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[Jonnyram]

Edit: hang on a sec... why am I bothering

 

[sonycowboy]

While they make money on a per-unit basis, I've heard from numerous sources that the initial R&D costs of the PS2 have not been covered by the difference, so overall it's a loss.

Sigh.

DCharlie doesn't count. :lol

I'm sorry, but what in the world makes you believe that R&D for the Emotion Engine and GS were so unbelievably high that 100M consoles sold at unheard price points for long periods of time would cause them to still lose money?

The EE & GS were lauded in their time, but you'd have to assume far beyond Intel levels of R&D to believe that. R&D is certainly expensive, but it's not nearly as expensive as many seem to think. The majority of losses are a result of selling millions of units below cost (which Sony certainly did) and recouping construction costs (multiple fabrication plants).
But the PS2 has LONG since been profitable.

 

[kaizoku]

Isn't Sony trying to win more than one war here?

The way I see it, consoles are becoming so powerful now, the dream for one machine which does everything is really not that far off. Sony and Microsoft are battling away to be the company who becomes the main player in that field. So thats one battle.

Then you have the console war with the 3 players.

Then you have blu-ray vs HD DVD.

I don't see how blu-ray can fail if its inside every PS3 machine. Thats not to say hd-dvd cant be a success in its own right.

If they win 2 of 3 wars, the last war is more or less in the bag.

 

[Beer Monkey]

the dream for one machine which does everything is really not that far off.

You mean the PC?

 

[DCharlie]

"Sigh.
DCharlie doesn't count."

I'm going to explain this whole thing ONE LAST TIME for you seeing as you keep misrepresenting what i was saying.

Back then (about 1.5 years ago) what i said was that the total returned amount in profit from the PS2 project was not greater than the various expenditures to bring the PS2 to market (R+D, related construction, etc)

So that although PS2 was bring in a profit, the OVERALL project had not been profitable AT THAT POINT IN TIME.

I can't prove it without pulling out figures that may or may not get me fired. You'll prove it from Sonys financials which don't tell the full story.

In essence, neither of us can be proved right.

We are going to have exactly the same argument this time again - and the main crux will be "how much of Bluray and Cell costs do you attribute to PS3?" - Sony are already saying "Well, it's engineering - not gaming" , but.... oh hell, lets wait until it happens, because we know we are going to have that convesation if i haven't quit this fucking shit hole by then (the board, not work)

 

[elostyle]

Sigh.

DCharlie doesn't count. :lol

I'm sorry, but what in the world makes you believe that R&D for the Emotion Engine and GS were so unbelievably high that 100M consoles sold at unheard price points for long periods of time would cause them to still lose money?

The EE & GS were lauded in their time, but you'd have to assume far beyond Intel levels of R&D to believe that. R&D is certainly expensive, but it's not nearly as expensive as many seem to think. The majority of losses are a result of selling millions of units below cost (which Sony certainly did) and recouping construction costs (multiple fabrication plants).
But the PS2 has LONG since been profitable.

Did they sell below cost or not? The info I have says that they spent 2 billion on R&D and their financial report from 2000 states that they were making a lot of money per unit. (The construction costs should be accounted for in R&D I think).

 

[sonycowboy]

I'm going to explain this whole thing ONE LAST TIME for you seeing as you keep misrepresenting what i was saying.

Back then (about 1.5 years ago) what i said was that the total returned amount in profit from the PS2 project was not greater than the various expenditures to bring the PS2 to market (R+D, related construction, etc)

So that although PS2 was bring in a profit, the OVERALL project had not been profitable AT THAT POINT IN TIME.

I can't prove it without pulling out figures that may or may not get me fired. You'll prove it from Sonys financials which don't tell the full story.

In essence, neither of us can be proved right.

You, of course, yourself know that construction and R&D are depreciated assets, and would never count towards a loss except for the portion of those costs that were booked to that quarter. And they still own the fabrication plants and have retooled them for 90nm and 65nm processing at costs far less than the initial outlay. They still have substantial value.

