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[Chittagong]

What does a Blu-Ray disc cost? I'm sure over the long haul their costs will come down too, but generally a new media type cost more at the beginning of it's lifecycle. Will that effect game costs/margins?

The physical costs in games are neglible for all optical media. BR is naturally more expensive in the outset, even by a huge percentage over DVD, but since the proportion of the overall product cost is so small, it won't make a difference. For publishers biggest concerns are platform fee and channel margin.

 

[DCharlie]

"They laid off 10,000 people this year. You just don't sell low like that. You don't"

they haven't laid them off yet.

 

[Big Takeover]

That's very true and pretty much in the core of Meryll Lynch's argument - the R&D cost for BR and Cell still sits within Sony, dragging down the overall company profitability. Still, you wouldn't typically put it into the bill of materials as a generic overhead.

I assume that the lifetime biz case calculation for PS3 factors in an amount of R&D. Now this is the real profitability wild card! The percentage split of the R&D between PS3 biz case and other CE products is unknown and ultimately gives Sony potentially the pricing leverage. If they structure their "likely scenario" to include high sales of TVs and computers using Cell and big royalties from BR, they can include a lower cut of the R&D bulk to their PS3 biz case and - ha!

This essentially means that Sony can show a profitable gaming business with a lower hardware margin. And this is where "Sony bets the house". Both sales of BR and Cell based products are extremely hard to predict at this point. If BR and Cell products sales do not take off, the bottom falls of the PS3 biz case: the smaller percentage of R&D allocated in the calculation for PS3 is insufficient and the company will be dragged to a profitability crisis.

So to succeed, Sony must excel in:

1. Correct pattern of entry for PS3 to optimize cost curve
2. Optimal consumer pricepoint to provide sufficient margin
3. Correct split of Cell and BR R&D are allocated to other CE products (affects 2.)
4. Making Cell and BR based CE products sell as assumed in 3.

If one of these fails, things will get very interesting. Sony has traditionally been very good in 1. and 2., but 3. and 4. provide a totally unique and complex risk element not previously seen in PlayStation business.

That pretty much sums it up. Also don't forget that Cell is a joint venture with IBM and Toshiba, and Blu-ray has it's own group spreading r&d cost over many companies. This should give them plenty of flexibility with PS3 pricing, although how soon I am unsure.

How quickly do these companies want a return on their investment and how well will the products sell are still to be seen, but on paper it looks good. It is a certainly a house of cards though.

 

[Pimpwerx]

That pricing chart is wacked. On a purely yield basis, Cell should yield better than RSX. RSX has more trannies, so likely a larger die. On top of that, Cell is far more applications than RSX, and a redundancy scheme that means Sony could conceivably get closer to 100% yield rates than any other chip, b/c the nature of Cell (stream processor) and the crazy redundancy of the die layout allows them to use this chip in a shitload of their CE line. DVDs, TVs, stereos, etc.... All they need to do is write software and tack on helper ASICs to assist. Cell is ridiculously powerful even in a 2SPE arrangement, and scalable enough that it will eventually see use in their mobile lines as well (65nm). It just seems like RSX would end up being the cost leader here, even taking the investments into account. That is unless you throw all Cell development on the shoulders of the PS3.

Ditto for BD, but even worse. For one, the PS3 will no doubt get a first-gen drive. But that said, (a) there aren't a great deal of differences between CD, DVD and BD drives. Optical drives operate on the same principle, so a majority of the moving parts are closely related. Tolerances vary, but costs for moving parts should be marginal. The only difference is the laser and whatever security features they've implemented in hardware. But the Cell and RSX will handle decoding functionality, so you don't have the costs of a standalone player. What's more baffling is that the cost scales the least of all the parts listed. That's just plain bologna. As anyone who's bought an optical drive knows, prices drop incredibly fast. With millions of units of PS3s, plus all the other BD drives they'll fill the rest of the CE line with, there's no way the drive costs don't plummet. Hell, they shouldn't be that high in the first place. Over $100 for a BD drive? Come the fuck on. Is it made of solid gold? PEACE.

 

[mckmas8808]

Actually read the link above on Next Gen Consoles. Then ask yourself again if you think the PS3 will be sub $400. It seems like the most revealing speculation yet, very rooted in the reality of the manufacturing process. AWESOME LINK. Do yourself a favor.

