected it to be; not even close. Sony are banking the whole farm on the PlayStation 4, and have gone to town designing, planning and executing some of the latest technological breakthroughs as well as borrowing ideas from the likes of Microsoft (the camera is very Kinect, and the interface is very Metro!), OnLive (allowing people to watch your game and comment on the fly, although again, this was one of the things I did NOT like about OnLive!), cloud gaming, streaming and predictive pre-downloads as you see in most On Demand services these days.

Yes, the PlayStation 4 is a powerhouse. But ask fans about price and they harp on about rumours it will be “something like £300!”.

Now, I’m one for cautious optimism at the best of times and yes, at a £300 price-point it would be the most stupid, no-brainer gaming investment I’ll have ever made in my life. But it’s precisely because it would be such a no-brainer that I doubt that a £300 entry-level PS4 is entirely possible without compromising on the technology inside. Remember that in the past, we’ve seen cut-down “Budget” versions of consoles that have removed all the shiny things that people wanted; vastly reduced hard drive size, the removal of backwards compatibility, the removal of WiFi and Ethernet on board and a lack of USB ports to add extra controllers, drives and accessories into. Sure, you can hope for a £300 budget one, but I’ll bet you ten quid right now that £300 version will be complete sh…

Capcom's 'Deep Down' is a tantalising look at what might be possible. But that power must come at a cost, right?

Capcom’s ‘Deep Down’ is a tantalising look at what might be possible. But that power must come at a cost, right?

Ahem. By that I mean, early adopters are not the sorts of people who accept compromise. Look to the Nintendo Wii-U as a demonstration of this factoid; the premium bundle has outsold the basic bundle by a 2:1 margin. People who buy into it early are often the sorts – like myself – who save for months if not years for these moments, and when we’re buying a new console we’re not going to want something where the whole thing is stripped down, paired back and less functional than another version. No, we’re the sorts who will expect enough USB slots for all our toys (16 hooked inside my PC and even then I’d say that’s not really enough for me!), we’ll demand perfect services from the off and we’re going to expect a bigger hard drive as standard. Because we’re prepared to pay more, we expect more. Our measures are higher in comparison to most later adopters who will just play their games and enjoy the social media connections. We’re the knowledgeable, we’re the demanding, we’re the nerdiest of the nerdy. We’re buying into the potential and the technology first and foremost – games are important, but launch line-ups are rarely much to write home about so it’s one of those other considerations.

So, we won’t stand for a cut-down, cut-price version. That is of course if a £300 price-point is even realistic without serious compromises.

A casual glance at the specs revealed for the PlayStation 4 will tell you how impressive Sony have gone for this. Power, power and more power. That seems to be the message, that this is a beast of a machine that probably wasn’t shown in its unitary form because they haven’t found a cage good enough yet to house the monsters that will lurk within. However, power costs and wholesale prices have been rising so this is definitely not the best time to be unveiling new hardware that isn’t being manufactured entirely by your own subsidiaries; indeed, the PlayStation 4 is looking very heavily at AMD-spec technology, and the graphics card alone is equivalent to a roughly-$200 Radeon HD 7850. Of course, that’s a retail price and in bulk, Sony will have reduced costs but it is still a sizable investment in console graphics. It also plans to have two processors – one of the next-generation AMD Jaguar processors for its main hardware (not exactly PC level but potent enough for a games console to be sure!) and a second, undisclosed low-power processor to handle system-side data, such as the home menus and running downloads, updates and the like in the background silently without troubling you in the middle of your game. This is likely also to be AMD-based. And yes, Sony’s close relationship with AMD right now will keep those costs low.

But then you have the GDDR5 RAM, still pretty bleeding-edge on a wholesale and retail level. The DualShock 4, which is likely to be $50 easily. A decent-sized hard drive – I will be bitterly disappointed if 1 Terabyte isn’t the standard, because you’d expect that in a modern era – it’s not that much more than a 500GB, and the extra space will allow for far greater system ease when it comes to social networking, downloading, streaming and gaming. Then you come to those hidden costs – the Research and Development, the manufacturing and packaging, the shipping and handling costs not to mention the QA and the firmware costs, as well as how expensive the new PS Network will have cost to design and run without tripping up over a Microsoft-baited bear-trap. Oh, and all those other legal fees.