I also have figures that can prove my point, but I don't want to get fired either. It's a stalemate :|

 

[Teddman]

Sorry, but that's incorrect. Economies of scale for the CELL and Blu-Ray (2 company owned technologies) make it where you lose less the more units you produce.

Right. AKA an ecomony of scale. Of course you are losing less the more you produce, but it's still a substantial loss over millions of units sold=my point you talked around.

 

[Andokuky]

$1000-1800 component :lol

 

[DCharlie]

"You, of course, yourself know that construction and R&D are depreciated assets, and would never count towards a loss except for the portion of those costs that were booked to that quarter. And they still own the fabrication plants and have retooled them for 90nm and 65nm processing at costs far less than the initial outlay. They still have substantial value."

:lol woooooooooooah there.... i think we have different understanding on what a "depricated asset" is !!!!

i think you are thinking about (edit) "Write down" (more accurate)

Depreciated assets is what your fabriaction plants are over time!!

(okay - it's just the way you used the term, it's depreciated in terms of the payment scheme - you amortize the costs over time. But that total cost is still applicable to the project! R&D for certain in PS2s case, you can argue that there is non-singular use in the construction of fabs)

 

[sonycowboy]

Right. AKA an ecomony of scale. Of course you are losing less the more you produce, but it's still a substantial loss over millions of units sold=my point you talked around.

Do you believe anybody thinks Sony won't lose money initially? Xbox360 is losing money and Microsoft doesn't happen to own any fabrication plants, or hold a huge portion of DVD patents like Sony does with Blu-Ray (Microsoft had to make VC-1 incredibly cheap and open it up for it to be included in the HD formats, they won't be making much there and, in fact, will be eating royalty costs to have HD-DVD included in Vista.)

I don't doubt Sony will take a pretty big hit, but they've got such control over the technology in the PS3 that it won't be the billions of dollars projected here. And believe it or not, they've planned it this way for quite a long time. It's not like they've been working for 4-5 years on the PS3 and then said "FUCK, this costs alot. Why didn't anyone tell me??"

And, I don't think I'm the one talking around points here. I'll concede losses, but I'm also certain that Sony has a business plan in place that accounts for those losses (although, I'm also sure it assumes a certain level of success for both the PS3 and Blu-Ray).

Claiming that it would bankrupt them as you alluded to above seems to be much more of a one-sided and uneven response.

 

[Flo_Evans]

Right. AKA an ecomony of scale. Of course you are losing less the more you produce, but it's still a substantial loss over millions of units sold=my point you talked around.

unless they sell their projected 200 million on launch day :lol the losses will become profit as time goes on. The reason they can afford to lose a few billion during the launch period is they bust out fancy charts and graphs at their local bank of japan and say "look here! we will be raking in profits by 2008!"

 

[sonycowboy]

"You, of course, yourself know that construction and R&D are depreciated assets, and would never count towards a loss except for the portion of those costs that were booked to that quarter. And they still own the fabrication plants and have retooled them for 90nm and 65nm processing at costs far less than the initial outlay. They still have substantial value."

:lol woooooooooooah there.... i think we have different understanding on what a "depricated asset" is !!!!

i think you are thinking about (edit) "Write down" (more accurate)

Depreciated assets is what your fabriaction plants are over time!!

Uh... That's exactly what I said isn't it? By construction, I meant the actual factories themselves, not the poor slobs who had to build it or the nails and metal required. But, if I didn't state it clearly enough for you, I apologize. I fully understand "depricated" assets

I do appreciate the attempt to rub my nose it in though.

 

[Teddman]

The issue I was raising in my post, and I think I made it pretty clear, is how much can Sony afford to lose on the PS3 up front at this point in time? Can they always tell shareholders and creditors, "Just give us a few years while we run up an even more massive debt, we're good for it"?

They are in worse financial shape than they were pre-PS2 launch, right? Significantly worse.

