In theory? Is it so hard to understand logic? A.K.A. Why the PS4 was so successful...

There was an article published at Eurogamer the other day essentially positing that most powerful console hardware is the way to 'win' in sales.

Not only is this not true - as seen time and time again - Richard Leadbetter, the story's author also had this nugget to share with the readers:

"Nintendo, Microsoft and indeed Sony itself will be looking at the phenomenon that is PlayStation 4, wondering why it was so successful. Part of the formula is undoubtedly the strength of the core technology. Looking back, Nielsen polling data suggested that "better resolution" was the number one reason buyers purchased PlayStation 4 over its competition. On the one hand, that nugget of data may seem quite unbelievable but on the other, consider this - given two extremely similar pieces of hardware sold at similar price-points with much the same library of software, which would you buy? "Better resolution" may well be the closest the survey had to a response highlighting the spec differential."

I can't understand where he's coming from on this - at all!


The reasons the Xbox One and PS4 have sold the way they have sold are pretty obvious to me and, I think, to virtually everyone in the industry as well as the players themselves. It's nothing to do with more powerful or less powerful hardware: at the end of the day, the CPU portions of the chips are practically equivalent (thanks to some tricky RAM comparisons) and the PS4 has a more powerful GPU but does that translate to much better games and game experiences on the PS4? Only if you're super picky about graphics and sit in front of your TV or monitor like you're playing on a PC - which, IMO, makes the whole console deal almost pointless.

But I digress.

There are three main reasons for the PS4 being so popular this generation in comparison to the relatively even split between the 360 and PS3 last generation and I'll list them in the order that I think is the most important:

1. Communication and knowing what your customers want
2. Territory focus
3. Price

It's that simple.

The worst thing is that the team at Microsoft somehow got all three of those wrong on a scale far beyond the team at Sony during the pre- and post launch of the PS3.

Let's work in order of my thought processes:

3. Price

This is the least important of the three because, at the end of the day, if the product is exactly what people want then they will pay for it. Sometimes, (looking at Apple and other designer products such as jewellery, scents and clothes) through the nose.

Looking at the price at launch, there's not a huge difference. Especially that, coming off of a 10-year lifespan of Xbox 360 and PS3 consumers were expecting something along similar lines - even if, now, it looks like both MS and Sony are looking to renege on that stated promise with their upgraded equipment. 

However, some people noted at the appropriate time that there might be hardware revisions incoming for the platform holders, even if that news thread seems to have been glossed over by the majority of the media. (It's actually quite interesting how, just months before this article in June [according to that 10-year promise link above], that Sony was all about the 10-year lifespan. They must have had some amazing marketing feedback!)

Anyway, let's look at the actual launch prices:

Xbox One: US$499      /    €499       /  £429

PS4:           US$399.99 /    €399.99  /  £349.99

Sure, it's a hundred either way in all three markets but, (and remember this is the consumer thinking here) a hundred isn't a huge factor in a ten-year investment. It will deter some people, perhaps mainly parents buying for their children, but I'm unsure of how huge an impact that portion of the market would have on an install base of the magnitudes we're talking about for consoles that are primarily aimed at mature persons.

Speaking of which:

1. Communication and knowing what your customers want

Sony made some huge mistakes with the early marketing and price point of the PS3. I'm not even going to link to those articles because you can probably find one or two just browsing the internet. Seriously, it was so derided and talked about at the time (and rightfully so) that I'm sure there are entire portions of business studies courses dedicated to the subject of how a company can throw a huge install base lead away in two easy steps with examples from the introduction of the PS3!

I, myself, hated Sony for their hubris at the time and (despite being a poor student) refused to buy a PS3 until 2010. I did buy an Xbox 360 though and it wasn't because it was the cheaper option: I bought it because Microsoft's marketing and customer-centric thinking won me over.

