Sony Learns From Activision Blizzard's Mistake

Sony (NYS: SNE) has finally come to its senses.

The Wall Street Journal is reporting that the successor to the PlayStation 3 -- likely to hit the market next year -- will have an optical disk drive.

There have been some head-scratching rumors surfacing ahead of next month's E3 conference about what Sony plans to do to resuscitate its slumping PS3 sales. Gaming websites reported earlier this year that Sony was considering features that would make the next gaming console incompatible with earlier software titles and prevent the playing of secondhand games.


Eliminating the drive would achieve both anti-consumer objectives, though it would clearly spell the end of the PlayStation franchise. Just think about what the PS4 -- or Orbis as gaming enthusiast website Kotaku unearthed earlier this year -- would be doing if it nixed the drive.

  • One of the things that sets the PS3 apart from the competition is that it plays Blu-ray discs. Buyers know that they are getting a spec-rich gaming machine that also happens to play rich high-def movies.
  • Killing the drive would mean an end to the used game market that happens to be where GameStop (NYS: GME) scores its meatiest margins. The ability to resell games may be a drag for Sony and software publishers that don't make money on the used games, but consumers would also want to pay far less for games that are forever shackled to their systems. GameStop would probably refuse to stock the console, and understandably so.
  • Backward compatibility is a big deal for gamers that have amassed large collections. They would be reluctant to buy into the new console right away, especially given Sony's history of sharp price cuts after gouging early adopters.
  • Sony's history of its network getting hacked doesn't make it very conducive for gamers to rely on the company's servers to either offer downloads or store Web-based games.

Thankfully we may never see Orbis or PS4 implode. The always chatty "people familiar with the matter" are telling the Journal that Sony is sticking to a drive-based system because Internet connections are still too inconsistent around the world.

Gamers can probably thank Activision Blizzard (NAS: ATVI) for that. The world's largest video game maker has been dogged by server outages with Diablo III since its launch two weeks ago. Error 37 and Error 73 messages indicating outright outages or server overcapacity issues continue to haunt the company this week.

If Sony was planning to rely exclusively on digital downloads -- and perhaps host the games to prevent user drives from quickly filling up -- the model could blow up if gamers can't get connected.

Obviously there's plenty of time to get this wrong. This wouldn't be the first time that Sony overestimated its appeal. However, it definitely seems as if it's retreating from what would have been a costly mistake.

Continue?
Digital delivery is the inevitable future of gaming. The industry is moving that way. The next trillion dollar revolution will be in mobile, but the best investing play isn't necessarily Sony or Activision Blizzard. If you want to cash in on the hot trend, a new report will get you up to speed. Yes, it's as free as this article, but it won't last forever so check it out now.

At the time this article was published Longtime Fool contributor Rick Munarriz calls them as he sees them. He does not own shares in any of the stocks in this story. Rick is also part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early.The Motley Fool owns shares of GameStop. The Fool owns shares of and has written calls on Activision Blizzard. Motley Fool newsletter services have recommended buying shares of Activision Blizzard. Motley Fool newsletter services have recommended creating a synthetic long position in Activision Blizzard. Motley Fool newsletter services have recommended writing covered calls on GameStop. The Motley Fool has a disclosure policy. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days.

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Allen Heffley

Ugh! The written of this artical needs to learn the facts.

PS3 wasn't hacked until early 2011 with the first jailbreak being late 2010 (which the hack resulted from - Sony sueing Geo Hotz).

Xbox 360 was hacked and jailbroken in the first year

None of Sony's customers lost money

Xbox live in 2011 had more hacks than the 1 on PSN & their customers actually lost money. Not to mention the 3 seperate occasions of xbox live customers suffering unintentional bans.

Also XBox live was down for 2 weeks in 2007 - and M$ didn't do anything to compensate their customers. Unlike Sony who gave 2 great games, weekend of free HD Movies, a month of PS+ (more free games) and credit protection just to make sure no one loses money.

Also Xbox is the one that suffered RROD, disk scratching, disk swapping (thanks to old DVD Tech), pay to play, pay for the right pay for netflix (must have xbox live gold) and no exclusives (all best xbox games are on PC).

