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PlayStation 3 Delayed, Over $800?

Posted by Zonk on Sat Feb 18, 2006 03:52 PM
from the not-a-good-weekend-for-sony dept.
AWhiteFlame writes "Cnet is reporting that a research report issued by Merrill Lynch suggests that the Sony PlayStation 3's American release may be postponed until 2007. From the article: 'The analyst firm proposed the idea that high costs and Sony's decision to use an 'ambitious new processor architecture--the Cell' is making it look like the company might not be able to meet its goal of getting the PS3 out in the U.S. this year.' Sony did not immediately respond to a request for comment." The official report (pdf) would also seem to indicate that the console will be somewhere in the neighborhood of $900 when it launches.

Related Stories

[+] Sony Denies PS3 Delay 188 comments
Eurogamer reports that Sony is flatly denying the delay of the PlayStation 3. From the article: "Sakaguchi was responding to allegations made by Merrill Lynch analyst Joe Osha in a report published late last week, in which Osha claimed that the PS3 could launch in autumn in Japan, with a US launch possibly being delayed to early 2007. 'There is no change in our original plan to release the console in spring 2006," Sakaguchi told the press in Tokyo, referring to the company's only stated goal for the launch so far - namely that the console will appear in at least one territory, most likely Japan, this spring.' They have lots of opportunities at GDC and E3 to change the public perception that their next console is still very much a work in progress.
[+] PlayStation 3 Not So Much Delayed? 170 comments
Chris Morris, on the CNN Game Over column, points out that even if Merrill Lynch's suggestion that the delayed initial launch of the PS3 is true, that's unlikely to affect the U.S. launch of the console. From the article: "Logic sometimes isn't enough, though. To get additional perspective on the situation, I spoke with several of Sony's partners (who are in regular contact with the company) and competitors (who keep a close eye on the PS3's launch window) about the report. No one was willing to talk on the record for fear of reprisal, but the consensus was nearly universal. The promised spring launch (which was expected in Japan, but not North America) will likely be pushed back, they said. The North American launch, which was always expected to occur later this year (November is the consensus), is not expected to change. Europe may well not see the PS3 until next year." The price tag reported, though, is still probably accurate. C|Net has a breakdown of the PlayStation 3's components.
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  • Apple to Sony? (Score:5, Interesting)

    by Yocto Yotta (840665) * <thanksillturnaro ... ]com ['il.' in g> on Saturday February 18 2006, @03:53PM (#14751221)
    I'm not an insider by any means, nor a PS "fan boy," but isn't it likely that this is just very intelligent marketing by Sony? It's generally accepted that a game console launching at $900 (hell, $600), isn't going to happen in this day and age of mass market acceptance being an essential requirement of the development of any piece of electronics. This falls right in line with the Blueray machine costs . . . make it seem like astronomically expensive hardware fit for a king, and then release them at a fraction of the price, and sooner. I don't care when they release it, but I'm betting it will be this year, and at a $500 price point or lower.

    Apple just did it with the Intel switch. First they've started releasing the stuff 6 months earlier than they said they would, and now their upgrading the processor clock speeds for free. Who wants to bet that wasn't in the writing already for the entire gestation of their Intel plans. If there were two companies I would compare hype-capabilities apple-to-apple (sorry), it would be Apple and Sony.
    • Re:Apple to Sony? by Yocto Yotta (Score:3) Saturday February 18 2006, @03:56PM
    • Re:Apple to Sony? by dslbrian (Score:2) Saturday February 18 2006, @04:01PM
      • Obligatory RTFA. by NoMoreNicksLeft (Score:3) Saturday February 18 2006, @04:06PM
        • Re:Obligatory RTFA. by Andrew Tanenbaum (Score:3) Saturday February 18 2006, @04:12PM
          • Re:Obligatory RTFA. by NoMoreNicksLeft (Score:2) Saturday February 18 2006, @04:30PM
          • Re:Obligatory RTFA. by CastrTroy (Score:3) Saturday February 18 2006, @04:58PM
            • This is counter-intuitive, so you don't lose points. But they lose more if he does buy it. Why? Because in the initial frenzy for the machine, there won't be enough. If someone buys one like he suggested, that's a machine no one else can buy. He's keeping it off the market, in effect. Depending on how demand goes for games, Sony may not be able to justify making any more of them.

