Monday, January 15, 2007

Good-Bye-Sony- PS3 Market Research

Allright, what follows is a follow-up to the Playstation Portable Market Research published on early 2006. I attempted to research the market conditions and placement of the Playstation3 system. However, the PS3 market research was never completed. The Simple reason is that I simply could not keep up with Sony's blunders. By the time I had tracked down a specific quote, verified the sources, ran the numbers, and everything else, a Sony representative would do something else that required investigating. Now, after the launch of the Playstation3 with most major retailers reporting Playstation3 units in stock and available, trying to pick apart how the Playstation3 would fail doesn't make as much sense as trying to determine a plan of action that recover the losses and keep Sony in business. I for one, personally, don't want to see Sony go bankrupt. I'm not very comfortable with the idea of Microsoft, a company with a long history of abusing monopoly status, having a lock on high-end console gaming.

However, as many people will attest, I have often referred to this unpublished document and linked to a .pdf version multiple times over the past several months. In order to go forward determing what Sony can do, I feel that the PS3 Market Research needs to be on a public site that anyone can view. So here it is, unfinished, not really edited, and several pages long... get comfy.

Goodbye Sony.

It seems odd today with my large library of Playstation and Playstation2 titles to ever think that I was anti-sony, but when the Playstation launched I rejected it as a gaming system. As far as I was concerned the Sega Saturn and the Nintendo 64 systems were the only real gaming systems worth talking about. My bias against the Playstation went so far as to reject Final Fantasy VII as a gaming title. It was not until several years later, after the Dreamcast launched, that I finally began to view the Playstation as a valid gaming platform, primarily at the insistance of a friend that I play Final Fantasy IX. Other releases such as Final Fantasy Chronicles (Chrono Trigger, an old favorite of mine from the SNES) helped me purchase an original Playstation system, but the sad thing was, I owned several games and played them through emulation before I ever actually owned an original Playstation.

The Playstation2 carrying titles like Devil May Cry, Final Fantasy X, and Ratchet and Clank, helped solidify the console in my mind as a gaming platform. I wasn't one of the first in line to get the system, however I had picked it up before the Gamecube launched. The Sony picture was spoiled with the behavior of Sony Online Entertainment (S.O.E.), and Sony's true colors were seen again when Sony moved against Connectix and the Virtual Game Station.

Most gamers have seen the reports before of the internal fighting that took place between Sony Corporate and Sony Computing Entertainment. It was no secret that for years Ken Katuragi and his section of Sony was the black sheep of the Sony corporate family. Then, something happened. Sony Corporate began to fall from grace. Competitors like Samsung were rapidly eating away at Sony's traditional products in home entertainment, such as TV's, DVD players, and VCR's, generating several articles about "The new Sony? It's a Samsung" ( ) In other markets Sony lost share to competitors in handheld cameras, video recorders, as well as lucrative audio markets. Sony/Ericson, the mobile product division, also lost ground against competitors in the mobile space. According to Business Week back in 2000 the Playstation brand was Sony's strongest brand, surpassing that of the Walkman ( ). Over the past 5 years as Sony filed it's quarterly and annual reports to entities like Securities and Exchange Commission (SEC), Federal Trade Commission (FTC), Fair Trade Commission of Japan (JFTC : ), Internal Revenue Service (IRS), and tax agencies in Japan and Europe, the picture was painted clearly. Playstation was not just Sony's best known brand, it was it's only brand.

The amount of failed products under Sony's watch is perhaps legendary. Remember the Minidisc ( )? The New Walkman ( ). How about ATRAC? ( ) Sony, is at the very least, an excercise in watching brillant ideas go to waste under the onslaught of proprietary technologies. Sony obtained a reputation for releasing products that were copies of already established products, and for introducing propietary technologies inferior to already avaialble open technologies.