Xbox is a scam and rip off. Sony gives the best for the buck, Nintendo gives retro and family gaming and PC offers the highest quality (at the most cost).

PC, Wii & PS3 - Free online play
PC, Wii & PS3 - Internet browser
PC, wii & PS3 - hardware reliance
Wii & PS3 - wifi since launch
360 - Pay to play ($300 every 5 years)
360 - No browser (even though this is M$, makers of bing and internet explorer, wii has it)
360 - worst hardware failure in history of electronics (RROD = 33-55% failures)
360 - Wifi extra $100 for 5 years.

May 31 2012 at 6:24 PM Report abuse rate up rate down Reply
SmallB

The issues with Diablo III had nothing to do with network connectivity being bad, but everything to do with the server code/load Ie: activision side of things not scaling correctly. So really not sure what facts you base your whole article on.... Wonder where did real journalism go, instead of out of .... op pieces.

"Killing the drive would mean an end to the used game market that happens to be where GameStop (NYS: GME) scores its meatiest margins. The ability to resell games may be a drag for Sony and software publishers that don't make money on the used games, but consumers would also want to pay far less for games that are forever shackled to their systems. GameStop would probably refuse to stock the console, and understandably so."

Why would Sony care ? about gamestop, gamestop is only one retailer, in one market.... and regardless if they have chosen to use disk they still have plan to kill the second hand market by giving the ability to 3rd party to limit the experience for games past the first registration. Second hand market doesn't profit anyone outside of retail, and with the direction game distribution is going retail has lost the only leverage they had.
your point about the fact people wouldn't be ready to spend money without a second hand market is not supported by any serious study.

May 31 2012 at 5:38 PM Report abuse rate up rate down Reply
seekingbeta2uralpha

Your article shows you have no idea what you're talking about. Digital download have nothing to do with the ability to log onto a server to play a game. Whether a game is loaded into a system via CD/disk or whether it is "downloaded" digitally is irrelevant if game-play takes place on a server.

ATVI's issue was with folks who were trying to ENTER into the game. Those players had already DOWNLOADED the game digitally onto their computers. The problem was the same, irrespective of whether the player installed the game via CD or via digital download.

The decision to include an optical CD reader in consoles simply allows a player to load a game onto their console via disk, rather than downloading a copy of the game to their console's digitally.

In both cases, if the gameplay is "single player" and no server is required, then no "bugs" like the ones that players encountered during D3's release would take place. On the other hand, if gameplay is required to take place over a server (e.g. mutli-player modes, etc.) then it doesn't make a difference whether the game is initially installed via disk or digital download. In the latter case, if a server is down, it doesn't matter whether the game is on a disk or was downloaded digitally.

Please check your facts before you write an article.

May 31 2012 at 4:57 PM Report abuse rate up rate down Reply
seekingbeta2uralpha

Your article shows you have no idea what you're talking about. Digital downloads have nothing to do with the ability to log onto a server to play a game. Whether a game is loaded into a system via CD/disk or whether it is "downloaded" digitally is irrelevant if game-play requirements must take place on a server.

ATVI's issue was with folks who were trying to ENTER into the game after basic requirements were already installed onto computers. Those players had already DOWNLOADED the game digitally. The problem would have been the same, irrespective of whether the player installed the game via CD or via digital download.

The decision to include an optical CD reader in consoles simply allow players to load a game onto their console via disk, rather than downloading a copy of the game to their console's digitally.

In both cases, if the gameplay is "single player" and no server is required, then no "bugs" like the ones that players encountered during D3's release would take place. On the other hand, if gameplay is required to take place over a server (e.g. mutli-player modes, etc.) then it doesn't make a difference whether the game is initially installed via disk or digital download.

Please check your facts before you write an article.

May 31 2012 at 4:55 PM Report abuse rate up rate down Reply
Robert

Server outages are common in the early days of every large scale online game like diablo 3. Changes are being made daily, and it is clear that ATVI's developers are fixing problems. Rather than looking at server issues as a negative, look at them as the moat between diablo 3 and future competitors.

May 31 2012 at 12:33 PM Report abuse rate up rate down Reply