              Where as if he lets a hardcore gamer buy it, sales might be so brisk of games, that Sony decides they will eventually make a profit, keeps going.

              So during the debut of the thing, it's entirely possible that him buying the machine could hurt them worse than not buying it (since he has no control to keep everyone from buying his unit). What you say only becomes true if he can convince others not to buy it either, an unlikely proposition.
              [ Parent ]
            • Re:Obligatory RTFA. by Anonymous Coward (Score:1) Sunday February 19 2006, @07:03AM
            • Re:Obligatory RTFA. by squidguy (Score:1) Sunday February 19 2006, @10:09AM
            • Re:Obligatory RTFA. by coopex (Score:1) Sunday February 19 2006, @07:13PM
          • Re:Fraud! by nitehawk214 (Score:2) Saturday February 18 2006, @08:10PM
            • Re:Fraud! by Andrew Tanenbaum (Score:2) Saturday February 18 2006, @10:17PM
        • Re:Obligatory RTFA. (Score:5, Insightful)

          by romiz (757548) on Saturday February 18 2006, @04:54PM (#14751592)
          The PS3 may be a loss leader, but there still is a limit. If the manufacturing cost is $900, and sony sells its console at only $500, it means that the company estimates that it can get at get back those $400 in a way or an other.

          Given the fact that the usual margin for the console manufacturer on game sales is 20%, that makes only $12 for each $60 game. Simple maths says that in those conditions, sony would have to sell in average more than 30 games per customer to break even on the machines it sold with a so large discount.

          And except for the rare hardcore gamer, how many people buy 30 games for a machine in one generation ?
          [ Parent ]
        • Re:Obligatory RTFA. by BewireNomali (Score:3) Saturday February 18 2006, @04:57PM
        • Re:Obligatory RTFA. by timeOday (Score:2) Saturday February 18 2006, @04:57PM
        • Re:Obligatory RTFA. (Score:5, Informative)

          by Total_Wimp (564548) on Saturday February 18 2006, @05:12PM (#14751689)
          The article states that $900 is the cost to Sony. It won't cost that retail, they always take a hit. The original Xbox cost more to make, than it sold for. It's called a loss leader, look it up.

          Then someone, probably many someones, are smoking crack.

          Explain to me how Sony is going to make up $400 per console on average if it costs them $900 and they sell for $500? A loss leader is not some magical thing where you sell a $900 item for half price and make a profit. The way it works is that you somehow manage to make more than the cost of the item through some other kind of sales. My question to you is: give me some kind of business model where Sony is going to make $400 bucks per console off some other kind of sales? Put another way, that's about 7 games. If the games cost nothing to make and Sony took home 100% of the profit, they'd have to sell 7 games for each console to break even.

          Sony is participating in a mature business where it is the market leader. Market leaders don't give away very much in order to gain market share, because they already have market share. They're in the business to make a profit. They may, in fact make more of a profit off blades than razors, but they won't give away a razor that costs them more than they can make in blades.

          That said, TFA is counting costs from a place that is not based in reality. As the IP owner and manufacturer of the Blue-Ray drive, it will not cost Sony anywhere clos to $350 to manufacture a drive and put itinto a Playstation. Their R&D and manufacturing facilities costs can not be put into a per-unit cost in the same way as if they were buying the drives from Toshiba. You can make any kind of argument you want here about 3-year right-offs and the like, but the fact is that those dollars are in reallity going into a whole industy and not just the PS3. Claiming the Blue-Ray drive as a $350 manufacturing cost of the PS3 is like claiming it costs $350 per unit to manufacture Windows Vista. You may be able to cook the numbers that way, but that kind of per-unit cost just isn't relevant to this particular kind of manufacturing.

