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The Next Game Consoles - (Merrill Lynch report)
- Thread starter sonicfan
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This is an analysts report that people are going to pay money for to plan their investments in the hundreds of millions of dollars, do you really think they're going to pull numbers from out of their ass like that? And both of these cost runs aren't including logistic issues such as packaging, transportation, taxes and duties that'll drive the costs even higher.tetsuoxb said:
Analysts do have more information than most people here since they're in direct contact with the companies involved, so to dismiss this report so easily is pretty naive.
Teddman said:
Most folks? I have to be honest Teddman I don't remember it panning out that way at all... I was always under the impression here that the GC has always been considered the underdog... with 2nd place at the best and 3rd place at the worst the general consensus... be that as it may, as you said it's simply one example.
Beer Monkey
Member
Interesting to see the $500 price again, it's the same scenario that Toshiba mentioned...
ML has a point regarding the potential for Sony's overall financial health to impact the merchandising of the 360.
Economies of scale + competition with an industry-standard part could certainly cause just that.
ML has a point regarding the potential for Sony's overall financial health to impact the merchandising of the 360.
Economies of scale + competition with an industry-standard part could certainly cause just that.
DarienA said:
Based on the date that report came out about a month or two before the debut E3 for both XBox and Gamecube, and I think most people at that point believed MS would be the likely bronze medalist. And that belief only grew when the 10fps Halo was shown alongside a bunch of forgettable games. Not to mention that XBox cost a hundred bucks more then Gamecube. Honestly I think anyone who believed MS would overtake Nintendo at that point was dismissed as a fucking loon. :lol
I seriously doubt the PS3 will launch under $450. They would piss off every hardware partner they have in the fight to make BluRay the defacto standard next gen media platform. If you were Matsushita, and you had just invested tens of millions of dollars in R&D and putting production lines in to build bluray players, and just got them to market at the early adopter DVD player customer friendly price of $1000, and Sony bent you over and launched the PS3 at $450....what would you think?
The long term vitality of BluRay is a huge factor for Sony, which is why they would risk the ps3's success to push the format. Sony would make BILLIONS licensing this tech to everyone under the sun, much more than their games licensing profits.
The PS3 will be expensive, very expensive. Remember the PS2, its launch helped push Sony's 50%(with Toshiba) stake in the DVD format. But the PS2 was the same price as DVD players at the time. Or have you forgotten?
The long term vitality of BluRay is a huge factor for Sony, which is why they would risk the ps3's success to push the format. Sony would make BILLIONS licensing this tech to everyone under the sun, much more than their games licensing profits.
The PS3 will be expensive, very expensive. Remember the PS2, its launch helped push Sony's 50%(with Toshiba) stake in the DVD format. But the PS2 was the same price as DVD players at the time. Or have you forgotten?
HomerSimpson-Man
Member
Haha, Sony and their "It's expensive!" game again.
On the flip side, I think a $450 dollar PS3 will probably piss off many of the movie stuidios planning Blu Ray movies.
This has already happened before the PS2 release (OMG the PS2 is going to cost 800 dollars!) and I can't believe people are falling for the Sony hype train again. Easy to lure in, easy to please when the $299 barebones or $349 value pricepoint is announced.
This has already happened before the PS2 release (OMG the PS2 is going to cost 800 dollars!) and I can't believe people are falling for the Sony hype train again. Easy to lure in, easy to please when the $299 barebones or $349 value pricepoint is announced.
Beer Monkey
Member
Oh, God, that would be so awesome if they launched at $450-$500 with no hard drive. GAF would go nuclear.
Well, I'm an old fuck who was around for the launches of VHS, Beta, Laserdisc, and DVD, and I'd be shocked if they didn't cost a grand.
Sony's in a whole new territory here...game systems don't historically launch with new media formats...
Ganondorf>Link
Member
:lol
Bullshit
IF the X360 does sell great before the PS3, Sony is not going to charge that much more for the PS3. No mention of Rev is pretty stupid, but its probably because they dont have a fucking clue about the system. Nobody does, even after they showed the damn controller the system is still a mystery.
Bullshit
IF the X360 does sell great before the PS3, Sony is not going to charge that much more for the PS3. No mention of Rev is pretty stupid, but its probably because they dont have a fucking clue about the system. Nobody does, even after they showed the damn controller the system is still a mystery.
Flo_Evans said:
Yes. Doesn't anyone remember the DVD launch? BluRay drives are going to be many times the cost of a DVD drive. Audio sampling chips and video tech to output high quality feeds like those off of a BDROM disc. Its simple really. Look at the Merrill report, a cost analysis makes the PS3 "much more" expensive than the X360 to manufacture, not to mention the 360 is being subsidized substantially at its launch price. Sony has two problems if they want to sell the PS3 in the $450 range.