All told, I’m expecting a £500 price point from the off. And even there – I’m not sure Sony will make any money.

Now, some genuinely believe that hurt the PlayStation 3 and I’d like to politely disagree. Look at the current sales numbers; 72.8 Million units sold. That’s not that far off the X-Box 360, which saw in the last year a dip in its sales whilst the PlayStation 3 took hold, thankfully because Sony got the design right and offered decent incentives for its PS+. Neither are close to the sales mania that was the Wii, and no doubt in the final year sales of the X-Box 360 and PlayStation 3 will slow down in anticipation for the next generation. The PlayStation 3 had a rough start, but it did recover. Costings are important too, because Sony learned the hard way with the Cell Processor that unique, specialist parts will always be complicated and costly even this far into a generation, and this is where the parts in the PlayStation 4 will arguably improve – they’re not too far removed from the norm and prices will drop over the next few years in their own favour.

I’d say that Sony’s biggest problem IS the pricing point; I don’t doubt that Sony will, as ever, loss-lead in favour of some market penetration but I doubt it will be anything like the hit they took on the PlayStation 3. The thing is, you can find this in the financial papers and columns; Sony has in recent years been in a deep financial crisis. Last year, Sony racked up a record breaking annual loss of 457 billion yen (USD $5.7 billion), which has led to Sony selling off a lot of divisions, closing down studios and even sell one of its main buildings in central Tokyo for a cash injection of 100 billion yen (US$1.14bil). This year isn’t likely to be as bad, but  there are definite signs of a struggle within the bowels of the PlayStation division and you could almost on Thursday hear the audible clenching of buttock muscles as the world got to see what the new PlayStation was going to have under the bonnet. Sony simply can’t afford to loss-lead in the same way it has done for so many years; it has to, dare I say it, take a very Nintendo-centric approach to its finances. Sure, Nintendo made a loss on the Wii-U (short-term, apparently it’s profitable again), but this was made up for with two game sales. It’s balancing the books in a very real sense, and it’s easy to draw the comparisons; Nintendo may not have had the huge sales of the Wii-U it wanted (although 3.26 million in just shy of two months is hardly terrible!), but it makes money and has huge cash reserves, tens of billions of dollars in the bank to not only weather the storm of a generational battle but similarly buy up talented developers such as Platinum Games. Sony has the last year had to shut down some prolific studios, such as SCE Liverpool – formerly Psygnosis, and if you’ve been gaming as long as I have, that’s a heavy price to have paid.

Killzone: Shadow Fall

Killzone: Shadow Fall is hugely ambitious with some gorgeous landscaping. But we’ve been here before. How much of it was… well… real?

The reason I say this is that a £400 will be attractive, but I’d say if Sony were being sensible it would maintain it’s £500/$500 pricing structure. Day-one buyers will see when and where Sony are cutting corners and this will genuinely get Sony nowhere fast. It will likely make very small losses at that point, but similarly losses that can be managed and sustained for the short-term it takes to get those manufacturing and other costings down a little bit. It won’t set the world on fire initially; but why do we want it to set the world on fire so soon? The Wii was a sales phenomenon, it’s true, but we can’t judge this generation based on the pricing and sales structure of the previous generation. Otherwise we’d get nowhere, always competing with the last generation and not moving forwards. Sony will have seven or eight – possibly even nine – years with the PlayStation 4 on the market. It’s a long-game, a marathon rather than a sprint and you can see that in the Wii. For all its incredible sales spikes and surges, as time went on it hit saturation. Everyone had a Wii that wanted one, and even most people who didn’t want one had one, so you ended up with sales figures in the last year or two tumble in dramatic fashion. No, the 360 and PlayStation 3 never caught it up; but it still looked bad to those investing in Nintendo, who expected the Wii to maintain its sales structure even when it became abundantly clear the last year or so was never going to relive those glory days. Meanwhile, the PlayStation 3 and X-Box 360, with price cuts and software incentives, have seen their sales gradually increase over time. You can’t always get as clear a picture with numbers because numbers need interpretation; numbers need someone to explain them, or they can be misinterpreted and badly handled.

