CEOs, analysts, journalists, bloggers: we're all struggling to put this generation of consoles into perspective. The truest thing we've heard on this subject came from Electronic Arts' incoming CEO John Riccitiello, who last year said of our relentless contrasting of Xbox 360's market performance to the PS2's, "It's just as inappropriate to try to compare Microsoft's situation to Sony's PS2 as it would be--as some people at Sony would like to do--to compare the Xbox 360 to the Sega Dreamcast." Yet that's exactly what we've done this week with our "Tokyo, We Have A Problem" and "Redmond, We Have A Problem" posts: examined past performance in an attempt to predict future performance, which, as we all know, is as likely to fail as it is to succeed. (As for Kyoto, it will be spared a close look until next week.) But despite Riccitiello's sage advice, we're hardheaded like that, and we've got a blog to feed besides. So the windmills will continue to be tilted at.

With having been said, once more unto the breach. In trying to make sense of the high price of Sony's Playstation 3, GamesIndustry.biz's Rob Fahey writes:

Sony's rather bizarre behaviour over the PS3's price point and its positioning as an aspirational product can be explained by one simple twist of logic. If the senior management at Sony believe that the biggest threat in the next year or two is not that Xbox 360 will gain a massive head-start, or that Nintendo will win hearts and minds, but rather that the PS2 market might shudder to an unseemly and costly halt before its time...

Well, in that case, the only thing for it to do would be to introduce PS3 in such a manner as to make users' future upgrade path to this new, aspirational system clear, but without actually positioning it at a level where they're likely to abandon PS2 en masse - flooding the market with second hand PS2 consoles and software and essentially wiping out the long tail business.

That doesn't ring true to us, because the customer who purchases a PS2 for $129 is not the same customer who's willing to buy a PS3 at $599, $499, or even $299 for that matter. In North America, the original Playstation sold the majority of its units after the price dropped to $99, a price drop that took place the same year PS2 debuted. Clearly, it took a long time for PS2 to clip the PS1's tail. There's a whole different breed of price-conscious consumers who buy in at $99, and considering that the PS2 hasn't even hit that price point yet, there's still plenty of life left in it.

As for Fahey's concern about the PS2's long tail, we don't share it, for North America and Europe, at least. Why? There's a wide variety of Greatest Hits titles available for $19.99; Electronic Arts will continue to support it with sports, racing and Harry Potter titles; Activision plans to make more Guitar Hero games for PS2; and Sony itself is still bringing out European hits like SingStar and Buzz!; and that's just what we know of already. Yes, big-budget AAA games will dry up and be replaced by kids' games, licensed games and casual games, but since those genres match the tastes of the types of gamers who wait until consoles hit $99 to buy in, they represent a lucrative market that videogame publishers will seek to exploit in North America and Europe for as long as they can. (Japan is another matter entirely; that country has transformed itself from Sonyland to Nintendoville in two short years, and if the PS2 dies prematurely over there, fratricide will not be listed as the cause.)

In fact, because the machines are roughly in the same class, the rising tide of Nintendo's Wii is only going to help keep the PS2 afloat, as publishers avail themselves of the opportunity to double-dip and make many of the same games for both of those machines--and probably even the PSP as well. Talk about unintended consequences. That's why when, last month, the blogger Dubious Quality looked at retailer EB Games' post-May 2007 release calendar, saw that there were only 11 PS2 games from major publishers listed and promptly declared "I don't see how this adds up to anything less than disaster," we simply shook our heads. It was only February, a time when most publishers are focused on their spring lineups and building buzz for their already-announced AAA next-gen titles. They're not going to unveil their holiday titles for last-generation consoles until sometime between May (when the Electronic Entertainment Expo used to take place) and July (when the replacement E3 Media Festival will be held.) It's certainly a worthwhile exercise to keep an eye out for any softness in Sony's bread-and-butter PS2 market, but folks, that ain't it.

In the end, the reason the PS3 is so expensive to buy is pretty simple: it's expensive to manufacture. Playstation chairman Ken Kutaragi's damn-the-torpedoes vision; Sony Corp's desire to make Blu-Ray the next disc standard; and a bet on another ten-year life cycle--these are the decisions responsible for a box that's expensive to make. Now the company has to play the hand that it dealt itself, and try to lose as little money as possible as it waits for process shrinks, reductions in the number of components, improving economies of scale and maturing manufacturing processes to help lift the hardware from the red into the black. It's a dangerous game that Sony's playing, because it has to balance profitability against market share, and right now, it's not doing terribly well at either. But the PS3's pricing has absolutely nothing to do with protecting the market position of PS2, which, as best as we can tell from past and present performance, remains unassailable--for now.