Okay so if the PS3 is $500 who many people will buy one? How many people will buy millions of games for Sony like they have in the past? How many people will download content from Sony:Connect due to the fact that they have a PS3? How many people are going to buy Blu-ray movies now that they PS3 is $500?

If you look at it that way, then you would see that $500 would kill their only cash cow.

 

[mckmas8808]

And people lets get back to the basics here. Do we here at GAF expect Sony to really launch for $499.99? Of course not. I think the PS3 will be $399.99 maybe even $349.99 with less price drops.



I look at it this way say the PS3 is $500 who many people will buy one? How many people will buy millions of games for Sony like they have in the past? With less consoles sold there will be less software sells. And if the PS3 will be twice the price of the X360 next holiday, then what would stop MS from dropping the price to $149 when Sony drops the price of the PS3 to $300? To me that could possibly mean that MS could have the X360 at $99 4 years from now while Sony is just be getting to the $199 mark (a price that MS would have hit 2 or 3 years before).



How many people will download content from Sony:Connect due to the fact that they won't be buying a PS3 due to the outragoues price difference between it and the 360? How many people are going to buy Blu-ray movies now that they PS3 is $500 compared to if the system started at a price point between $299.99 and $399.99?

If you look at it that way, then you would see that $500 would kill their only cash cow. Sony's other divisions could never bank off of the PS3 due to it's horrible price disadvantage. Blu-ray wouldn't catch on no where near as quick as the movie houses are hoping it will. Sony's movie division wouldn't as much as it could if the PS3's price wasn't comparable to the 360.



Sony's electronics division would be hurting due to the lack of economy of scale. The PS3's two biggest advantages (i.e. Blu-ray and CELL) could bust. If that happens with the lose of the console market advantage that they have had for the last decade wouldn't Sony be in a worst situation than they are in now?



Why would Howard Stringer praise over and over about putting the PS3 in the middle of everything Sony related if they can't even price the PS3 comparable to the other two next-gen consoles. Yes I didn't forget (maybe you guys did) that the Nintendo Revolution will cost even less than the Xbox 360. So while the Xbox 360 could be $250 next holiday season the Revolution could be $199.



So what do we have here? Holiday season 2006 we have



A.) PS3 for $500 (without a HDD)



B.) Xbox 360 for $250 (with a HDD)



C.) Revolution for $199 (with 512MB of Flash memory)





I'm sorry I just don't see that happening.

 

[Beer Monkey]

I look at it this way say the PS3 is $500 who many people will buy one? How many people will buy millions of games for Sony like they have in the past? With less consoles sold there will be less software sells. And if the PS3 will be twice the price of the X360 next holiday, then what would stop MS from dropping the price to $149 when Sony drops the price of the PS3 to $300? To me that could possibly mean that MS could have the X360 at $99 4 years from now while Sony is just be getting to the $199 mark (a price that MS would have hit 2 or 3 years before).

I know lots of people who will buy whichever one hits $199 first as long as it runs Madden. And they won't buy either of them until they hit $199.

 

[Dr_Cogent]

Here's how I am trying to approach things.

Wait for PS3, get Xbox 360.

Wait another year, get PS3.

I'm sick and tired of buying a console that has shit for a library and not enough games to keep me busy.

And I am also sick of paying premium price.

 

[inpHilltr8r]

http://webpages.charter.net/spartan85/ML_Consoles.pdf

spartan85 -> Michael Custer : http://digest.garynuman.info/1998/1-485.html
Michael Custer -> GA : http://www.gaming-age.com/cgi-bin/news/news2.pl?y=2001&m=6&nid=5-19.db

Which would explain the directory full of speculative console business reports, and owl pics at http://webpages.charter.net/spartan85/

 

[P90]

I know lots of people who will buy whichever one hits $199 first as long as it runs Madden. And they won't buy either of them until they hit $199.

Sounds like me, the first console to $199 is the winner. Don't like Madden though.

 

[sonicfan]

spartan85 -> Michael Custer : http://digest.garynuman.info/1998/1-485.html
Michael Custer -> GA : http://www.gaming-age.com/cgi-bin/news/news2.pl?y=2001&m=6&nid=5-19.db

Which would explain the directory full of speculative console business reports, and owl pics at http://webpages.charter.net/spartan85/

I thought everybody knew that? :lol

 

[Mrbob]

Here's how I am trying to approach things.