Why then, is the gaming public, so shocked over the Playstation3? Why is the gaming publics so shocked over the pricing of the system, and then the included features? Why are those who are technologically involved for several years acting with surprise at Sony's current set course?

The easiest explanation, I believe, is that nobody thought Sony could possibly be that stupid. A perhaps, gut instinct, that at some point wiser heads would prevail and Sony would realize the position it held in consumer confidence and in the technology market overall. However, that hasn't happened, so our first question at this point is why? Why has Sony not woken up to where it is?

This again, I think, has an easy explanation. Sony believes itself to be a technology leader when it is not. Sony has billions of dollars sunk into product research, and there is a strong possibility that the corporate culture will not allow Sony to accept that it is not a leader within technology. I think this corporate culture explains the ATRAC media encoding format. Despite the fact that the .mp3 and .ogg Vorbis formats were and are much wider spread, Sony continued to push a media format that no manufacturer outside of Sony itself was using. While it might be accurate to run a comparison to Apple's Itunes audio format, it is important to keep in mind that Apple uses the .Mp3 format as the base for it's Itunes service, Apple did not create a completely new format to compete with established formats. This corporate culture may also explain the mini-disc, another product that found itself redundant in a market with crashing CD-R prices, affordable CD-burners, and media players capable of playing .mp3 and .ogg formats.

From the outside, it appears that Sony's mantra is Sony is the center of everything, and everything is around Sony. This is a particular dangerous market mindset to have, something Sony should have been aware from the 1970's and 1980's with the Beta video format. We've already been over how the VHS format succeeded over Beta, and there is little reason to rehash that story.

So, Sony has a corporate culture problem that prevents it from recognizing and dealing with current market conditions. However, if this is the Sony Corporate Culture, doesn't that make the Playstation and SCE an anomoly on Sony's track record of products? No.

Now, as already mentioned, SCE was Sony's black sheep during the 1990's. Ken Katuragi's SCE was not as well funded as the traditional production segments within Sony, often being the subject of derision from other Sony employees. The result is that SCE had to make intelligent decisions within Sony in order to be profitable, and the higher standard SCE held for itself showed through. The original Playstation, a Nintendo product that Nintendo rejected, became the best selling console of all time ( / ). The Playstation brand rose, outside of Sony's Corporate care, a blacksheep that supplanted the walkman as Sony's best known product. We've already been over that, but it is important, because Sony Corporate decided to make SCE the focus.

The Playstation became the center of Sony's future living room. First invisioned with the PSX console, then with the Playstation3, Sony intended to ride the Playstation brand back to dominence within the home entertainment industry. SCE became Sony's frontman, the visible entity up on the stage singing for all to hear. SCE because Sony's single shining star.

And that is a problem. Sony's internal corporate history of products and behavior was in distinct contrast to the behavior and policies of SCE, and when SCE became the frontman for Sony, that meant that it became the frontman for all of Sony's previous baggage.

The result is that gamers today should not be at all surprised by Sony's behavior. There should not be any surprise that Sony just doesn't understand how badly E3 2006 went for the company. There should not be any shock as to Sony's arrogence that 5 million people will buy Playstation3 even if there are no games. ( ) There should not be any outrage that Sony will now license its games instead of selling its games. There should not be any confusion that this is the real Sony that has taken a back seat to SCE for several years. This is the real Sony Corporation that gamers are finally getting to meet. This is the Sony Corporation responsible for driving wonderful Massive Multiplayer Online games into the ground. This is the Sony Corporation responsible for purchasing emulation technology for X86 processors then bold face denying they purchased the technology until court statements were faxed in. This is the real Sony.

Now, over the past 2 entries I've made on Sony I've detailed their booth report and wrote an open letter outlining the path that Sony absolutely needs to take in order to extricate themselves from the mess created by the E3 2006 showing. There is little doubt that Sony will not follow any suggestions. The corporate culture simply will not allow Sony to accept advice from outside parties.

