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In an attempt to capitalize on the PlayStation 3's (PS3) Cell Broadband Engine computer chip technology, Sony (NYSE: SNE) announced Wednesday that it has joined with Namco Bandai Holdings to form a new company to develop games for the console.
The new company, dubbed "Cellius," will have Ken Kutaragi, widely considered the father of the PlayStation line, at the helm as the company's chairman.
Namco Bandai and Sony have put up some 100 million yen (US$823,000) to form the jointly owned company. Namco Bandai will own 51 percent of the company with Sony claiming the remaining 49 percent.
The newly created game developer will officially launch its operations on March 6, according to reports.
Specific details on products the company will develop have not yet been determined, but according to Satoshi Fukuoka, a Sony spokesperson in Tokyo, Cellius will concentrate its efforts on new entertainment products, including games for the PS3, as well as audio and visual content for mobile phones and PCs.
Advanced Processor
Sony is attempting to solve a problem created by its own pursuit of the advanced technology housed in the PS3 -- the Cell chip -- according to Rob Enderle, principal analyst at Enderle Group.
Developed in conjunction with IBM (NYSE: IBM) and Toshiba, the chip reportedly cost around $1.65 billion to develop.
The processor is one of the most advanced chips in the world, according to Sony, and enables "massive floating point calculation." The Cell chip enables the PS3 to perform some 35 times faster than the PS2, providing sharper graphics and more complex games.
The Cart or the Horse?
As with any cutting edge technology, the issue for Sony is that the Cell is unlike any other processor included in a gaming console to date. Game makers, therefore, have had difficulty developing games for it.
"Cell is harder to develop for because it is vastly different than what we have had in the market before this," Enderle said.
Sony is caught up in a perfect storm of its own design. With the cost of game development running in the millions of dollars, game developers have not had a lot of incentive to develop games for the PS3.
The added difficulty of development meets up with the fact that there is not much revenue to be had until there are a lot of game systems in the market, Enderle explained. The number of PS3 systems sold is relatively low, with 1 million sold in North America and the European launch of the PS3 set for March 23.
In a classic catch 22, however, people will not buy the systems until there are compelling games.
"This cart and horse issue needs to be addressed through either aggressive upfront funding or through dedicated companies building games for the new platform," said Enderle. "The latter provides more control and may better assure that the games that do come out on top of a new system release are compelling enough to drive system sales."
Keeping Up With Microsoft
The Cell has great potential but it may take some time before that potential is met, according to Enderle. That is another reason for the creation of Cellius, as it could become a center for learning how to develop on the Cell and future derivatives of it.
However, Sony is late in the game with Cellius. Microsoft (Nasdaq: MSFT) has purchased a number of game developmewnt firms over the past few years and clearly understood there was a need for something like this, Enderle explained.
However, unlike Sony and Nintendo, which has a similar offering, Microsoft chose a more conventional path for the Xbox 360. This helped cut down on the company's time to market and made the platform easier for game development.
"The one thing Microsoft seemed to get -- that both Nintendo and Sony missed -- was the need to make game development less risky and cost-intensive," said Enderle. "Cellius should help Sony develop similar tools so that they can help developers reduce their development cost and get good games to market more quickly."
It will be several years, however, before Cellius is able to bring a game to market, noted Enderle. The company is "coming late in the game" and will have a greater impact on PlayStation 4, he predicted, because by the time the company starts generating games, the PS3 will be heading towards the end of its life cycle.
"It's a shame [Sony] didn't do this three or so years ago," Enderle concluded.
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