Do you believe anybody thinks Sony won't lose money initially? Xbox360 is losing money and Microsoft doesn't happen to own any fabrication plants, or hold a huge portion of DVD patents like Sony does with Blu-Ray

Not really a comparison that speaks to Sony's situation, as Microsoft can certainly afford to take big losses up front with room to spare. I'm just wondering if Sony can, and if the delay of the PS3 is a sign that they can't right now. The higher than expected price of Blu-Ray players at CES would seem to support that.

 

[Arsynic]

To answer the original question:

Magic.

The same magic that brought us the PSP at $200-$250.

People keep bringing up the PSP as if it proves their point. The PSP is expensive as shit for a handheld.

 

[DCharlie]

"I don't doubt Sony will take a pretty big hit, but they've got such control over the technology in the PS3 that it won't be the billions of dollars projected here. And believe it or not, they've planned it this way for quite a long time. It's not like they've been working for 4-5 years on the PS3 and then said "FUCK, this costs alot. Why didn't anyone tell me??""

as i mentioned above, best to save this argument to next gen, but this is then going to be an argument as to what costs you allocate to PS3.

PS3 requires bluray and Cell - it needs a high calibur cell (1 dead SPE) but that process provides bonuses in that the non-usable Cells don't go to waste. Sony can rightly claim that it isn't all for PS3, so Cells cost isn't a sole Game cost. However, Sony plan on selling 100million+ PS3s - i don't think any other device will come near that level of saturation. So a good portion of Cell R&D etc has to be assigned as an overhead for the PS3 project - same with the Bluray drive.

Perhaps the person who came in and said "FUCK this costs a lot!" was Stringer? Would explain Kutaragi's demotion for a start!

 

[rc213]

Anyone know how the specifics of the Cell chips Toshiba will be putting in all their 2006 Tv Sets?

 

[sonycowboy]

as i mentioned above, best to save this argument to next gen, but this is then going to be an argument as to what costs you allocate to PS3.

PS3 requires bluray and Cell - it needs a high calibur cell (1 dead SPE) but that process provides bonuses in that the non-usable Cells don't go to waste. Sony can rightly claim that it isn't all for PS3, so Cells cost isn't a sole Game cost. However, Sony plan on selling 100million+ PS3s - i don't think any other device will come near that level of saturation. So a good portion of Cell R&D etc has to be assigned as an overhead for the PS3 project - same with the Bluray drive.

Perhaps the person who came in and said "FUCK this costs a lot!" was Stringer? Would explain Kutaragi's demotion for a start!

You do know that yields for a 7 SPE Cell are going to be quite high right? Probably a good bit more than the 360 CPU as if you were to assign at random a single critical flaw in a given chip to either the PPE or one of the 8 SPE's, you'd have a 8/9 chance of still having a good PS3 chip?

I don't know how you can call it a "high calibur" CELL unless you're pretty intimate with what the current yields are and know that 7 SPE cells aren't hitting a decent yield and more importantly won't have substantially better yields as production really gets going later this year or next year.

 

[DCharlie]

"You do know that yields for a 7 SPE Cell are going to be quite high right? Probably a good bit more than the 360 CPU as if you were to assign at random a single critical flaw in a given chip to either the PPE or one of the 8 SPE's, you'd have a 8/9 chance of still having a good PS3 chip? "

actually - given the actual production fab'ing hasn't started - NO ONE knows what the exact yields will be just yet , but yes - the chances of a single critical flaw are greatly reduced due to the nature of the chip.

I don't know how you can call it a "high calibur" CELL unless you're pretty intimate with what the current yields are and know that 7 SPE cells aren't hitting a decent yield and more importantly won't have substantially better yields as production really gets going later this year or next year.

well, there seems to be expected wastage that is implicit in the plan in that there are several levels of chip class (8 spe, 7 spe, 4 spe - being the ones mentioned so far). Again, no one knows exactly what the yields will be. I can find out the latest though at my next football game.

I do appreciate the attempt to rub my nose it in though.

then stop with all the "DCharlie doesn't count" bullshit then!

 

[Ignatz Mouse]

Big money is made on the mainstream crowd that buys in after a couple of price cuts and rising profit margins.

Both true.