More to the point; why would we be horrified at a £500 price point on release? Again, early adopters will already have predicted this as an eventuality. We know that with great power comes great fiscal responsibility. If you want the latest gadget, console, TV – it’s gonna cost you, and there is no shame in that. If the PlayStation 4 drops a hundred pounds/dollars in the first year, we don’t sit up all night crying about how wronged we were. We acknowledge this as one of those things that happens when you are an early adopter. It’s nothing shameful, it’s just how it is and many of us bloggers and writers and reviewers and the like will end up buying them so we can continue on with what we do. For some, it’s just one of those inevitable business expenses; something that has to be done. You can’t think. “Oh, I will wait a year.” Some of us don’t have that choice. Silly as that sounds. If Sony can get away with it at that price, then it will, and it will do it because it makes the most financial sense for them to do so.

Of course, that’s not to say that there won’t be interesting developments. Microsoft proved for example that it can sell consoles with a raised subscription fee in order to cut the retail price of its hardware. So yes, Sony could get away with a £300 console IF it also levied a 2-year £14.99 a month PSN contract with it. But it would still be offsetting the cost of the hardware and making that money back elsewhere. It doesn’t make the hardware any cheaper; it just means we’re paying for it over a longer period. Again, as an early adopter, I’m the sort who’d rather pay the £500 and own it, thanks. It becomes mine. Sony could also raise the RRP of its games digitally to cover those costs, but then you’d really be asking for trouble. A digital service that cannot compete with physical retail is a complete waste of time. Sony may have other schemes as well; depending what is in the box of course, and what – if anything – they can sell separately.

But it will cost. You will be paying more than £300 for it. And I don’t see the problem with that. Sure, it’s expensive but if you’re a habitual early adopter, or you know the expense is coming, then you’ll have been planning this spend for months if not years anyway. People who think it’s a bit expensive and a bit early will, as ever, wait for deals or the price to come down. This is the way of things; how it is, and how it has always been, and you can’t judge a new generation based on last generations numbers. It’s like saying a child will only ever be as good at what its parents do. It’s just… this new generation is different. It will be different. And it is exciting and brilliant (Microsoft is set for its own reveal in April, after all, so it’s going to be an exciting year!) but it will be different. When we began this generation in 2006 we weren’t worried about the whole financial crisis thing. Now of course, most of us have suffered for it. Different world. Different priorities. Different mindsets. Different people.

There is no shame in Sony wanting to make as little in the way of losses as is possible; whatever Sony choose as a course, we will be paying in the long term. The price we pay for power is… well, the price, actually. You can’t demand power AND cheapness. The two are not natural bedfellows, it’s like sticking a goat in a pen with a hungry lion. You may not see it as you walk away for a day or so but that goat is going to be eaten by the lion. Power requires precision, and that unfortunately means that it will be expensive to make, manufacture, produce and ship. Cut corners will end up being seen, and eventually could cost Sony in the long run like the Red Ring of Death cost Microsoft so dearly with the X-Box 360, as Microsoft not only had to redesign and replace faulty units but extend the warranties to three years to cover any more malfunctions. This was hugely expensive. Cut corners will also be dangerous, as Sony found out to its own cost with the security failsafes with the PS Network hack a couple years back, when it became clear Sony had cut a few corners on their security systems and weren’t even encrypting the most sensitive of data. Not only did Sony have to spend vast sums of money on new security and encryption to regain consumer confidence, but it affected its users too, many of which were encouraged to get new credit and debit cards, as those details might have been compromised.

A new generation is a time to start with a clean slate. Nintendo, Microsoft and Sony will not be alone – the Ouya is coming to play in a few weeks time as well, which should be interesting. Sony of course however have problems to deal with – financial troubles that have lasted years. It will want this clean start, but not at the cost of haemorrhaging  money to make it work. Sony have gone for a top-end, long-term, high-risk approach and that, invariably, is going to cost them – and us – more on release. Not to mention one of the biggest turn-offs for early PS3 adoptions were the outlandish and silly comments made by CEO’s and staff at Sony, who weren’t just oblivious to criticism – but actively insulting!