1) They will lose a damned fortune.
2) They will piss off all of there hardware partners who support BluRay.
Agent Icebeezy
Welcome beautful toddler, Madison Elizabeth, to the horde!
beermonkey@tehbias said:
That's the harbinger right there.
snatches said:
I agree. IMO, anyone who think PS3 will launch at any other price other thatn $299 is out to lunch. The reason this isn't a disaster for MS is because when Sony launches at $299, MS can drop the 360 price to $249. MS will maintain the price advantage over PS3. However, price isn't everything... see Nintendo.
snatches said:
lol does anyone remember the 1st HDD? it was like $5000 for a 5mb drive. Does that mean every time they introduce a new HDD its going to cost $5000?
no.
going by the the Merrill Lynch report, a DVD drive cost $25 to make, and a blu-ray one $100. An elcheapo DVD player at walmart is $50... can you do the math and figure out how much an elcheapo blu-ray player will cost?
now of course there will be 'high end' players on the market 1st, hell if you are stupid you can still buy a $1000 DVD player.
I don't know what you guys think the diffrence in blu-ray and DVD is that makes it so much more expensive. Its a blue laser vs. a red laser.. all the other components are pretty much the same.
Guys,
I think you're really missing the point that Merrill is making and it's a significant one.
There's really two parts that you need to execute well with console business model. The part that's visibile to all of us is games lineup, creating impressive perception about performance etc.
The less visible part is optimizing living daylights from manufacturing processes and riding the cost curve.
If Merrill estimates for component costs are even roughly correct (which they seem to be by the way) then Sony is entering into a world of pain.
Let me explain. BOM and retail price are separate issues. Even if your bill of materials (BOM) is $450 you might still want to do subsidise your platform to get the software portfolio (case PSP pricing). However subsidising $100 per each sold console is starting to really hurt at +10 million unit volumes.
In the previous XBox vs. PS2 round Microsoft had about $100 disadvantage almost all the way through console life cycle. This meant that Sony could do easy price cuts and even with MS subsidies Xbox was always more expensive of the two consoles.
With similar advantage on their side MS should be able to price XBox360 significantly lower than PS3 _all the way through the life cycle_. When Sony drops the price it will be a walk in the park for MS to drop the price even lower and so on.
Sony's pressed for cash as things are. They clearly can't afford $1B kind of subsidies. This really might not be good for them.
I think you're really missing the point that Merrill is making and it's a significant one.
There's really two parts that you need to execute well with console business model. The part that's visibile to all of us is games lineup, creating impressive perception about performance etc.
The less visible part is optimizing living daylights from manufacturing processes and riding the cost curve.
If Merrill estimates for component costs are even roughly correct (which they seem to be by the way) then Sony is entering into a world of pain.
Let me explain. BOM and retail price are separate issues. Even if your bill of materials (BOM) is $450 you might still want to do subsidise your platform to get the software portfolio (case PSP pricing). However subsidising $100 per each sold console is starting to really hurt at +10 million unit volumes.
In the previous XBox vs. PS2 round Microsoft had about $100 disadvantage almost all the way through console life cycle. This meant that Sony could do easy price cuts and even with MS subsidies Xbox was always more expensive of the two consoles.
With similar advantage on their side MS should be able to price XBox360 significantly lower than PS3 _all the way through the life cycle_. When Sony drops the price it will be a walk in the park for MS to drop the price even lower and so on.
Sony's pressed for cash as things are. They clearly can't afford $1B kind of subsidies. This really might not be good for them.
Agent Icebeezy
Welcome beautful toddler, Madison Elizabeth, to the horde!
PS3 price day is going to be a day that melts the internet. Tis will be a grand ole day. I would like to think that analysts know more about what they are talking about rather than some message boarders such as ourselves. They do get paid to do this for a living.
Big Takeover
Member
AJ_ said:
That is entirely correct.
Flo_Evans said:
8 track, standard cassette, cd, dvd, do you remember any of these launching at under $1000? Yes, I get your drift, times have changed. But there is an entire political profit machine behind the scenes here and you are MISSING THE POINT. And the components are not the same. You could have said that about HDTV's like 6 years ago, but they only became affordable in the last 2 years. GET IT NOW?!!