For opne-format electronics, money is made on early adopters.

For closed-format game systems, monet is made on software and *late* adopters after price drops.

 

[sonycowboy]

then stop with all the "DCharlie doesn't count" bullshit then!

Fair enough. It was more about the PS2 profitability argument that's been had ad infinitum, which I just happen to call the DC manuever. The argument, not you personally

 

[SolidSnakex]

People keep bringing up the PSP as if it proves their point. The PSP is expensive as shit for a handheld.

People bring it up because the technology made people think it was going to be 400+ at launch.

 

[Beer Monkey]

People bring it up because the technology made people think it was going to be 400+ at launch.

Just as I knew that the PS3 wouldn't be out here in Spring or Summer (heck, Fall is almost pushing it), I knew that PSP wouldn't be $400. Lots of us knew.

And you know what? If it were $130 instead of $250, maybe it'd have a majority of the marketplace like some nuts predicted.

 

[SolidSnakex]

Just as I knew that the PS3 wouldn't be out here in Spring or Summer (heck, Fall is almost pushing it)

When did Sony ever say it'd be out in the US in Spring?

 

[Raistlin]

Does anyone honestly believe a BluRay actually costs $1000-1800 to manufacture? :lol


You are pay high prices on new electronics for three reasons:

1) They can sell it at that price. Basically, they are taking advantage of the early adopter - it has always been done like this. Prices end up dropping later.

2) They are trying to displace some of the R&D costs. Since the user base will be initially limited (regardless of the price of the player), it will take a while for BluRay group to recoup the money spent simply through licensing fees. This gives them more of it back in the short-term.

3) For companies not receiving licensing fees, they obviously need to make a profit on the HW itself. This is totally different than the console model.

Also, that $1800 unit is a Pioneer Elite model. The Elite brand is Pioneer’s equivalent to Sony’s ES – basically they are mid to lower-high end range models.



In the case of PS3, Sony is simply continuing the console model we’ve seen since PS1; sell at a lost, and make up for it in software.

Don’t kid yourself into thinking they are losing anywhere near the amount referred to earlier though. For one, it just doesn’t cost that much even if they OEM'd it – secondly, they can make it at cost since they designed and manufactured it.

Regardless, they will make licensing fees of not only game software, but movies as well.

 

[HokieJoe]

Underworld!

Yep, I think Underworld has been confirmed as a Bluray release. Katie B will look even hotter in all of that Goth blood-sucking drag.

 

[Agent X]

For instance, if you are losing 200 dollars per console, you make 1 million, you are down 2 billion.

Now that's a neat trick. Is this the "new math" they're teaching in schools now?

 

[Ben Sones]

There were DVD players out there for $1000-$1800 when PS2 was released

That's true, but there were also DVD players that were a lot less. $1000 seems to be the minimum going price for a Blu-Ray DVD player. That's a pretty enormous price discrepancy, assuming that the PS3 is going to sell for under $500--especially since the Blu-Ray drive is just one component in an already expensive hardware package. Maybe Sony can afford to do it, but if I were a company making standalone players under license from Sony, I'd be pretty pissed off that they were undercutting me by that much.

 

[MrSingh]

People keep bringing up the PSP as if it proves their point. The PSP is expensive as shit for a handheld.

I didn't bring it up to prove any point. If Sony can sell PS3 at $250, all the better for me, the consumer. I don't care if they break even or lose $700 per machine... (sucks for our buddies working at Sony though, if they have to subsidize hardware costs... NO BONUS FOR YUO! huahuahua!)

C'mon you can do it.. bring out the PS3 at $300 or below!

 

[boutrosinit]

Sony has yet to do that. They're lying about a Spring 06 release date?

If Spring starts in September, then no.

 

[MrSingh]

If Spring starts in September, then no.

Spring does start in september in the southern hemisphere. LOLAMIRITE?

 

[TerryLee81]

One stupid question:

Can a BR player read "normal" DVDs?

