If you are up to date with the gaming news that’s been unfolding over the past few hours, you’ve probably heard that Sony’s pricing of their PlayStation 4 has undercut Microsoft’s Xbox One by almost $100. This unprecedented switch in pricing, perhaps, is indicative of what most gamers call the “third console curse,” wherein the platform holder on their third time out seem to think that their arrogance is impervious to any sort of negative effect on their platform’s sales. This infamous curse affected Sony on the PlayStation 3 when they announced the system at $499* (ironically the same price Microsoft is selling the Xbox One), Nintendo with the decision to stick with cartridges with the Nintendo 64, and Sega with the Sega Saturn with its high price point and U.S./Japanese hardware parity. While some are declaring the next generation to be Sony’s, I decided to look into how we got to this point in time and evaluate how Sony, perhaps carefully, executed the greatest console announcement assassination in the history of E3.
Before I begin, however, please keep in mind that much of this information was gathered via rumor sites and several forums. Each of these sources had corroborating information that either matches or makes sense, given the context of what they’re discussing. I by no means say that these are absolute truths, but I would like to engage in some sort of conversation as to what other scenarios could have happened.
The Next Generation
When Sony announced that the PlayStation 3 was going to be $499 in 2006, I don’t think many people at Sony thought that it was a good idea. This led to Mark Cerny, of Cerny Games, to basically handle the architecture for their next generation hardware. At the time, Sony’s investment on the Cell processor sounded like a good idea, but the reality of the processor is that they never were able to fully implement it across their entire cadre of appliances and electronics. I would further posit that, by looking at how developers struggled with the PlayStation 3, that most engineers just didn’t want to deal with an overly complicated piece of silicon.
The choice of giving Mark Cerny the keys to the kingdom of PlayStation is definitely a curious move, and certainly something I was not expecting at the PlayStation Meeting. Deified by forum posters with GIFs and proclaiming him as the savior of Sony to some, Mark Cerny started off as a developer with humble beginnings. Primarily known as the man responsible for Marble Madness, Cerny also had his hands on Sonic 2, Crash Bandicoot, Spyro the Dragon, Jak and Daxter, and the Ratchet and Clank series, making him a very experienced developer. But the real news to take out of Mark Cerny’s involvement is that finally, Sony didn’t stick with a Japanese engineer to create a platform for a predominantly Western developer base. As much as I’d hate to say this, game development hasn’t exactly been booming in Japan, so the choice to have Cerny create the architecture was a stroke of brilliance.
There was also a shift happening at Microsoft over the past few years that occurred. Peter Moore left for EA, J. Allard moved to a new division, and the various individuals responsible for the Xbox 360’s success at launch became a faint memory. One of the things Microsoft touted in the current gen is its 10 year cycle, which will set the stage for all the discussions we’ll have here. This 10 year cycle is turning out to be much shorter than Microsoft anticipated, with the next generation being started by the unlikeliest of the two competitors.
The Announcement
Not many people knew about the PlayStation Meeting in February of 2013. In fact, for the years that preceded that fateful day, Sony had always said that they wanted Microsoft to make the first move. Sony, in their current position, has never really tried to aggressively take out anyone since 1995, when the infamous PlayStation price reveal occurred. Sony was humbled by the reaction to the PlayStation 3’s price point and knew that, while they could possibly (or even probably) come back with the next generation, they needed to play their cards right and entice a lot more gamers into the PlayStation fold.
The PlayStation 3’s Cell architecture, coupled with a failure to meet the maturation of the gaming lifestyle brought about by Microsoft’s Xbox 360, ensured that Sony’s platform would be behind by at least a couple of years. In fact, it’s interesting to think back to when we did not have the ability to call the XMB while we were in a game or a movie, nor were we able to obtain Trophies in games on the PlayStation 3. For the first few years, Sony played catch up, while Microsoft ensured that Sony trailed behind with exclusive after exclusive.
