Activision vs. Sony

A month ago, Activision boss Bobby Kotick said that without a PS3 price cut to boost the system, they might have to stop making games for the platform. It’s a controversial statement, but at this point anything anyone says about the PS3 is controversial. If you mention, offhandedly, that you wish the power cord was six inches longer, it will most likely ignite a caustic flamewar where you will be branded a “hater” and an “xbot”.

To me, the interesting thing isn’t that Kotick was thinking it, it’s that he choose to say it out loud. People in Kotick’s position don’t get where they are by talking without thinking. He deliberately chose to fire a shot across Sony’s bow, and I don’t think he did it because he wanted to launch ten thousand flamewars across the internet. (Although he did do that.) Trolling is a popular internet pastime, but I doubt Bobby Kotick was trying to stir things up just for laughs.

On the business side, his position makes a lot of sense, and he’s certainly not the first person to notice that the PS3 has the smallest user base and yet the highest development costs. As I’ve pointed out, graphics cost money. The PS3’s focus on graphics means that any game taking advantage of the hardware is going to be more expensive than the same game (in gameplay terms) on another platform. The unorthodox architecture of the PS3 adds additional costs onto this. There is a learning curve for developers, along with the cost of developing additional tools. Code written on the PS3 is less portable to other platforms, and code written for other platforms will require an overhaul or re-design to be useful on the PS3. This means there is a soft barrier between the PS3 and all other platforms, and to penetrate that barrier requires money.

At the risk of digging up an old flame war while talking about the new one: Back in February, Sony went on the record saying that the PS3 was hard to develop for, on purpose. The explanation to go with this assertion was a bit of a non-sequitur, and basically came down to ‘we made it hard so that it would take a long time to learn to use it well, which would give the platform a long life.’ That doesn’t make a lot of sense. While they’ve made some serious mistakes, the guys at Sony are not idiots. If they’re doing something that sounds dumb it probably means we aren’t seeing the whole picture. My own take on things is that they made development hard in a cunning and cutthroat attempt to crush the competition.

Imagine if the PS3 was leading the pack and dominating the market instead of the Wii. The PS3 would then be the prime target for developers. Porting from the outlandish hardware down to the other platforms would be a painful expense, and the resulting games would look a lot worse than the original PS3 version. A lot of companies wouldn’t even bother doing that extra effort to pick up a few extra sales from the second and third string systems. A dominating PS3 would choke out its rivals. It wouldn’t be the incompatible system, they would be. This would drive even more people to the platform as they sought to get their hands on all those PS3 exclusives. This might sound far fetched now, but I’ll bet it looked like dynamite on the dry-erase board back in 2004. Its predecessor, the PS2, was the king of the previous generation and is (in my humble opinion) the best console ever in terms of price point and library size.

But Sony tried to strengthen their lead and wound up undone by their own plan. With the PS3 in third place, the inertia is going in the opposite direction and the forces that were supposed to lock developers into the PS3 are instead keeping them away. This explains why their reasons for the PS3 development headaches don’t make any sense. They simply can’t come right out and admit, “We were trying to screw the other guys but our plan backfired.” They probably wouldn’t want to admit to that even if the plan had worked.

The other thing impacting the fate of the PS3 is the fact that Sony was fighting two wars with one system. On one hand they are fighting the console wars, which they are not winning. On the other hand they were fighting the video format wars, which they have won clearly and decisively. The victory of Blu-ray is likely more important to Sony in the long run. The console wars go back and forth with each generation, but the Blu-ray isn’t likely to be threatened for the foreseeable future. Unless wall-sized plasma screens make their way into every home, there isn’t going to be a need for another step up in video quality. The Blu-ray could last decades. The addition of the Blu-ray player may have driven up the price of the PS3 and crippled its sales, but it also gave Sony an early win in the format wars. Even if the PS3 were a complete failure (which it isn’t) it would still have been worth it to secure the victory for Blu-ray, which will still be making Sony huge piles of cash even when gamers are arguing about the Xbox 1080 vs. the PS5. (And it will be very interesting to see what Microsoft does in the next generation. Will they stick with DVD drives, or will they swallow their pride and stick a Blu-ray in the thing?)

Which brings this meandering line of thought back to Bobby Kotick and his threat to stop developing for the PS3 if the system doesn’t see a price cut. Maybe he’s serious. Maybe he’s bluffing. In either case, he really does want to see the PS3 price go down. The good news is, this means Activision is still interested in the platform. If they’d written off the PS3 they would simply (and perhaps quietly) stop producing titles for the platform. Kotick wouldn’t have started making noise if he didn’t want his company to be on the PS3.

For Sony’s part, I’m not sure how feasible a price cut would be. They just cut it a year ago, and they were already losing money on each unit sold. Even if they were able to slash the price down below Xbox 360 levels, it would take a while for the increased sales to grow the user base enough to attract more developers. (Assuming they do. The baleful economy is probably degrading sales across the board.) And even then, it would take a couple of years for those games to come to fruition. Sony would have to make painful financial sacrifices now, and hope that the new sales would pay off two or three years down the road.

I predict that despite his grousing, Kotick isn’t going to get his PS3 price cut. As the CEO of Activision, he’ll probably be able to afford one anyway.

Shamus Young is the guy behind this movie, this website, this book, these two webcomics, and this program. He really just wants the PS3 to be incredibly cheap and still play PS2 games and also include a free pony.