Now, at this point, we've established that there is a corporate culture within Sony, that the corporate culture is corruptive, that the corporate culture did not effect SCE at it's start, that the corporate culture is now affecting SCE, and that there is a long history of this corporate culture affecting Sony's ability to react to market conditions. From this point I want to delve more into the Playstation side of Sony and look at exactly why Sony is making bad choices and try to explain the possible rationale behind these choices.

First shock : license

The first shock is that Sony now intends to license games instead of selling games. This is actually what Microsoft does with Microsoft Windows, and what the Recording industry does with music. You do not actually purchase the content. What you purchase when you "buy" Windows Operating System or a RIAA member music CD is a license to use the product as the legal /owner/ dictates. That is why people who copy RIAA member music cd's are susceptable to being taken to court, as well as being jailed and or fined. The fact is, once a consumer agrees to a license, they are held to that license.

One of the items I mentioned a long time ago in the casual blog is an upcoming editorial on Digital Rights Management, reffered to as DRM. One of the concepts of DRM, as explained to consumers, is that it allows the /owner/ of the content to decide what happens to the content. That is the reason why owner is bolded. When you purchase a license to use content, rather than the content itself, you are not the /owner/. Rather, the owner is whoever produced the content. DRM, therefor, is used to control the content as the /owner/ wishes. If you are not the /owner/ of the content, you do not have control.

The gut reaction to realizing what licesning content and DRM actually are intended to accomplish is that content providers would never actually do that. Unfortunantly, content providers are already doing that. Sony/BMG has been in hot-water for using Music-CD's to install root-kits in Microsoft Windows Operating Systems.

The reality is, Sony fully intends to remove consumer control of Sony produced content. Consumers will not actually own the content, it will still legally be Sony's, and Sony can use the content in any way it pleases. This ties into Sony's view of the living room of the future. Everything is centered around Sony and Sony is the center of everything. Everything entertainment related is Sony. Consumer Advocy groups and privacy groups will probably have a field day in courts with this.

Second Shock : rumble

The second shock was the reduction of rumble from Sony's Playstation 3 controller, creating a controller similar to Nintendo's Wavebird. When Sony announced the new controller design their press release stated that getting the motion sensing to work required dropping the rumble portion of the controller, in effect copying the Nintendo Wavebird. However, the Wavebird eschewed the rumble feature because the battery life and weight was not acceptable to Nintendo. With the Wii controller, Nintendo includes not just rumble, but a full 360 degree sphere of spatial interaction, and a speaker, all with similar battery life to the WaveBird, if not longer. Sony's announcment of no rumble and motion sensative control caught many developers off guards. Some developers, such as Capcom, were upset to learn about Playstation 3 motion sensative controls from the Pre-E3 Press Briefing. Sony's release on May 8th ( ) declared that " the vibration feature that is currently available on DUALSHOCK® and DUALSHOCK®2 controllers for PlayStation and PlayStation®2, will be removed from the new PS3 controller as vibration itself interferes with information detected by the sensor."

At the time of the press-release Sony's argument was percieved as acceptable. Logically, it did make sense that a technology designed to spontaneouly move the controller in eratic and random directions would interfere with the ability of the controller to determine it's positional location. Within 24 hours the argument went from acceptable to questionable with Nintendo's demonstration of their new controller designs for the Nintendo Wii. Within a few days the questionable logic from Sony turned into yet another PR disaster driven from Sony's E3 show. The real story behind the facade involved a long running law-suit with Immersion Corporation, producers of force feedback technologies and devices. ( ). Several years ago Immersion had hauled Sony and Microsoft into court for infringing on rumble designs used in game pads manufacturered by Sony and Microsoft. Microsoft settled with Immersion, licensed the Immersion technology, and proceeded to buy just under 10% of Immersion stock ( ). Sony elected to fight Immersion in court, and as many expected, continued to lose in court againt Immersion. Immersion called Sony's bluff on the reduction of rumble from the Playstation 3 ( ), extending their idea of an olive branch by offering Sony several solutions to getting rumble technology to work with the Playstation 3 controller. These solutions are not pipe dreams either; eDimensional ( ), a licensor of Immersion technologies, already has working controllers for PC and PS2 that integrate 6 axis motion sensing with Immersion rumble ( ). The only catch for Sony is that Sony would need to drop the ongoing appeal against the court rulings and pony up $90 million to Immersion.