But it’s also interesting to note that the opposite is also true. While Sony managed to gain back loyal supporters, despite the PlayStation Network outage in 2011, the creation of the PlayStation Instant Game Library was a huge boon for them. For $50 a year, you’re able to obtain a game… or two… a week! Microsoft then increased Xbox Live’s cost from $50 to $60, while unfortunately slowing down the base operating system with repeated updates, causing the current Xbox 360 to bloat and operate slower than any of the previous UI iterations.
It’s now believed that Sony’s February PlayStation Meeting slighted Microsoft so dramatically that when the event happened, rumors started circulating that the Windows borne company was going to have an event in April, ahead of E3. The trouble was that this whole time, Microsoft was running on several assumptions that cost them a lead in the next generation:
- Sony was going to have DRM built into the system
- Sony was launching the PlayStation 4 in 2014
- Sony was going to be utilizing the base AMD Jaguar processor with 3GB of memory
- Sony’s component costs were pointing at a $499 price point due to the cost of GDDR5 production
Couple these with a DRM strategy that was mismanaged by the corporation’s PR and executives and you had a hodgepodge of ill will going into the biggest video game convention in the world. Sure, they attempted to fix the problem by releasing an info dump of facts, but gamers weren’t happy despite the attempted clarifications.
The Hardware
Sources tell me that both the PlayStation 4 and the Xbox One, codenamed Orbis and Durango at the time, were practically the same platform during early 2012. Early reports of dev kits on both identified Orbis and Durango as using AMD processors with 3GB of RAM. Then, something happened around the middle of 2012 that would lead to a difference in component costs.
Microsoft gambled with using DDR3, a much slower memory, and instead using an onboard eSRAM on the actual processor itself. The eSRAM would allow the Durango to compensate for the lack of speed of DDR3 while at the same time increasing component costs.
Sony, on the other hand, gambled with the much faster GDDR5, a type of memory that was fast and had only been available on video cards. Unlike Microsoft, Sony wanted the speed of the RAM to do exactly that, so the processor was just a regular issue AMD processor.
In the Fall of 2012, however, Microsoft started having issues producing the processor. Because they had to embed eSRAM into it, the failure rate turned out to be really high. Rumor had it a while back that in order to lower the potential failure rate on the device in the wild that they would have to run the processor at a slower clock speed, thus lowering the temperature generated by the processor. This has not yet been confirmed, seeing as how Microsoft is coy about their specs these days, but there have been rumblings that the processor production is troubling at best.
In the same period, Sony’s gamble began to pay off, and in February 2013 during the PlayStation Meeting, not only did they say that they were using GDDR5, but that they also announced that the final system would carry a whopping 8GB of GDDR5. This announcement completely blindsided Microsoft, with the company expecting their competitor to do an unveiling next year given the 10 year cycle this generation was dictated to have, having been too focused on the production of their processor, and they felt that they had to regroup and realign themselves in order for people not to match both platforms bit by bit.
Microsoft pushed their Xbox One reveal by a month as a result.
This new angle positioned the Xbox One as an all-in-one entertainment system, not unlike Microsoft’s previous Mediaroom or WebTV experiments, where it married the web and your entertainment. This is an idea that Microsoft has been struggling with, and the Xbox One was an opportunity for them to get a cut out of that. The curious move drew the ire of gamers, mocking the whole conference as a very “dudebro,” in gamer parlance, kind of event… though the inclusion of The Price is Right was funny.
Smoke And Mirrors
As expected, Microsoft did not reveal specifics about the Xbox One at E3. Typically, Microsoft has been very upfront about their hardware specs in the past. It’s now believed that this is part of the realignment that Microsoft had internally so that Sony’s PlayStation 4 couldn’t necessarily be directly compared to the Xbox One, despite both being game consoles. Unfortunately, what they didn’t get correct was the messaging behind the DRM.
A few weeks later, Microsoft reiterated what we hoped wouldn’t be true. Considered as fairly draconian DRM by many, the Xbox One requires you to check-in every 24 hours and, in some cases, even every hour. Games are then treated more like licenses and are limited depending on either the publisher or Microsoft. Sharing games with your family would only be limited to 1 person at a time, as the Xbox One requires all games to be installed onto the hard drive and require online authentication.