Wait for PS3, get Xbox 360.

Wait another year, get PS3.

I'm sick and tired of buying a console that has shit for a library and not enough games to keep me busy.

And I am also sick of paying premium price.

It is a good idea, but next gen sports games are too enticing at the moment. So is next gen live.

I would rather use the 360 pad anyway over the boomerang.

So my plan is to buy Xbox 360 at launch.

Then PS3 in late 2007 when MGS4 is out. Hopefully PS3 is under 250 by then.

 

[mckmas8808]

[Pulling card time]

This is Merrill Lynch's report in 1999 about the price of the PS2.


http://news.zdnet.com/2100-9595_22-515432.html?legacy=zdnn

Report: PlayStation to land Jan. 23
By Robert Lemos, ZDNet News
Published on ZDNet News: August 13, 1999, 5:00 PM PT

Financial firm Merrill Lynch predicts that the PlayStation 2 -- Sony Corp.'s next-generation game machine -- will hit Japanese shelves on Jan. 23 at a hefty price of 45,000 yen (U.S. $391), according to a report published this week.

Even at that price, Sony will barely cover the cost of the parts needed to build the machine, ZDNN reported in a previous article. In addition, the machine will have to contend with Sega Enterprises Ltd.'s own game machine, the Dreamcast, which has been available in Japan for almost a year.

While Dreamcast machine will hit U.S. shelves Sept. 9 at a much more affordable $199, analysts have predicted that the PlayStation 2 will become the giant in the market.

Merrill Lynch's outlook is also optimistic. The report pegs initial shipments of the PlayStation 2 at 400,000 units with a total of 1 million consoles sold during the first three months of 2000.

Aggressive plans
Those numbers mesh with the agreements forged between Sony and its partners. For example, Sony has contracted Toshiba to manufacture the console's main processor to the tune of 1 million processors by Dec. 1999, and another million in the first quarter of 2000.

The aggressive plans will drain the company's coffers, according to the Merrill Lynch report, which predicted that Sony's PlayStation division will post a $110 million loss in the year ending March 2000.

Those losses will be temporary if demand picks up, transforming into a $130 million profit by the following year. High software prices will contribute to the turnaround, with the 10 initial titles at an average price of 8,000 yen (U.S. $70) each.

The report said to expect more details at the Tokyo Game Show in September.

To bad PS2 launched in Japan on March 4, 2000 for 39,800 yen. The average price for launch titles were 6,800 yen (or lower as the most expensive was at 6,800 yen).

For production shipments go to
http://www.scei.co.jp/corporate/data/bizdataps2_e.html

2000/03/06 720,000 units (Japan only)
2000/03/15 1 million units (Japan only)
2000/03/31 1.41 million units (Japan only)
2000/05/24 2 million units (Japan only)

BTW, PS2 was launched in the US on October 26, 2000 at $299.99 with an HDD bay

As you can see the big body unstoppable Merrill Lynch can be wrong too.[/pulling card time]




*thanks to one @ B3D who actually posted this

 

[sonicfan]

[Pulling card time]

This is Merrill Lynch's report in 1999 about the price of the PS2.


http://news.zdnet.com/2100-9595_22-515432.html?legacy=zdnn







*thanks to one @ B3D who actually posted this

Hmmm, I wonder where that first came from.....

PS2 week in review

PlayStation 2 Price, Ship Date Info Leaks Out
Click here for the story.
According to Merrill Lynch analyst reports, first reported by Gaming-Age, the Japanese PlayStation 2 will ship on January 23, 2000 in Japan for a price of Y45,000 ($US 391). Merrill Lynch, which received the information from Sony, also reported that 400,000 systems will initially ship, followed by another 600,000 by the close of March.

The GA archives only go back to 2000.

 

[AJ_]

So what do we have here? Holiday season 2006 we have
A.) PS3 for $500 (without a HDD)
B.) Xbox 360 for $250 (with a HDD)
C.) Revolution for $199 (with 512MB of Flash memory)

I'm sorry I just don't see that happening.

Neither do I. Even with new management it is rather safe to assume that Sony performs well under pressure and they will most likely find ways to reduce BOM before the launch (albeit dropping Blu-Ray this late in the game is probably a bit too melodramatic).