Sony's move to drop rumble from the Playstation 3 was a clear move to remove itself from the quagmire of the Playstation and Playstation2 rumble controllers. Part of the injunction Immersion successfully won against Sony was a court order to cease all shipments of Playstation and Playstation2 units. Removing rumble from the Playstation 3 would allow Sony to have a new console on the market without rumble controls, and Sony could comply with the injunction instructions to cease shipments of Playstation and Playstation 2 units. That brings about a whole new can of worms. If Sony did comply with the injunction and yank Playstation and Playstation 2 units from the market, that would leave a console drought Sony would gladly fill with the Playstation 3 and Playstation Portable units.

Third Shock : price point

The third shock Sony dropped during E3 was the price point of the Playstation 3. What is more confusing to the outside observer is that Sony took Microsoft to task over the dual pricing structure of the Xbox 360 back in 2005 ( ). Yet, in 2006 Sony announced it's own dual unit pricing structure, with even Ken Kutaragi saying the console was probably too cheap. ( ) As one of the few, if any writers, who presumed to write that the Playstation 3 would be as cheap as the Xbox 360 to make, if not cheaper, Sony's pricing structure of the Playstation 3 was indeed shocking. $600 is the price of a brand new computer, something I already addressed in the open letter to Sony. However, why this price? What is the rationale or explanation behind it?

The primary reason is the marketing push behind the Playstation 3. Sony is pushing the machine as the "cheapest Blu-Ray" player. However, with Microsoft pushing the Xbox 360 and it's HD-DVD Drive attachment at a price under that of the Sony Playstation 3, movie watchers will have a cheaper way to get High Definition Movies and a powerful gaming system. As I've already written, Blu-Ray cannot be the sole focus of Sony. The Playstation 3 cannot be sold as the cheapest Blu-Ray player. Why? Why is that so? Why can Sony not sell the Playstation 3 as the cheapest Blu-Ray player?

Because consumers don't care. Think about Sony's history for a minute or two. Sony has a long history of producing competing products for content delivery that were rejected by the market place. First there was the Beta format, already discussed in the Playstation Portable Market Dissection. Then there was Mini-disc. Then there was the Atrac format. Then there was the UMD format. Each propietary media content delivery platform as envisioned and implemented by Sony has flopped in the market place. While most consumers may not care, the fact is that Blu-Ray movies are targeted at the movie consumer who buys a lot of movies and buys the best equipment to watch those movies on. The small niche of consumers that actually care whether or not the movie is in 640 interlaced or 1080 progressive scan. Sony themselves displayed the problem with High Definition content with the looped Gran Tourismo 4 video during E3. Yes, the picture quality is fanastic when you are 5 feet away from the TV. But as you get beyond 10feet, 20 feet, 30 feet, and so on out from the TV, the High Defintion picture advantage is completely lost. Gran Toursimo 4 in High Def looks exactly the same as Gran Tourismo 4 at 20 feet. The average consumer is not going to be swayed by a picture quality difference they can't actively see. The result is that very few consumers are going to actively buy High Definition movies because the movies offer a much higher resolution picture. That reveals the second problem Sony has, the problem of content delivery. HD-DVD is already here, today. Consumers can already obtain HD-DVD movies and players. The small niche that actually cares about the quality difference between standard DVD and High Definition DVD's are already buying HD-DVD units. That small niche will not be buying when the Playstation 3 launches. The third problem Sony has is that the target market is well aware of past Sony products. Many of the market that is actively into purchasing High Definition content is still feeling the bite from Beta. These consumers are already edgy about Sony products, the long history of broken and shattered promises lingering within memories.