Several months ago, a patent document leaked from Sony regarding a DRM scheme that was alleged by some that they’ll be using on the next PlayStation. Sony has since denied this, claiming it would be for another device, but the question that was asked remained in people’s minds. Also remember that Microsoft also had similar rumors as well and, just like Sony, they denied it. A source tells me that the patent document leak was actually Sony testing the reaction to a DRM scheme that would require games to check in every so often. Did Microsoft really think that Sony was going to do this, which is why they created their platform in the manner that they did?
What we do now know is that the PlayStation 4 does not do DRM. In fact, Sony was quick to point out that their games will, “never need to phone home every 24 hours,” and that they believed in the current lifestyle of gamers. Even before the next generation of systems was released, Sony has already won the mindshare of so many gamers.
The Coup De Grâce
A source was quick to tell me that the price of both platforms will vary depending on the situation of each platform holder. My source told me that Sony was seeking a price of $449 while Microsoft was aiming for the same price as well. The problem with the latter is that due to the component failure that occurred with betting on onboard eSRAM on the processor, the whole process requires more production and, by proxy, costs more. It was at that point yesterday, at E3, that Microsoft most likely had to make a judgment call: $499, or release later. Obviously, they didn’t opt for the latter.
Sony, on the other hand, undercuts Microsoft by $100, and the rest, as they say, is history. If you look at Sony’s announcement, the PlayStation 4 with the brand new Eye does undercut the Xbox One with the Kinect by $50, although Sony is making the Eye optional. There have also been quotes from Sony that said that they knew they were going to undercut the Xbox One, which corroborates all the information I’ve compiled here.
It’s been well known and documented with the books written by Dean Takashi that a lot of espionage happened between the development of the Xbox 360 and the PlayStation 3. Perhaps Sony figured them out and implanted false information to throw Microsoft’s leadership off? Regardless, Microsoft clearly underestimated Sony since the beginning of this generation: You can’t force everyone to stick to a generation because you said so. In a way, Microsoft’s proclamation that this generation was going to last for 10 years deluded the company into thinking that they had absolute control over the mindshare of the population. But tides turn terrible quick, and the same people who praise you in the industry will quickly turn on you. I think that’s the lesson Microsoft will need to learn as they follow, not lead, this generation of consoles.
*The PlayStation 3 launched with 2 configurations: 20GB for $499 and 60GB for $599.
Gamer Horizon 
I actually had fun watching this whole drama unfold. Back during the PS4 reveal it was pretty obvious that Sony was going for the jugular and you hit the nail on the head with this article.
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Indeed, great article Alex. It is nice that you brought up the DRM issue, as I think that is the real kicker for people buying the PS4 over the Xbox One at the moment. That and the price difference, the PS4 has pretty much ended Xbox One before it could even get off the ground.
Rumors are rumors, but to have “bad” rumors confirmed as true is even worse. Microsoft has a lot of work to do if they want to win back customers, but they are not looking good at all. This is definitely becoming one of the most interesting eras of the console wars, that’s for sure.
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Enjoyed the article. While I still miss backward compatibility (though Sony is at least trying something), DRM was the bigger issue for me and the fact Sony isn’t including any has made my decision for me. Microsoft has made some big mistakes so early I can’t believe it, but that is what happens when you underestimate your competition.
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Listening to the crowd chant “Sony” is probably the craziest moment in E3 history, and I’ve been around for some time.
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Honestly after reading this article it’s making more sense that Sony had a game plan set up for a while that would allow Microsoft to destroy themselves. Here’s my thoughts:
Sony’s 5 Step Plan
1. After hearing publishers and Microsoft talk about used game’s sales and DRM so much Sony “leaks” a patent detailing tech to remove used games from their console. This allows them to gauge gamer reactions and make Microsoft think they were implementing it too so therefore they should too.
2. Make Microsoft think they were waiting on them to kick things off first. Sony figured Microsoft wouldn’t want to kick the next gen off until the end of 2014 because that would give them 2 years left with the Xbox 360.