One less know fact is that Sony actually dropped the price of PSP by about $100 only 4-6 weeks before the Japanese price announcement. They originally had planned for a higher pricepoint and it looks like they were planning to make real money from PSP hardware (which they by the way still do, but not quite as much). The final price point was lower because major publishers (EA, Atari etc.) started to wind down their PSP investments because they didn't believe that PSP would turn into a major platform with the original planned price point.

Of course Sony then announced PSP in Japan with $199 price point and has been succesfull in hiking up the price point in the markets that followed later.

This was rather frustrating for many of the publishers though as they first ramped up teams and projects and then when Sony communicated price points they started winding down some of their ops only to ramp them up again after the Japanese price announcement.

Curiosly enough Sony is absolutely brilliant in creating perceptions like this. With PSP world and the dog was stunned by the $199 price point in Japan and everyone for some durange reason bought into that. Yet today the price point in US is still $249 and Europe retails close to €299.

I fully expect Sony to use this roll-out format for PS3 (why wouldn't they since it seems to work so well and the press never learns). PS3 will be launched in Japan with price X, 6-10 months later in US with price X + $100, and 6-10 months later in Europe with price X + $150. People will get so exited about early videos and low Japanese price announcement that they'll buy into that and won't complain when later when PS3 hits their markets with higher price points. Oh, well..

 

[Lord Error]

I fully expect Sony to use this roll-out format for PS3 (why wouldn't they since it seems to work so well and the press never learns). PS3 will be launched in Japan with price X, 6-10 months later in US with price X + $100, and 6-10 months later in Europe with price X + $150. People will get so exited about early videos and low Japanese price announcement that they'll buy into that and won't complain when later when PS3 hits their markets with higher price points. Oh, well..

Press never learns? Sony only did what you described with PSP. PS2 on the other hand was cheaper in US than it was in Japan. Actually, even PSP had basically identical price as in the Japan since the price for the value pack in JP was also around $250 (slightly more actually, and they didn't even get a free movie)

 

[DCharlie]

"Press never learns? Sony only did what you described with PSP. PS2 on the other hand was cheaper in US than it was in Japan. Actually, even PSP had basically identical price as in the Japan since the price for the value pack in JP was also around $250 (slightly more actually, and they didn't even get a free movie)"

... we got a 19800 yen model, the americans took it in the ass because that model has never existed!

Get used to the shafting ! Japanese for the subsidy total! "It's like Pearl Harbour"

 

[Kung Fu Jedi]

Isn't the value of the US dollar a lot less vs. the Yen then it was back in 2000? That may account for a higher price here in the States.

 

[AJ_]

Press never learns? Sony only did what you described with PSP. PS2 on the other hand was cheaper in US than it was in Japan. Actually, even PSP had basically identical price as in the Japan since the price for the value pack in JP was also around $250 (slightly more actually, and they didn't even get a free movie)

Pardon me for being slightly cynical with regard to press. But yeah, they never do learn...

Japan commands way significant halo effect to gaming press. When Sony announces launch dates or price points press gets exited about them and reports them as global expectations. Yet this is typically not the case. Case PS3, should press report realistic expectations to lauch dates (no, certainly not spring '06) for relevant markets and realistic price points (about +$100 for US and +$150 for Europe) the consumer impact would be significantly lower. Then again one of the major functions of the gaming press is to get consumers exited about this stuff and reporting realistic expectations wouldn't do the trick, now would it?

The part that's misleading to regular consumers is managing the expectations. With PS2 all of us were waiting for that to ship outside of Japan after the initial launch impressions. And that's was a lot longer wait than most people believed (huge generalisations here I agree, but anyway). Given Sony's operating model you don't have to be sherlock holmes to figure out that they're likely applying the same format for PS3, yet US and European press are mostly talking about spring '06 launch when it's likely to be winter '06 for US and spring '07 for Europe.

And yes, press is currently reporting KillZone videos as the real thing, right? So much for learning curve.

 

[AJ_]

BTW: Just to clarify my take on the press.

A major function of the press is to disseminate information. But another just as important function of the press is to generate exitement among consumers. Gaming industry could hardly survive (or at least grow in the current scale) should press fail to execute with latter function.