The point of all that is that Blu-Ray is not going to be the dominant movie delivery system that Sony is wishing it to be. With a standing price of $1000+ per Blu-Ray player, the Blu-Ray format is not going to be a popular holiday sales gift short of the extremely small market that can afford a $1000+ player and a TV to display the pictures on. The next question then is why does Sony think it can sell the Playstation 3 as the cheapest Blu-Ray player? Why does Sony need Blu-Ray to succeed? Why does this matter to Sony?

Sony thinks it can sell the Playstation 3 as the cheapest Blu-Ray player because Sony still believes it is a technology leader. Sony still behaves like it is the sole force that drives content delivery platforms for the consumer. Sony's corporate behavior indicates that for Sony it is the year of the Beta video cassette or the year of the walkman. Well, it isn't, and there are more market considerations to account for. Sony inherently believes that Blu-Ray will sell because it is a High-Definition content device and that consumers will want Blu-Ray movies. Since Sony believes that Blu-Ray will be the dominant content delivery platform and that all consumers will be lining up to get Blu-Ray players, it can sell the Playstation 3 as the cheapest Blu-Ray player and that consumers will line up for the Playstation 3.

Sony needs Blu-Ray to succeed for more drastic reasons. As already covered in the PSP market dissection Sony stands to regain billions in revenue from Blu-Ray disc licenses, billions that Sony currently doesn't have. At the end of 2005 during Sony's year-end financial statements it was revealed that only two sections of Sony's corporate structure were profitable. SCE, boosted by UMD license profits, and the section responsible for selling LCD displays. With no other section within Sony performing at a profit there is a potential major financial problem for the Sony Corporation. Blu-Ray represents the holy grail of the return to being a profitable company. If Blu-Ray succeeds as the High Definition content delivery platform of choice the royalties derived will be astronomical. Every manufacturer involved in optical content delivery platforms, be it the disc manufacturers or drive manufacturers would have to fork money over to Sony in order to ride the Blu-Ray bandwagon.

That is why Blu-Ray matters to Sony and why it is so important to Sony internally as to why the Playstation 3 must be positioned as the cheapest Blue-Ray player. Sony believes the Playstation 3 to be the forefront of it's return to technological domination within home entertainment. However, this marketing path is one that will not work, at least not in it's current state, and Sony is going to run into a serious problem if it believes that the Playstation 3 will sell on the promise of Blu-Ray alone.

Fourth Shock : Content

The forth shock Sony dropped during E3 was the sheer lack of content for the Playstation 3 platform. To do a quick comparision, Sony's raised platform only featured 4 titles for the Playstation 3. Behind Nintendo's closed walls were 27 different Wii games. The Xbox 360 also had multiple Xbox 360 titles on display covering the Role Playing game, the first Person Shooter, sports, 3rd person action, as well as typical movie license titles. While many 1st and 2nd party developers for Sony have had Cell based systems since 2004, 3rd parties haven't been as fortunante. The result was a dearth of appreciable titles for the Playstation 3 platform. It is one thing to launch a platform with a small number of games, it is another to launch a platform with a small number of games that people actually want to play.

That was one of the faults the Playstation 2 ran into. The number of games worth the cost of the platform were extremely few to start with. It wasn't until Capcom's Devil May Cry did the Playstation 2 have a title that drove sales based on a game alone. Nintendo, traditionally the king of poor launch lineups, admitted that it made several mistakes with the launch of the Gamecube and the Nintendo 64 ( ). Yes, it's nice to have a single game that is worth playing, but it takes more than a single game in order to be successful. The problem is with Sony's launch is that there are no exclusive must have titles for the platform. Nintendo is going to launch their system with a Zelda title and plan to have Mario and Metroid titles out quickly as well. Sony is going to launch with...