Teddman said:
I wasn't on the GAF at that time, but I do remember the article and the uproar it caused. The article got the ordering correct, but their reasoning is still flawed (taking into consideration the timeframe it was written). In this case, Forbes "pulled a Homer" to get the ordering correct, because they certainly showed little grasp of the videogame market at the time. IGN's article correctly rebuffs it.
Forbes had a similar "Nintendo should leave the hardware business" article later in the year that caused yet another uproar for its numerous inaccuracies and flawed logic.
I agree with your sentiment that analysts get paid to look at the video game industry for a reason and often have a better grasp of what matters (from a business standpoint) than the average gamer. However, trying to hold the Forbes article up as an example of that doesn't work out. ;-)
Big Takeover
Member
DarienA said:
It will remain too high for too long though, and that will hurt Sony.
DarienA said:
Hmm.. Things like Optical Drives are _very_ hard to cost shrink. Just looking at the components not only is XBox360 cheaper to manufacture intially, but it would also seem to cost shrink way better than PS3. If you got data that indicates otherwise, please share.
Flo_Evans said:
Well, that's about three times the cost! So, if we apply that same math here, then yes, you can expect Blu-Ray players to cost about $1,000 when they enter the US market.
Not really, but they will be expensive.
And the difference between Blu-Ray and DVD is much, much more than the color of the laser. It's is a brand new format, using totally independent media, that has soaked up billions of dollars in R&D costs.
PhoenixDark
Banned
Kung Fu Jedi said:
I agree, to a certain extent. I love Nintendo, and always will. But, the minute Iwata pulled out that controller their chances in the US and Europe went out the window. Sure, the Revolution is going to do well; it might do better than the Gamecube. But, it's not going to challenge the Xbox 360 and PS3 in the market, and Nintendo knows that. That's why they want to create another market.
I think Nintendo knows they have Japan in the bag with the Revolution, and I agree with them; I wouldn't be suprised at all if the Revolution takes over the entire country.
These analyists aren't hating on Nintendo at all - they are being truthful. In the end, Nintendo will be profitable and make their money, and they'll be happy.
I disagree. The Forbes article shows that analysts often look at the bigger, longterm picture and don't get caught up in whatever console/company is en vogue with hardcore messageboard fans in a given week.donny2112 said:
I can't understand how you would defend the IGN rebuttal.
BCD2 said:
Ok but who knows exactly how long is too long?
AJ_ said:Hmm.. Things like Optical Drives are _very_ hard to cost shrink. Just looking at the components not only is XBox360 cheaper to manufacture intially, but it would also seem to cost shrink way better than PS3. If you got data that indicates otherwise, please share.
Optical drives yes... especially one as new as the BR drive will be, but it's all the other components including specifically the proposed shrinking of cell die that I'm thinking about. Of course all of the other components will shrink over time... cost wise as for whether they'll shrink better than the X360? or how that will affect future price drops? F*ck if I know.
Teddman said:
That's very possible.... but considering in the end we don't know how much higher or what the final costs are for Sony that seems to be VERY thin ice to be treading on in terms of making future cost predictions.
Flo_Evans said:
Nope. If Sony wanted to disrupt the 360 launch, they would do it by dropping the price of the PS2. Even then, the target market of 360 vs. PS2 is vastly different. Hardcore gamers will get the 360 no matter what Sony does and a $99 PS2 would not detract from it.
Agent Icebeezy
Welcome beautful toddler, Madison Elizabeth, to the horde!
snatches said:
It wouldn't if it were $299 though, would it? Their not releasing the price just foreshadows what is going to go on. $399 or higher is my call
Chittagong
Gold Member
AJ_ said:
Amen.
Posts this good should give you a golden ticket directly to the Member tag.
Dave Long said:
Bring on the hat, man! If this was business as usual for Sony I'd bet they'd be agressive with subsidies and leave no room what so ever for MS. But Sony simply does not have similar cash position as Microsoft does. I'm sure that if Kutaragi would have his way an agressive scenarion would be the way they'd execute. But Kutaragi hasn't exactly been promoted lately (kinda the opposite, right?) so I don't think he'll be able to pull off $1B subsidies.
Sony's always betting on the Introduce in Japan with subsidies, introduce in US & Europe when cost shrinks have homed in strategy. The way they'll play this one is going to be August '06 launch in Japan, early '07 US followed by mid '07 Europe. They'll do first 5-10M units in Japan with insanely low price to create a perception of low price and by the time they ramp up volumes they have gone through enough cost shrinks to hit same price point without subsidies (see PSP and PS2 launches).
Only this time around MS has already been through a number of cost shrinks and has more cash available for subsidies.
This one will be fun watch.
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