3. Kick off the next gen in 2013 and announce it before E3. This makes Microsoft scramble to reveal their console earlier than expected.
4. After the PS4 reveal, give minimal details on the “policies.” These being used games, DRM, and always online. This keeps the gamers guessing while adding a little negativity to the gamers minds. This also reinforces Microsoft’s thoughts that Sony is implementing these things in their console too.
5. This all hinges on Microsoft announcing these features for their console and the gamers massive negative backlash. At this point all they have to do is reveal at E3 they aren’t doing any of those things and bam they have the gamers in their hand.
The crazy part of this plan is it doesn’t affect Sony negatively at all. If the plan step one fails and Microsoft doesn’t implement the stuff in their system then nothing changes except for the fact that Sony is going to do a better job with the PS4 than the PS3. If the plan succeeds Microsoft destroys themselves and Sony gets back the gamers. All in all if they did this, it was genius.
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The last part you mentioned about what you mentioned is exactly why I think a lot of my article is so plausible. If anything, the only “loss” they could’ve possibly had was that Microsoft and Sony would’ve been at an even level. Very interesting comment and I love your insight!
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This whole scenario is a great example of Game Theory, which is the study of getting your opponent to react in a way that is most beneficial to you. There are some other points that I think would add to this piece.
In 2012 as the two companies were leading up to E3, the big talk was about whether or not Sony and Microsoft would be talking about their next gen consoles. Each side knew that if the other was going to talk about their new console that a response would be needed. And for awhile, both sides danced around the issue. Then Sony came out and said that they would be focusing on the PS3 at E3 and that it was too soon talk next gen just yet. They signaled to Microsoft that they were not going to plan an announcement and gambled that Microsoft would not either. When E3 came, neither mentioned anything about their next gen consoles and this established a sort of trust between the two companies. Sony could send out these messages and be trusted to follow through with them.
Then in earlier this year Sony’s Kaz Hirai sent another message. They were going to let Microsoft announce first and that Sony was in no hurry. This sent the message to Microsoft that they had the luxury of time, and since Sony had earlier established they could be counted on to follow through with their messages, Microsoft had reason to believe they were being sincere. They planned for an April reveal which would not give Sony enough time to respond before E3. They were going to be in control of the schedule and the conversation.
Then all hell broke loose when Sony comes out not long after Kaz’s statement and announced the PlayStation even at the end of February. Rumors had it that Sony was also having problems with chip production, so how could they possibly be ready for a reveal? This turns the tables and suddenly Microsoft is on the defensive and has to respond.
And other rumors, such as DRM and price were all things MS were counting on to be true as well. By the time they discovered they had been fooled, it was too late. They had partnerships established and plans laid out. On Monday Sony revealed what they were really up to and gave MS a black eye. Now the question is how will MS respond? They may be down now, but they also have billions of dollars to rely on to pull them back up. It will be interesting to watch.
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They really don’t have billions of dollars at their disposal. Microsoft as a whole have billions of dollars, the Xbox division probably has a limit that they are pushing now. Seeing as the Xbox division of Microsoft doesn’t make up the bulk of Microsoft’s profits (this is done with Windows and all it’s products) giving a majority of the company’s money to them would be unwise because if the Xbox division ultimately does not recoup all that spent money their company will suffer.
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Right, and if Microsoft as a whole decides that they need this living room take over device to be successful, they are going to channel money into it to help it be successful. We’ve seen already with the $1 billion investment for exclusive games that they’re willing to spend the cash to try to get ahead. The question is will it work? Microsoft has also been spending a ton of cash trying to promote Windows Phone, but the results they’re getting are not that great.
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Microsoft is starting to see it’s dominance waver in the PC space too. Windows 8 is doing horrible still. What Microsoft never understand is that in the game industry you can’t buy your way to the top. Gamers don’t like that.
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I love that you acknowledge that Microsoft can’t just blow their money on smear campaigns. I think it’s a little bit too late with that, given that they themselves dug the hole themselves. Still, I’ve already heard people at E3 saying that EA and Ubisoft – allegedly the number one supporters of the DRM – were pissed off that Sony announced the “no DRM” plan, causing a parity between the platforms. Activision, of course, is indifferent given that the top 3 games in video games right now are owned by them. It’s definitely going to be an interesting next gen!
