Okay, so what are the other business models? Let's take a (very brief) look at them:
I'd say Sony's current business model is:
- sell Blu-ray with Playstation 3
- sell Playstation 3 with graphics and the "cool" factor - lots of ultra-slick trailers and pretty pictures
- sell Playstation 3 with a large lineup of popular third party games
- offer free online
The problem is, third-party games and support are being withdrawn from PS3 all the time. Square Enix just said that it doesn't want to support any one console too much. That's horrible news for PS3 - the SE fans make up a large and very "hardcore" base for the company. Wii is seeing opposite announcements. The other problem is that Blu-ray is making PS3 an expensive proposition for consumers - PS3 is a bargain if you're thinking of it as a Blu-ray player, but PS3 is supposed to be the trojan horse for Blu-ray, not the other way around. The demand for PS3 is high (but waning), the demand for Blu-ray is mostly unknown.
Free online has been promised, but my impression is that the company has yet to explain how it's going to deliver that.
The only thing Sony has done right is the graphics. Maybe also the cool factor, certainly PS3 is carrying over the PS2 cool factor, but we're starting to see that cool factor crumble on PSP, the nut that plays games.
Microsoft's business model:
- reduce fixed hardware costs by making the hard drive optional
- buy lots of exclusive games (same as Xbox business model)
- improve graphics, HD era, blah blah
- encourage distribution of cheap third party games through Xbox Live
- expand the Xbox Live experience in general
The only outright flaw that I see in Microsoft's business model is that making the hard drive optional may be reducing the effectiveness of the Xbox Live initiatives and also annoys developers by not allowing them to rely on the drive.
The Xbox live initiatives, especially the distribution of indie third party games, have promise. With WOW showing just how much people love online gaming, and with Live Arcade bulking up 360's lineup, Live is looking good.
Securing third party exclusives seems smart, but Microsoft already tried this on Xbox, yet PS2 spanked Xbox soundly. Remember when Dead to Rights, Splinter Cell and Wreckless: The Yakuza missions were exclusives? The exclusives are getting bigger and bolder (PETER F'IN JACKSON, GUYS!) but that just means Microsoft is bleeding more money away in order to buy marketshare.
Most importantly, Xbox 360 sales so far this year aren't that impressive. That could still turn around at Christmas time, but so far I think 360 is failing to live up to Microsoft's hopes of a Playstation 2-like head start.