Analyst to Sony: change or lose

Late last month, San Diego-based DFC Intelligence raised more than a few eyebrows when it said that Sony could very well end up last in the next-gen gaming race, behind competitors Microsoft and Nintendo. Today, the research firm released an industry briefing, and its song remains largely the same.

DFC begins by saying that Sony is currently the "king of the video game market," but with the PlayStation 3, it is clear that Sony is "handing its competitors a golden opportunity." The firm believes that the premium PS3's $600 price tag will put off potential consumers, hurting the overall gaming market and possibly putting Sony dead last in terms of installed user base.

It's not just the launch price that DFC believes could hurt Sony. Sony CEO Ken Kutaragi has gone on record as saying that the PS3 is more like a computer than just a gaming console, and, according to DFC, could see upgrades such as a writable Blu-ray drive or improvement to the system's memory.

While this may appeal to gearheads, DFC believes it will mean the price of the PS3 won't drop at the rate of normal consoles. "By fixing its hardware standard for several years," DFC argues, "video game console systems have been able to significantly lower prices over time by not having to upgrade to the latest technology."

"We believe that under Kutaragi's techno-elite PlayStation 3 strategy, the PlayStation 3 could end up with a market share more resembling Apple products [in the PC sector] as opposed to the dominant PlayStation 2 market share."

As for the other consoles, Microsoft's Xbox 360 and Nintendo's Wii, DFC sees scenarios where both of them could become the leader in installed base.

Even though the firm doesn't see an end to the 360's woes in Japan, it sees its strength in the North American market as reason why it could be the market share leader. The Wii, on the other hand, has "the biggest opportunity" because of its low price and potential to "expand into a much more mass market audience."

"By letting Sony and Microsoft split the hardcore teenage/twenty-something video game marketplace, the Wii could end up number one in market share for the next generation," said DFC.