All in all, yes, the PlayStation 4 will be an expensive item. A desirable, but expensive, tool. And this is not a surprise. This should not be a shock to anyone at all. I am all for wanting better pricing and better consumer deals, but if this comes at the cost of killing companies, then it’s ultimately not possible to maintain it. Sony will want to try and get the PlayStation 4 into profit as soon as it can. If it can do this with a Live-style subscription fee, or by long-term finance deals, then great. Sony might have a bright future ahead of them with clever manipulation of the costs.

PSN Hack

The PS Network hack. As capable a demonstration of the dangers of cutting costs and corners as you’re ever likely to see.

Again, at £300 the PlayStation 4 would likely be a complete no-brainer. But it would also indicate there are no brains at Sony either, and that the price they will have to pay so we can get such a bargain might be too much to absorb. Sony can’t afford to be reckless, and shouldn’t be reckless. They’ve demonstrated and proven their potential and that they deserve to be in the market. The PlayStation 4 needs to do a lot; it needs all that power, all that expense, all that extra garnish. We should have enough faith in Sony not to see a high price point as cynical or greedy, but as a necessity. It’s necessary for Sony to be competitive as well as make any money at all. Sony do not owe us a cheaper price point. They simply don’t. They need to make something – they need to make some money, or they will find themselves in the sort of precarious position that we saw Sega drift into with the Dreamcast. You can’t be oblivious to the need to balance the books. And even if the PlayStation 4 could be chopped down, it’s unlikely it would spike any initial sales. For the first year or so, the PlayStation 4’s biggest competition will not be Microsoft, or even the Nintendo Wii-U, but it’s own predecessor; the PlayStation 3. With numerous games due for it this year, from its own version of WatchDogs to Beyond: Two Souls and The Last of Us, there is plenty of life in the old dog yet. Sony aren’t including backwards compatibility, which means no incentive to buy into it early for most people. No reason to rush out and get one on launch. The PlayStation 3 will continue for a good year to eighteen months, swallowing up Sony’s own market share until a truly killer title comes along to provide an incentive to upgrade, or until Sony find a way to allow people to enjoy the games they love on a new system prompting them to invest in the hardware.

So yes. The PlayStation 4 will cost. Probably between £400 and £500. And for what it is, what it is meant to do and what they say it will do, that’s a good price. A good price, and yes, expensive. But most people simply won’t care. It’s a PlayStation 4. And that’s all the reason they need to buy into it early, be they fans, reviewers, bloggers or technology columnists. It’s a necessary expense. It wouldn’t surprise us. It wouldn’t suddenly turn us off buying one. If you want one, truth is you’ve probably already got the money, or will ensure the money is ready in time. We’ll burn through the launch games, we’ll get through the glitches and bugs, we’ll inevitably deal with the odd hardware failure or two. And we simply won’t care.

If you don’t like the price – wait. That is not a crime. If anything, I’d suggest those that wait for a year or so might end up being the ones who get the better deals – the revised hardware, the stable firmware, the Gaikai revolution will be in full swing. People who wait will tend to always end up with a better machine than those at launch, because we along with Sony will have burned through all the technical hiccups that come with brand-new technology. And that’s the price WE pay as early adopters. And we don’t complain.

Some evils are necessary. The PlayStation 4 isn’t likely to come cheap, but that’s because it isn’t cheap.

And we shouldn’t be demanding it be cheaper, or we’re going to find out what happens when you expect cheaper. We’ll pay more to get it up to a decent specification than if we’d just accepted a proper deal at the start. We’ll find Sony demand more for their otherwise excellent PS+ service. We’ll get hardware which, simply, misses all the important little details that make you feel special, wanted and catered for. Details that can be cut off to save some cash.

You can ask for a cheaper PlayStation 4. But odds are it’ll be a heck of a lot nastier as a result. I’d rather spend the £500, thanks, and get a proper forward-looking console than a compromised, cut-down, cut-price attempt at soothing a bunch of people who didn’t quite get the gist of what Sony were promising. A bright future, an interesting future, a long-term future. All signs point to a pricey entry.

But it didn’t hurt the PlayStation 3. That system has managed to do alright in spite of everything that went wrong for it. Same will be true of the PlayStation 4. A high price won’t magically doom it…

… but it might just ensure Sony gets to implement that long-term strategy.

And that’s fine with me.

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