Sony vs. Ronald Reagan

In 1983, the government of the United States of America destroyed a small island in the Pacific Ocean with an experimental nuclear weapon called the MX Missile. Or rather, they would have had the missile’s eight nuclear warheads been armed.

This was not the first time nuclear weapons had been dropped in the Pacific Ocean. Islands in the Marshall Range had been used by the United States Military for nuclear target practice and experimentation since 1946, most notably when Bikini Atoll was destroyed, ushering in the era of Doomsday Scenarios and sexy swimwear. Most of those tests, however, had been “live,” using armed warheads.

The 1983 test of the MX missile was much more dramatic, in spite of the lack of a mushroom cloud, because it demonstrated the ability of the US Military to deploy a single missile with a payload of eight separate nuclear warheads, each more than 20 times more powerful than the bomb used at Hiroshima, anywhere in the world almost instantly. That the test warheads were not actually “live” for this test mattered little. The intended audience for this demonstration knew full well the destructive capability of those warheads. That intended audience being the government of the Union of Soviet Socialist Republics, of course, and the political fallout from this non-detonation would ultimately prove far more deadly to that country than any bomb.

The Soviet Union, having been forced to compete in a growing arms race with the US for more than thirty years, would ultimately bankrupt itself reaching for this latest prize. The Soviet’s own multi-warhead missile was developed and deployed in the late eighties, but not before the long-standing conflict had already taken its toll. In 1991, Russia conceded defeat. The Soviet Union crumbled, the walls fell and Ronald Reagan and his aggressive economic and military policies took much of the credit.

I’ve been on the fence about who would “win” the next-gen console war for some time. Mainly because I shudder at the thought of applying such militaristic terminology to what is, essentially, a competition between entertainment companies. (Visions of half-tracks filled with armed clowns dance through my head.) But recent developments in the Sony vs. Microsoft struggle have caused me to reevaluate the situation, as parallels between the current console war and the Cold War now appear inescapable.

Take, for example, the latest news coming out of Sonyland. In an interview with PSM, Kaz Hirai states that PS3 games will be more expensive than PS2 games, but that since consumers have become accustomed to software prices hovering at or near the $59 mark, Sony would be foolish to suddenly bump them up to $99. Which sounds reasonable until you remember who you’re talking about.

This is Sony; the same company that expects you to work extra hours to be able to afford the PS3. Why are they (probably) selling their new console, which is supposedly going to compete with Microsoft’s Xbox360 for $600, when the Xbox 360 is available for $399? Because it’s a damn expensive machine to produce, that’s why. Estimates on the exact cost of the device (many of which center around the assumed costs of developing Blu-Ray players) are flying, and are all probably wrong, but it’s safe to assume that Sony will be losing hundreds of dollars on every PS3.

Thing is, consoles are supposed to lose money. They are referred to as “loss leaders.” The company takes a bath on the machine and recoups with licensing, software sales and merchandising. That is, after all, the name of the game game. Video game technology rides the bleeding edge and bleeding edge technology is expensive. So, you make an expensive piece of technology, sell it for a low price and once it’s installed into 10 million homes, you make your money back selling people extra things they may or may not need. It’s essentially the same principle behind Dell giving away a free printer with every computer. The money is in the ink. Sony’s gamble on the Blu-Ray format, for example, is costing them a fortune in manufacturing alone, but they’re counting on the money being in the games.

So why then would Sony be suggesting raising the software price even higher than Microsoft already raised it, when they’ll be counting on the software to bring home the bacon. After all, it has to be affordable to sell, doesn’t it?

Blu-Ray strikes again.

The players aren’t the only expensive aspect to the new technology. Apparently, manufacturing the new discs is just as complicated. Sony claims (hopes) that wide acceptance of the format will encourage costs to diminish, but to make that happen, they have to get the players into homes so that consumers will demand more of the disks. So now we’re back to the subject of loss-leaders. While they’re busy taking a bath on the consoles, they can’t very well also take a bath on the software. Where then, would the money come from? Where indeed.

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