This poor communication and hubris made me dislike Sony and Playstation as a brand. It worked for many years and they took those many years to get me to trust them again. Microsoft did exactly the same thing for the pre-release build-up of the Xbox One and drowned any trust and connection I had with their brand. 

From the 'always online' schtick, to the U-turn on that policy, to the leaked 'potential family sharing option' - which was never a certainty or fully elucidated in the marketing during the always online message - to the employee bashing of people who have less than perfect network connections or, who, being logical, intelligent people, recognise that servers and connections to those servers are never "up" 100% of the time, to the second U-turn on the DOA kinect integration*.

MS marketing and corporate speak devolved into a mess of 'you want this' rather than 'this is what we think you want'. It may be a subtle difference for people in PR and marketing but there's a huge gulf between the two on the consumer side of the equation. Even to this day, Microsoft are still struggling to make their message clear and positive and, to be fair, this extends beyond the console side of Microsoft's house.

This is a hugely off-putting action on the part of any company, least of all if it's happening on a consecutive basis where every 'conversation' a consumer has with a company works out this way. Worse still, if the company doesn't understand the consumer it's talking to at all...

You know what I am (and many people who buy console hardware are)? We are gamers. We don't care about cruft such as OS ability and TV viewing. Sure, we'll use our console hardware to do both, given the chance and the inclination, but we buy a console to specifically play games. That's it.

It's not a difficult thing to understand.

Let me put it this way with, as always, a terrible analogy. People don't buy modern smartphones (or are all phones so smart these days that the moniker is meaningless?) because they focus on games/apps or style. They buy a smartphone because it works primarily as a phone - a communication device. The other stuff (the design and apps) are secondary stuff that is then used as a comparison assessment. This is where Microsoft took a dive, thinking that they understood the consumer, without actually understanding consumer behaviour.

It's a huge mistake that I'm surprised was able to be achieved at a monolithic entity such as MS (having worked in monolithic entities myself and seeing how difficult it is to pursue change or make decisions outside of a huge, decentralised committee or focus group) and it really is, or was, a huge blunder.

Microsoft mistook the production by-product of the phone market for the buying habits of the phone market and applied that to the dedicated devices market. They looked for something similar in the console technology ecosystem and found "connected devices" as an application that was booming. (Okay, I'm extrapolating here but this is the only way I can see this playing out.) Netflix and Co. were a huge usage statistic on 360 and PS3 (at least in the USA where they were available at that time) and they saw an opportunity to integrate play with TV. I can't fault them for this conclusion because I do play games whilst watching TV (series and films) so there must be a niche where this applies. The caveat here is that I only do it when I am intimately familiar with the game in question and that doesn't happen all that often.

You know how, when you have twenty different similar devices competing for your mindshare, that one differentiator can really make you switch to that product? Sure, you can carve out a nice few hundred million 'niche' in that scenario... It works for a market of 7 billion potential customers but that business strategy doesn't work for a market of 100-200 million or when you only have only two or three competing devices.

This is the lesson that Microsoft learned the hard way. 

They put side-loading applications as a priority, TV listing integration and pass-through video as standard items. No gamer has ever asked for that on the same screen** and yet they made it their Homer. I noted above that I watch TV at the same time as playing some games... but never on the same screen! Nor do or would I want to pass-through actual live TV content onto that screen. Sure, their thinking was that third parties would make 'apps' like for the smartphones that would integrate with TV content such as American football matches or other sports but they are such a minority usage case and I imagine that the demographic cross-over between the hardcore sports fan and hardcore gamer is minimal at best!

Even worse than this is the well-understood fact (statistical fact to boot!) that live TV viewing is on a negative trend and on-demand viewing is increasing in proportion. People talk about cable-cutting and the potential of internet-only viewing (ignoring illegal content). In fact, HBO and Fox and many other content curators and creators are increasingly announcing their online-only, on-demand plans. Yet, this is the world that the tone-deaf and out-of-touch management at Microsoft entered with their live TV integration (with no DVR functionality)...