If majority of gaming press would start to report news in a boring matter of factly kind of way the whole industry would lose as the end result.

In this particular situation Sony has an unfair advantage with press. They are in a position where they can launch in a single market, create hype, and sit down to work on the cost shrinks before ramping up to volume production. This is unique to Sony and a rather desirable position that they've worked hard to achieve and there's nothing wrong with that. Business is about finding competitive advantages and sustaining them and Sony's playing a brilliant game with this one.

 

[DarienA]

In this particular situation Sony has an unfair advantage with press. They are in a position where they can launch in a single market, create hype, and sit down to work on the cost shrinks before ramping up to volume production. This is unique to Sony and a rather desirable position that they've worked hard to achieve and there's nothing wrong with that. Business is about finding competitive advantages and sustaining them and Sony's playing a brilliant game with this one.

How is this position unique to Sony? Any of the other hardware manufacturers can choose to do the same.

 

[inpHilltr8r]

I thought everybody knew that? :lol

For values of everybody that didn't include myself, the poster I was replying to.

I mean, 'cmon, a bunch dubiously slanted reports, on a site with 'spartan' in the url, tell me your curiousity wouldn't have been tweaked. Thought for a moment we had one of them 'viral marketeers' I keep hearing so much about. :lol

 

[AJ_]

How is this position unique to Sony? Any of the other hardware manufacturers can choose to do the same.

The unique part is Sony's presence in Japan. Gaming market has been driven by Japan in the past. This has enabled Sony to grab global mindshare while they've restricted supply in other markets.

In many ways I see this changing. US is creating major IP's like GTA or Halo and because of this I doubt whether MS should engage in a, rather bloody I'm afraid, battle over Japan. In fact I'd go as far as argue that now MS could and should focus on dominating the US market. US and Europe also have a halo effect (US media has reasonable impact to Europe) so this might be valid strategy.

But not for this round. For the upcoming next gen race MS has to do what they can to capitalize against Sony's restricted markets approach, besides MS has the fund to back up this kind of strategy.

 

[soundwave05]

I think PS3 pricing will be something like this


North America - $300-$350

Japan - $400

Europe - $400

They'll sell for lower in the U.S. market, because that's going to be their toughest market.

And no, that does not violate any anti-trust or dumping laws.

 

[DCharlie]

"Isn't the value of the US dollar a lot less vs. the Yen then it was back in 2000? That may account for a higher price here in the States."

108 yen to the $ in 2000
vs
110 yen to the $ in 2005

 

[Pedigree Chum]

The day PS3's price is unveiled is going to be a landmark in GAF history. I'm already stocking up on the popcorn.

I know, that $300 price point is gonna sting a lot of folks here.

:lol

Edit: Whoops, didn't mean to bump this. Don't ban me!

 

[zero44]

The PS3 will not be above $400. I can't believe people actually argue this. The ONLY way it will be above $400 is with store bundles OR Sony has decided that they dont want to 'win' the console wars next-gen.

:lol

 

[Tenacious-V]

"Salt, I'd like you to meet Wounds" :lol :lol

 

[aerofx]

:lol Razoric OWNED!!!!!!

 

[Aryuken]

Ooooh man, this is a harsh bump.

this was totally :

 

[Cronox]

So much crow eating in this thread... And what about the guy who said he'd eat his hat if PS3 launched at more than $399? I want hat-eating stat.

 

[Sgt. Killjoy]

[Pulling card time]

This is Merrill Lynch's report in 1999 about the price of the PS2.


http://news.zdnet.com/2100-9595_22-515432.html?legacy=zdnn



To bad PS2 launched in Japan on March 4, 2000 for 39,800 yen. The average price for launch titles were 6,800 yen (or lower as the most expensive was at 6,800 yen).

For production shipments go to
http://www.scei.co.jp/corporate/data/bizdataps2_e.html

2000/03/06 720,000 units (Japan only)
2000/03/15 1 million units (Japan only)
2000/03/31 1.41 million units (Japan only)
2000/05/24 2 million units (Japan only)

BTW, PS2 was launched in the US on October 26, 2000 at $299.99 with an HDD bay

As you can see the big body unstoppable Merrill Lynch can be wrong too.[/pulling card time]




*thanks to one @ B3D who actually posted this

but they were predicting the price.

 

[sprsk]

we already have a thread for this you retards