If You’re Not First You’re Last: Why Number One is Everything in the Console Wars

Three systems enter, one system leaves. That’s how Microsoft, Sony, and Nintendo seem to see this console war; a battle over the living rooms of the world that must be won, at any cost. All three companies have gone to incredible lengths, spent gratuitous amounts of cash and rolled some hefty dice, all for the pursuit of attaining the highest point on the pedestal. Now competition goes hand in hand with capitalism, and the world has seen plenty of risky business ventures before the time videogames, but today’s industry is full of enough gambles that bring up the question, is it all worth it?

About a month ago on an episode of the Official Xbox Magazine podcast, videogame industry analyst Michael Pachter expressed his confusion of Microsoft’s obsession with attaining first place in the videogame console business. Since Microsoft is so used to being the king of the castle in the PC software market, it’s not much a surprise that they would refuse to settle for anything less in videogames. When launching the Xbox 360, the company was so obsessed with getting their product out the door before Sony that quality control for the system suffered, and shortages were so bad that not many were even able to witness the failures. A few years down the road, MS finally addressed the rampant hardware issues that customers were experiencing by increasing the warranty protection for the red rings for up to three years, costing an estimated billion dollars. So was all that trouble really worth a head start?

While Pachter mainly discussed Microsoft when it came to taking foolish risks in order to break ahead of the competition, we all know that Sony has done the same thing. Fortunately for them, their risks have finally begun to pay off. BluRay may be the only way right now, but Sony made the decision to integrate the technology into the PS3 long before the format war was anywhere near decided, and they would have been some incredibly murky waters had the wind blown the other way. The format debacle factors into a gamble that didn’t pay off for Sony at first, since it caused the high price of the PS3 that even many of the hardcore crowd couldn’t justify, leaving them lagging behind the other two systems for some time. Sony is always willing to incorporate the latest technology that they believe will benefit them later on, but they do so at a time when its future on the market can be hard to predict.

As this epic struggle between Microsoft and Sony is being waged, the little console that neither even considered adequate competition has been laughing all the way to a very big bank. But despite the Wii’s incredible mainstream popularity, the decision to say no to new graphics technology and yes to motion sensing can’t really be described as anything else but a big risk. This one, to put it mildly, paid off in spades for Nintendo, but not every unique gadget the company has made over the years was as well received. Remember the Virtual Boy or the Power Glove? Nintendo definitely enjoys hitting balls out into the leftfield to areas nobody thought they would stray, but even they have struck out once or twice while trying to set themselves apart from the rest.

So in their own way, each of the companies listed have rolled the dice a few times, be it Microsoft in a hurry, Sony forgetting how much money people can really spend, or Nintendo inducing violent seizures. So in order for a console to succeed, can it only do so above all the rest? Not to Michael Pachter, who points out that money can still be made even if a company is not the front runner, and it’s better than being in first whilst losing money. Microsoft themselves have shown that although the Wii is leading the charge, the Xbox division saw its first year of profit in the third quarter of fiscal 2008 with $89 million.

Clearly this shows that just because a console isn’t in the lead, doesn’t mean it can’t make some coin. Still, Microsoft and Sony pursue some very lofty goals and aren’t averse to potentially throwing a few millions of dollars down the drain; they can afford to. The objective of world domination that each company possesses in the console wars is also shown in their attempts to grab every aspect of the market. It’s pretty clear that the hardcore crowd lives on PlayStation and Xbox, but that just isn’t good enough for Microsoft and Sony, who have repeatedly attempted to capture the casual crowd with programs such as Xbox Live Arcade. Trying to grab as much of the market as possible can be understood, but if MS is already making a profit do they really need to seize grandma’s change purse as well?

Recently the war has even spread into neutral territory with the release of Grand Theft Auto IV for both 360 and PS3. The race to see which version sells the most has become a popularity contest between the two companies for who gets to brag for having the most GTA love. When you look at it the battle of GTA within the larger console war is a feint one at best, since each version will generate millions of revenue for either system. The fact that Microsoft paid $50 million for exclusive downloadable content for GTA makes some wonder if these two can ever share, and if more of this squabbling over multiplatform titles is soon to come. Both companies need to be aware that games aren’t just a vehicle for selling systems, but also continued revenue afterwards, so big attach rates to a lesser number of consoles is still better than no attach rates at all.

The three titans of the videogame industry may make the market out to be a gladiatorial battleground where all three systems are programmed to transform and begin tearing each other apart right in the store, but that just isn’t the case. The success of the three platforms, regardless of who is doing slightly better than the other, shows that the market can indeed support them all. Yet the looming fear of being kicked out of the race remains, and part of it can probably be traced back to the Dreamcast, whose death still carries a presence today. The Dreamcast’s untimely end may have been its most influential role within the gaming industry, in that it showed that in the heat of competition a console can be destroyed. The fear of it happening again elevates the competition between systems today above the usual sales scuffles, and into a fight for survival where laying everything on the line is often seen as necessary, and being second could lead to being zero.

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