 

[GamingGuru]

What im wondering is how the hell are they gonna fit a first gen blue ray drive into the ps3 caseing. Sure, that Sony Stand Alone Blue Ray Player shown at CES is probally their top of the line BR player..but that sucker aint small..how will by be able to fit a blue ray drive into the ps3?

Are they just gonna take a heap of shit out of blueray and put in your sub averabe BR player in PS3?

I demand some answers lol :lol

For the guy above my reply..yes BR will read regular dvd's

 

[Takuan]

What if, much like PS2 DVD playback, PS3 BR video quality will be lower than that of a good stand-alone player? How does that factor into the cost?

 

[hukasmokincaterpillar]

What im wondering is how the hell are they gonna fit a first gen blue ray drive into the ps3 caseing. Sure, that Sony Stand Alone Blue Ray Player shown at CES is probally their top of the line BR player..but that sucker aint small..how will by be able to fit a blue ray drive into the ps3?

Are they just gonna take a heap of shit out of blueray and put in your sub averabe BR player in PS3?

This seems to be a common misconception going around, both on actual manufacturing cost and size of the BR drive. All the added hardware found in a stand-a-lone player is taken care of by Cell/RSX in PS3, no slouches in decoding and image processing in their own right. The actual drive itself is probably a standard slim slot loader that doesnt take up much space at all.

Here's a rough example of what it'll likely be under the hood: http://www.blu-ray.com/images/ifa2005/panasonic_15.jpg

 

[gofreak]

What if, much like PS2 DVD playback, PS3 BR video quality will be lower than that of a good stand-alone player? How does that factor into the cost?

I think this is probably a bit more software dependent than hardware dependent, for PS3. So, unless you want to count the cost of programmer salaries for x months or whatever..

 

[bud]

Just about how much will Sony lose on each PS3?

 

[Raistlin]

Sony was demonstrating BluRay movies running off of PS3 hardware at CES.

Decoding, ect. was confirmed to be handled via CELL and RSX - thereby reducing much of the HW associated with a separate BluRay player. In reality the drive itself is the only thing PS3 needs – all decoding, scaling, output, etc. is already in the PS3 regardless.

Also note that the few confirmed prices for BluRay players are for mid to lower-high-end units. I have yet to see price confirmations for any ‘entry level’ players.

 

[Raistlin]

Just about how much will Sony lose on each PS3?

Since we don't know Sony's actual costs, nor the price of PS3 - how can this be answered?



Regardless, the BluRay functionality is probably pretty insignificant in the scheme of things. While the drive / laser assembly is obviously more expensive than a DVD drive at this point, I doubt the difference is all that great - they are very similar technology. All other functionality that would be needed in a dedicated BluRay player is already built-in to the PS3 (CELL + RSX for decoding, scaling, etc. - HDMI already there, etc.), so this thread topic is pretty much invalid.


Also note, Sony has two things helping offset the cost of the drive in PS3.

1) They get them at cost since the researched, designed, and manufactured them.

2) Licensing fees generated by movie sales will offset costs.

 

[TerryLee81]

All Games are suposed to be on Blu-Ray, right?

So it's not like Blu-ray support would be a nice extra for watching movies, like th HDDVD drive for X360...

 

[Raistlin]

I'm not sure if all games have to be on BluRay.

I think it might be just like PS2 - at first a majority where on CD - at this point almost all are DVD.

 

[gofreak]

All Games are suposed to be on Blu-Ray, right?

No, actually. PS3 games can be released on CD or DVD if the publisher so wishes. Kaz Hirai actually mentioned at the BDA conference yesterday evening that he expects PS3 games to follow a similar trend to PS2's - which started off in the first year with 75% being on CD, 35% on DVD, which overtime changed to 5% on CD, 95% on DVD. (with DVD being the new CD, and Blu-ray being the new DVD, obviously ).

 

[Ben Sones]

People keep bringing up the PSP as if it proves their point. The PSP is expensive as shit for a handheld.

It is expensive compared to the Gameboy line, but it's very inexpensive for what you get. Compare it to similar devices--Pocket PCs and the like--with similar media capabilities and LCD screens of that quality. $250 is dirt cheap by those standards. They are obviously selling the thing at a loss.