It's hard to believe that these sorts of decisions were made and then fully backed to almost completion - except I live them on a day-to-day basis on a much smaller scale.

This is a classic situation where the people in upper management get a message or idea and then run with it, feeding on each other's enthusiasm without complete vertical decision-making and feedback in their organisation; the people at the bottom and middle tiers can see the problems and might be able to address them but have no ability to effect change on the system they are trapped in. Some of them even buy into the reality that is being projected by the corporate centre of the entity in question.

I said worse still but the worst is actually to come..

2. Territory focus

All those add-on features and potential third party app added value was only ever developed for one market. It's the largest single market, to be sure, but it's not, historically, the indicator of success for both hardware or software.

I've written (a very long time ago) about how the European market is a better indicator of a game's worldwide success than either the Japanese or North American market's reception to a given title*** - most probably due to the cultural diversity therein. Well, the Xbox One is another notch in this theory because it was entirely focussed on the North American market at launch. Every. Single. Differentiator. Of the Xbox One was focussed on the USA. Be that TV pass-through (that's two years after release for 19 countries worldwide), app integration and the kinect voice interactivity. All of the positives that could be clawed out of the mess that was the MS marketing department's fumbling of things only applied to that one market during the launch period.

Console installed base (estimated)
Xbox 360: USA 48.90M  / EU 25.80M
PS3:           USA 29.31M / EU 34.35M
Xbox One: USA 12.98M / EU 5.55M
PS4:           USA 14.91M / EU 16.14M

The thing is, even looking at the 360's success above in console units sold, the Xbox brand always focussed on the USA in a bizarre reflection of Sega and Nintendo whereby they understood their home market surprisingly well but failed to understand the foreign markets in a post 1994 world. Sony, somehow and despite almost catastrophic failures, has managed to continue to present a broader appeal to their worldwide consumer base.

When a consumer in the EU, ROW or Japan compared the XBO to the PS4 and to their abilities in other markets at their respective releases in a given consumer's country the majority of them would find that the PS4 presented a relatively unified view across the whole of the world. Third party app makers aside, the PS4 was a gaming device and, despite paying relatively more than the USA in most countries, consumers of the PS4 in all countries enjoyed a similar experience. This was not so with the Xbox One. When a consumer compared what they got for their money's worth in EU versus the USA, they would find that they lacked a lot of the support and functionality (whether they required/liked it or not) that their cheaper-paying brethren in the USA got.

This is such a fundamental blunder that I wonder if it was because of the late direction change of the always online issue for the Xbox One console that such a lack of worldwide market support existed during that launch period. Either way, that lack made the Xbox One proposition so much weaker for the majority of the worldwide market and individual countries that might not make a big impact on sales like the USA does, all add up when it comes to total units shifted.

In conclusion

Adding all of these factors together gives you the main reasons, from a consumer's perspective, why the Xbox One currently finds itself in the situation it is in... i.e. a respectable second place. It also outlines why the PS3 was able to claw its way back from a respectable second place mid-cycle to being joint first late-cycle and why I cannot see the XBO doing the same...

Despite the missteps surrounding a mid-cycle hardware upgrade that are apparently happening right now - which might harm both (or all three) hardware platform vendors - marketing, messaging and true consumer desire focus are the main drivers for adoption of technology and software. These are and always will be the reason for the success and failure of every offering from every company, even if those successes and failures are not fully understood or investigated.

*You know what? The Kinect has some amazing applications. Taking away 10-20% of your computation power, impacting your customers' privacy concerns and providing only one or two game applications that are actually good with the tech isn't a great reason for forcing it on a device though. Siri and S voice aren't required for the operation of either Apple or Google's phones...

**Okay, there's always a few people!

***I couldn't be bothered to go through my archives and forum posts to find the exact blurb but I did some research based on sales numbers and reception and found that a game's overall success was more closely tied to the sales in the EU market than either the JPN or USA markets.