PlayStation2 Poised to Play Stateside - Product Development

Emedia Professional, July, 2000 by Lauren Wiley

In four months, Sony's long-anticipated gaming supercomputer/ DVD and CD player (and eventually Internet gateway) will burst onto the scene in North America. Sony Computer Entertainment America will launch PlayStation2 (PS2) here October 26, with an initial shipment of one million units, followed by an additional insurgence of two million through March 2001. The consoles will have a suggested retail price of $299; a controller, multiport and 8MB memory card will be sold for $34 extra; and software titles will sell for $49 each.

Since its release in 1994, the original, CD-based PlayStation has sold more than 70 million units. As a result, Sony controls more than half of the world's video game market, worth about $13 billion in the United States and Japan alone. In 1998, PlayStation sales consisted of 40 percent of Sony's profits. Sony is depending on the success of PlayStation's sequel to remain a dominant force. The console already has made a huge splash in Japan. In the first two months following PS2's March 4 Pacific Rim release, Sony sold 1.8 million units--just shy of the computer giant's goal of two million.

The console's 16-inch-tall black and blue tower houses the "Emotion Engine," a chip that generates the polygons used to build 3-D graphics. The original PlayStation could generate 360,000 polygons per second; its successor can produce more than 20 million.

Despite PS2's triumphant debut in Japan, several problems have surfaced. First, customers began complaining that when they saved Ridge Racer V game files, they wiped out the consoles' DVD drivers. The drivers could be replaced by using the Utilities disc, and the company sent out upgraded Utilities disc software a week and a half later to correct the glitch, says Sony Computer Entertainment public relations director, Molly Smith. Then came reports that some Japanese consumers found a way to watch North American DVDs using PlayStation2. Sony had agreed to manufacture consoles that could only play DVDs regionally coded for viewing in Japan. This measure was taken in accordance with DVD's international regionalization scheme, in which six codes have been created to appease Hollywood film makers who feared they would lose money if foreign audiences bought DVDs when they were released in the United States instead of going to the theater in their staggered international release intervals.

Sony's agreement is made even more important to movie studios in light of the lack of DVD penetration in the Japanese market. Because so few homes own DVD players, many consumers are utilizing PS2's DVD capability. A survey by Nikkei Online conducted a month after its release showed that 74% of consumers bought the console for both games and DVD movies, and that 53% bought DVDs to watch using the system. The code flaw was present in just the first million consoles shipped and the problem no longer exists, says Smith. "None of these problems will affect the U.S. launch," she adds.

The U.S. market is a lot different from the Japanese one, she says. For example,-DVD players are far more common in the States, so the ability to play DVDs may be less of a selling point. However, PS2 may still be perceived as competition by DVD player manufacturers. Smith doesn't consider PlayStation2 a threat to the DVD player market. "I would hope that DVD player manufacturers would be looking at this as a potential way to broaden the market," she says.

Sony expects that the game selection and the audiovisual capabilities of the console will make or break PS2's fortunes in the U.S. market. "I think it's going to come down to what sort of compelling entertainment we can offer," Smith says. According to Sony, more than 200 developers have signed license agreements with Sony, and close to 300 titles are in development so far. In addition, PlayStation2 supports the more-than-800 original PlayStation games already on the market.

Rumor had it that Sony would include a hard disk drive and a modem in the U.S. PlayStation2s to pre-empt the challenge from Microsoft's X-Box game console, which will hit markets in the second half of 2001 complete with an 8GB hard disk drive. Microsoft claims the X-Box will boast graphics chips three times the speed of PlayStation2's. Another major competitor, Sega Enterprise, already has sold more than four million Dreamcast consoles, a gaming unit with a built-in 56K modem, but no hard drive. Sega announced plans to give away the console to consumers who sign up for its $22-per-month Internet service for two years.

Sony's Smith denies that the company has ever considered installing a modem or drive in its initial shipment of U.S. consoles. Sony does plan to sell a hard disk soon, but will not say when or for how much. As for a modem, Smith says, the company wants to wait for broadband to become more widespread, and that may or may not be before the X-Box premieres. "We need to have a pretty proven installed base out there to log on to our network," she adds.

If Sony succeeds in building that user base, expect to see PlayStation3 in 2005.