The lack of content actually available for the platform is one of the reasons why Sony's arrogence about 5 million people buying the console anyways is so infuriating ( ). The question is at this point, why does Sony think it can get away with having little or no content for an extremely expensive gaming console?

Sony's positioning of the PS3 is odder yet by a quick sampling of previous consoles that have topped the $500 launch price mark. There have only been 2 consoles to top the $500 mark before. The Neo-Geo console which weighed in at $650 ( ), and Trip Hawkins 3DO platform at $700 ( ). While the Neo-Geo and 3DO brands are probably recognizable to today's gamers, many are probably not aware that previous owners of the brands attempted to enter the home console market. As expected, both console attempts failed outside of niche purchasers. Sony apologists make the argument that it is inaccurate to compare the Playstation 3 to the Neo Geo and 3DO consoles, basing these innaccuracies on arguments such as console features. One of the arguments deals with the available gamer populace. There are far more gamers available who can purchase a gaming console than there were back in 1990 and 1993, so there are more who will purchase the console. This argument does have a basis in truth. The overall gaming market in 2006 is indeed larger in terms of the number of players and the amounts of revenue generated. However, this particular market hinges on the idea that the gaming market would buy consoles in the same ratios that the consoles were purchased at in 1990 and 1993, or at least in ratios favorable to Sony's Playstation 3 price points. The immediate problem with that particular assumption is that the video game market is as narrow today as it was in 1990 and 1993. Today's market is much more diverse. Thus, while there are more overall gamers available who might pay for an extremely expensive console, the number of gamers available who will pay for a console at the Playstation 3 price points are probably few in number.

In Sony's situation the available market conditions at the time of the Playstation 3 launch are not favorable to the purchase of the system either. Traditionally, the producers of a console use a subsidized marketing process in order to generate revenues. For example, when the Gamecube launched in 2000 it had a price point of $200. However the production cost of the Gamecube was most certainly in excess of $200, probably closer to $300 or $350. Nintendo sold the console at a production loss, then made money from the profits generated by the sale of Gamecube games. For those who remember Microsoft's entry into the console space with the original Xbox many investors shied away because Microsoft was not experienced in dealing with subsidized markets. Subsidized production campaigns are the major issue on why available content is so important. The Neo Geo and 3DO consoles flopped not only due to the high price, but the lack of meaningful content that was worth a purchase. While Neo Geo does have some properties such as Metal Slug and King of Fighters, no one would argue that these properties are worth the singular cost of a console.

It appears that Sony is under the perception that people will buy their console without any meaningful content to have on the console. While this might be true, this isn't healthy for long term finances. Witness the Xbox and Microsoft's Home Entertainment Department which never posted a profit over the length of the Xbox's life. Now, Sony believes that they can get away with launching at the current price points because their current content delivery line is focused on the Playstation 2. What Sony intends to do is use the funds generated by the Playstation 2 licenses in order to fund the initial rounds of Playstation 3 systems. Then, when developers get a handle on the Playstation 3 and actually start producing games for the system, Sony will then be able to rest on the funds generated by the Playstation 3 games. To Sony there is little reason to think that this will not work. This is, afterall, the same process that was used to launch the Playstation 2. Those who remember the lackluster Playstation 2 launch titles will remember that the Playstation went out on a blaze of titles like Dragon Warrior VII. However, there are several conditions of the market that are decidedly different between 2006 and 1999 when the Playstation 2 made it's debut.

The first difference is that as of the end of 2006, only one non-gaming section of Sony posted a profit. The rest of the entire Sony corporation is not profitable and will be unable to generate any support for Playstation 3 platform. This will have the effect of increasing the visible financial damage by SCE on Sony's overall financial records.

The second difference is that Sony will be launching alongside another hardware platform, in this case Nintendo's Wii system. Over the course of 1999 and 2000 Sony launched the Playstation2 without any direct competition. This is important to consider given Nintendo's selling price is even lower than the competitor already on the market.

