Gaming PCs vs. Consoles: Dell/Gateway Win, Sony Loses

The battle we have been anticipating is heating up. This isn’t the battle between the Xbox, Playstation, and Wii, nor is it the battle between Voodoo, Alienware, Dell, Gateway, and HP; it is the battle between PCs and game consoles. Sony’s Playstation still owns the market with PS2 sales setting the benchmark, but this is an old product, and the new PS3 has created more red ink for the company than most companies could handle and survive. Dell has been under pressure to perform as well, but not only have their standard gaming products been strong, they also bought Alienware, the largest of the gaming specialty PC builders, and used it to lead the PC market.

This week, let’s explore both Dell and Sony’s new offerings and suggest that maybe we are seeing the beginning of a decline for the high-priced console (Nintendo is kicking butt) and a resurgence for the gaming PC.

Dell: Putting on the Afterburners

When Michael Dell came back to run the company, no one anticipated that the result would be the top kick-ass gaming platform from any branded vendor. The Dell XPS 720 H2C Edition is just that — from aggressive looks tied to interactive lighting and water cooling, this thing is unlike anything any other company in Dell’s class is currently shipping. It replaces and updates the XPS 710 H2C . Of the major vendors, only HP has something coming in this class, and it is so secret not even Homeland Security knows what it looks like.

While systems like this are all about performance, one of the most interesting parts of this one is the extensive LED case lighting. These lights can be adjusted to cycle, pulse, or respond to game events. Having the entire case flash red when my shields are about to drop or my health has dropped into the red would probably be incredibly handy as I manage my debt (which has been known to reach legendary levels.)

Of course, it has twin NVIDIA GTX 8800s so you can pump up the graphics, but this system goes well beyond graphics.

At the core of this, or cores (excuse the pun), is a new Intel Core 2 Extreme Quad-Core processor (leave it up to Intel to create a product name that is almost a sentence) overclocked to 3.46 GHz with liquid cooling. It’s also one of the first systems to come with a Blu-ray drive (granted, it would be better if it also had an HD-DVD drive), dual 160GB 10000RPM SATA drives, a Sound Blaster XtremeMusic card, wireless rear speakers, and 2GBs of Corsair Dominator DDR over-clocked to 1066MHz, and it all fits in a drop-dead gorgeous piano black case with those special lights. But wait, there’s more: it has a 24” widescreen gaming LCD monitor and flat panel speakers as well.

Now, if you want to upgrade, you can get a faster processor overclocked to 3.73Mhz, the AGEA PhysiX Processor (someone tell me if they’ve found anything this is really good for), their killer 27” monitor with Scalar (I have one), and wireless rear speakers, and can move up to 8800 Ultra NVIDIA graphics card.

This thing starts at $5,999, and I’ll bet they sell every one they make and that this sets the current bar with regard to the new generation of gaming systems. These systems are very profitable, traditionally carrying the largest margins in the PC industry.

Can the PS3 Be Saved?

When you consider that the PS3 is one-tenth the cost of the XPS 720 H2C Edition, has 5 more virtual cores, is sold below cost, and was the thing folks were lining up for late last year, it’s hard to understand why it is such a failure. Consistently outsold by both the Wii and the Xbox 360, there simply doesn’t seem to be much hope for what should be the flagship console offering in the market today.

Instead of being profitable, Sony supposedly loses between $200 and $300 per system sold. If folks use it as a cheap Blu-ray drive and don’t buy games, Sony never makes this money back.

I think you could argue that the combination of the unneeded Blu-ray drive and a lack of compelling content doomed this puppy to the overpriced and underselling offering we have today. Generating more red ink for Sony than most companies could handle and survive, it is currently a train wreck, but can Sony turn it around to become, once again, the standards bearer for the console market?

The cause of the problem is both the Blu-ray drive (note that the Dell has one too) that caused the product to be too expensive for the segment and the lack of anything approaching a killer new game for the system. Toss on top that it’s relatively hard to use, will only do HD on HDCP-compliant TVs, and sucks (when compared to either the old or the new Xbox) as a media extender, you can see why it is struggling. With the highest price it should have the highest value, but dollar for dollar, the Wii is the best value for a console pure play and the Xbox 360 is the best value for a mixed media product.

Could they lower prices? Given they are already losing $200 to $300 (estimated) with every one of these sold and are deeply in the red, getting management to lower prices as significantly as is needed will be very difficult to get approval for, especially since there are a lack of really good games to drive back up the necessary royalties from the game sellers.

Could they remove the Blu-ray drive and then lower the price? Yes, but then what do you do with all of the media already out there, and if you then roll out a Blu-ray external drive (to deal with existing media) like Microsoft, you still have to get the cost of the darned drive down to a couple hundred bucks (but at least you can force the drive division to pick that up). In the end, however, it would look like you were backing away from Blu-ray, and with Wal-Mart apparently moving to drive HD-DVD, the combination could kill Blu-ray (which, given the Wal-Mart thing, is likely anyway).

In the end, what they need is the definitive killer game. The Halo 3 beta was underwhelming, and Shadowrun may be too different to be a massive hit, Nintendo is largely living off of sports games, which suggests Sony could (if they find a killer title soon) pick up some momentum. But Hellgate London 2038 (not the release year) is looking like the game to own in the second half, and it’s a, gasp, Windows offering supporting the Dell as the ideal platform for the holidays.

Good thing is the PS2 is still selling well, but that suggests folks are simply passing on the PS3. If the developers see this, the chance for a great PS3 game becomes vastly more remote. One company has even created what appears to be a really cool product that turns the PS2 into a nice media extender called QTV.

Sony Loses – PCs Will Increasingly Win

In the end, I think Sony has boxed itself into a corner. Much like it was with Atari, who lost the gaming market, or with the Walkman line that Apple eclipsed with the iPod (because Sony got wedded to horrid DRM and Memory Stick), this may be the end of their dominance in this segment. For instance, with gaming PCs dropping sharply in price, this Gateway FX530S gaming system is only $200 more than the PS3. Only the very reasonably priced Wii may be safe.

Tacked onto that, PCs change at least twice a year and game systems once every 4 or 5 years. This problem is going to get much worse for Sony, and it really doesn’t look all that good for the segment unless Microsoft is successful — and they could be — at turning the Xbox 360 into a full HD set top box (content remains a problem.)

We’ll see, but with Sony’s weakness the battle for gaming may be shifting to the PC, and for a lot of us, that probably isn’t a bad thing, really.

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