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EA has been on the back pedal today trying to get back in with gamers. They’re saying now that they will “probably” make the choice to support what the consumers want and if they want used games that’s what they’ll get. It’ll be interesting to see how many publishers try to include some form of DRM on the PS4 after Sony has publicly announced they are doing away with Online Passes from now on.
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It’s interesting because if these publishers did apply some sort of DRM, they would look anti-consumer, which is something EA has been trying to fix (by removing online passes) in terms of their image. In a way, EA and Ubisoft potentially pushing Microsoft to support DRM at the hardware level was one way they could pass the blame onto the platform holder rather than openly admitting that it was their fault Microsoft put it in all along. If you consider it in this sense, it would seem like Microsoft was a victim. The “DRM” part of Microsoft’s decision is one that wasn’t really clear as to its reasons and origins, but of course, despite this, it just sucks for everyone all around to have to deal with.
Ted, earlier today, basically proclaimed for instance that Killer Instinct would be dead. As an avid fighting game fan, he knows the needs of the fighting game community… and most venues that these tournaments are held do not have internet connections. Many things to consider when going online only on consoles.
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Well EA came out yesterday and said they had nothing to do with the DRM on the Xbox One and it was all Microsoft’s idea. This was in an article on Kotaku.
And there are so many variables in this day in age that make an online only console not worth it yet. Someone in a video said it best. We’re okay with our music, books, and movies being always connected but our games are different. We don’t want to stream them or rent them because as much as they’re similar mediums our games are still different.
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Don;t know how much money they can spend, they apparently had a billion dollars worth of money and have already spent a good amount of starting some new studios on top of getting exclusive content like the FIFA ultimate team addition, Titanfall getting (timed) exclusive, Insomniac going exclusive for a game.. Rumors they spent 400m on the NFL deal alone and for EA to give MS such a huge deal on the next Fifa, well that must have cost a ridiculous amount of millions considering the PS version is by far the most dominant (the one that sells the most in Europe).
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This is a brilliant article shedding light on some of the behind-the-scenes machinations of both companies. Well done, and shared on G+ and Twitter!
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The PlayStation 3 was actually launched with 2 configurations: 20GB at $499 and 60GB at $599. I actually added that clarification to the article, so thank you for bringing that up! I didn’t consider that people would probably remember the higher of the two price points.
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PS3 cost “599” at launch.
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There were two models. One at $499 and one at $599.
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Here’s a source if you don’t believe me. $499 and $599 were the launch prices, and I did pick up a 20GB PS3 at launch. http://money.cnn.com/2006/05/08/technology/ps3_pricing/
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Great article Alex! I am happy to see mature discussions in regard to the console war. I can see this being a long term strategic plan on Sony’s part.
Regarding DRM. I think another interesting point is that Sony is boasting the feature of playing games during download, making buying games digitally much more attractive. By encouraging digital distribution they are encouraging users to accept DRM, as it is expected in that model. You cannot sell back a digital copy, or share it with friends, and it isn’t a problem. Another focus was on indie games, which are also primarily digital distribution.
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I think all your points are valid. The notion of them being consumer friendly could possibly be a good will gesture extended so that people will be a lot more receptive towards getting games digitally. Another thing of note too is that Sony has the Gaikai service, which will allow them to offer backwards compatibility of your digital purchases on PS3 (at least from what I hear) on the PS4. Whether or not Gaikai will be free or paid as part of PlayStation Plus remains to be seen, however.
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Overall I think the game industry needs to begin to behave more like the other media industries and less like the software industry. I have extensive thoughts on this that I won’t share here.
Basically, that behavior is more familiar to Sony than it is to Microsoft, based on the overall company itself and that is becoming more apparent in recent events.
If you look at each company as a whole, outside of the specific game companies, the differences in behavior become much more clear, not just in this generation of hardware but in game design as well.
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