The third difference is that in 1999 and 2000 when Sony launched the Playstation2, Sega's Dreamcast was not experiencing full 3rd party support. Instead the Dreamcast was ignored by developers like Electronic Arts. In 2006 the Nintendo Wii is experiencing an incredibly strong line-up of 3rd party titles that are completely unique from the Xbox 360 and the Playstation 3. The Xbox 360 is also enjoying full 3rd party support. The result is that the Playstation 3 is not launching into a market where the Playstation 3 will have the exclusive content factor.

The forth difference between 2006 and 1999 is that in 1999 and 2000 Sony was in a position to strong arm developers and force them to drop games from other platforms. That particular strategy is marked by Sony's strong arming of Valve software in order to prevent Half Life: Blue Shift from launching on the Sega Dreamcast. Sony's control over 3rd parties in 2006 is hardly the same, and attempting to strong arm any developers from releasing games on the Microsoft Xbox 360 or Windows Platform is not a wise idea. Unlike Sega in 1999 Microsoft can easily make it worth a developers time to completely ignore the Playstation platform. Nintendo's console which is radically different from the Xbox 360 or Playstation 3 has wide spread developer approval, another target Sony would be unwise to attempt strongarms over.

If Sony honestly believes that it can be profitable and sell Playstation 3 units without any support content, the Sony Corporation will be in for a rough ride. Content is what moves systems. Content is what kept Nintendo in second place world wide sales, and content is what kept the original Xbox from ever getting out of the third spot in worldwide sales. Microsoft learned their lesson and is making good with several new games for the Xbox 360. Nintendo and Microsoft are ready and waiting to release their finalized content for their respective systems, and Sony has nothing to combat that. One of the mistakes Sony made during E3 is that the Playstation 3 content avaialble did not make anybody walk out of E3 and say "I must absolutely get a Playstation 3 to experience that." Nintendo and Microsoft succeeded in their pursuits, much of the talk around E3 was about people who now had to get an Xbox 360 or a Nintendo Wii system.

Fifth Shock: DVI, HDMI, Component, and HDCP

The fifth shock Sony created was the fuss over the lack of an HDMI port on the lower model Playstation 3 system. This particular shock has already been directly addressed in the Sony booth report. However, this time around, I want to examine the specific reasons over why Sony has these different formats to begin with, and what the logic and rationale behind these reasons are.

The primary advantage to an HDMI cable is that it transmits the same digital signal as a DVI cable and can also carry an 8 channel audio stream. This is signal is also the same that is used in the popular Component cable format. The HDMI plug is also smaller, and the cord can be thinner, making it more flexible. Using adapters consumers can also use DVI plugs with HDMI cables, or use HDMI cables with DVI plugs, or use HDMI to component cable plugs.

Another advantage, from the viewpoint of entities wishing to license and control content, HDMI natively supports HDCP, an encryption protocol used to secure High Definition content against fair-use practices. Corporations like Sony that have a desire to control how, when, and how much, content is experienced by consumers, HDCP is a giant leap ahead.

The primary disadvantage of HDMI is that the plugs and support chips are more expensive to produce than the seperate support chips and plugs for DVI cables, component cables, and coaxial or digial audio cables. The secondary disadvantage to the connector is that it isn't very widespread. Most High Defintion Television sets on the market use component input, and most 16*9 format LCD monitors use DVI input. While HDMI plugs could be converted to DVI or Component output, doing so could require special keying of the original plug.

The logic behind Sony's move with the use of HDMI was fairly clear. HDMI was positioned for use on the premium Playstation unit, : eDimensional rumble controller. : gamecube launch lessons : ship 6 million units : use opera remote to surf : PS3 price point : blu-ray key for games : peter moore on PS3 controller : immersion calls Sony on rumble

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