Similarly, $400-500 is very expensive for a game console, but very cheap compared to stand-alone Blu-Ray players, which start at around $1000.

 

[Musashi Wins!]

While I can see why the media will effect content for gaming and standards for the high-end television set of today and tomorrow....the media wars are so boring game wise. I just hope Sony can afford to maintain such a title diversity on their next gen platform and subsidize the localization of so much Japanese content. Or rather, afford to keep the relation with developers much the same as they struggle to develop games for these new monster systems at affordable cost.

Not really on subject, but these threads while interesting, are bumming me out a little.

 

[DenogginizerOS]

While I can see why the media will effect content for gaming and standards for the high-end television set of today and tomorrow....the media wars are so boring game wise. I just hope Sony can afford to maintain such a title diversity on their next gen platform and subsidize the localization of so much Japanese content. Or rather, afford to keep the relation with developers much the same as they struggle to develop games for these new monster systems at affordable cost.

Not really on subject, but these threads while interesting, are bumming me out a little.

I agree.

Format Wars and Console Wars, I can't take it any more!

We didn't start the fire.....

 

[Deg]

It is expensive compared to the Gameboy line, but it's very inexpensive for what you get. Compare it to similar devices--Pocket PCs and the like--with similar media capabilities and LCD screens of that quality. $250 is dirt cheap by those standards. They are obviously selling the thing at a loss.

Similarly, $400-500 is very expensive for a game console, but very cheap compared to stand-alone Blu-Ray players, which start at around $1000.

Its called added value.

 

[urk]

Just about how much will Sony lose on each PS3?

At launch or over a five year run?

 

[open_mouth_]

Sony was demonstrating BluRay movies running off of PS3 hardware at CES.

Decoding, ect. was confirmed to be handled via CELL and RSX - thereby reducing much of the HW associated with a separate BluRay player. In reality the drive itself is the only thing PS3 needs – all decoding, scaling, output, etc. is already in the PS3 regardless.

Also note that the few confirmed prices for BluRay players are for mid to lower-high-end units. I have yet to see price confirmations for any ‘entry level’ players.

yup. this is why the PS3 will be $399 at most. In fact, at $399, I think Sony will lose a comparable amount per console as they did with the PS2 back in the day.

 

[marc^o^]

In the case of PS3, Sony is simply continuing the console model we’ve seen since PS1; sell at a lost, and make up for it in software.

The problem I foresee is that the console model has changed: the console itself will surely be more expensive than the PS2 at its time, resulting in fewer buyers that can afford one. With the x360, Revolution, PSP and DS, the PS3 will face much more competition than when the PS2 launched against the Dreamcast & GBA. I included portables in my reasoning as they take away a significant amount of money from gamers pockets. I don't think like many analysts that the PS3 will sell as much as PS2, and that PS3 games will sell as much as PS2 ones. The market will be saturated with successful consoles, IMO Sony can only lose shares in this next battle. So they should not push the console model you mentioned too far.

This said, I appreciate the incredible risk they are taking and I'll certainly support it, buying a PS3 when it launches.

 

[kaching]

The problem I foresee is that the console model has changed: the console itself will surely be more expensive than the PS2 at its time, resulting in fewer buyers that can afford one.

You also need to account for how the market may have changed though, whether they are willing to pay more than they were 5 or 10 yrs ago. All indications suggest they are since the PS2 has sold significantly faster than the PSOne while not dropping in price as quickly. The PS2 still hasn't hit the $99 pricepoint yet has almost caught up to PSOne LTD sales.

With the x360, Revolution, PSP and DS, the PS3 will face much more competition than when the PS2 launched against the Dreamcast & GBA. I included portables in my reasoning as they take away a significant amount of money from gamers pockets.

By the logic you're using to include portables, you should certainly include PSOne and N64 when discussing what the PS2 launched against. Besides, regardless of what it launched against, over the majority of its lifespan it has had multiple competitors to vie against for sales. I don't think the situation for next gen is really all that different.