          [ Parent ]
        • Re:Obligatory RTFA. by ClamIAm (Score:2) Saturday February 18 2006, @07:18PM
        • Re:Obligatory RTFA. by Fulcrum of Evil (Score:2) Saturday February 18 2006, @07:32PM
        • Re:Obligatory RTFA. by nomadic (Score:2) Saturday February 18 2006, @09:29PM
        • 1 reply beneath your current threshold.
      • Re:Apple to Sony? (Score:5, Funny)

        by Citizen of Earth (569446) on Saturday February 18 2006, @07:00PM (#14752221)
        Hmm, I think the cons are winning

        I think you're overestimating Microsoft's chances.
        [ Parent ]
    • Re:Apple to Sony? by H310iSe (Score:1) Saturday February 18 2006, @04:02PM
    • Attention Zonk: Summary is misleading by Anonymous Coward (Score:1) Saturday February 18 2006, @04:06PM
    • Re:Apple to Sony? (Score:5, Informative)

      by ThisIsForReal (897233) on Saturday February 18 2006, @04:19PM (#14751370)
      (http://cv-industries.com/)
      No, it's not an exaggerated look at the cost of blu-ray. When DVD players first became available in the consumer market around 1995, the players all cost over $1k. Sure, the drive is $30 now, but not back in the day. I remember in 1997 when the first DVD-R drive was made, it was marketed to the military and retailed for $16k. $350 for blu-ray is the truth, not a marketing ploy.
      [ Parent ]
      • Re:Apple to Sony? (Score:5, Interesting)

        by NutscrapeSucks (446616) on Saturday February 18 2006, @05:05PM (#14751637)
        Well, the reason Sony is sticking a BluRay drive into the PS3 is to bring up mass production as quickly as possible and force economies of scale. Of course, that also means the PS3 is delayed until BluRay has all the kinks worked out.
        [ Parent ]
      • Re:Apple to Sony? by Kjella (Score:2) Sunday February 19 2006, @01:42AM
      • Re:Apple to Sony? by masterzora (Score:1) Saturday February 18 2006, @05:23PM
      • Re:Apple to Sony? by NutscrapeSucks (Score:2) Saturday February 18 2006, @11:25PM
      • Re:Apple to Sony? by Keeper (Score:2) Sunday February 19 2006, @12:02AM
      • Re:Apple to Sony? by amliebsch (Score:2) Sunday February 19 2006, @06:47PM
      • 4 replies beneath your current threshold.
    • Re:Apple to Sony? by dawdygod (Score:1) Saturday February 18 2006, @04:28PM
    • Re:Apple to Sony? by CastrTroy (Score:2) Saturday February 18 2006, @04:55PM
    • Re:Apple to Sony? (Score:4, Insightful)

      by bbzzdd (769894) on Saturday February 18 2006, @05:05PM (#14751640)

      This has always been Ken Kat strategy from day one. Hype the PS3 as a supercomputer and go on record that it will be "expensive." Then when all looks dire (and just in time for E3 '06) expose the true price point for $399 USD -- "Yes $399, to let it go at this price is killing us. Did I mention it's a supercomputer?"

      If Sony knows one thing, it's how to hype a product.

      [ Parent ]
      • Re:Apple to Sony? (Score:5, Insightful)

        If Sony knows one thing, it's how to hype a product.

        I think it's more accurate to say "If Kutaragi knows one thing, it's how to hype a product". Until Kutaragi came along, Sony was a very different company: very good industrial design, solid and sometimes innovative technology, understated marketing.

        The PS line turned all that on its head, and given other changes which have loosened the company's traditional moorings (e.g. Sony's founder retiring), Sony itself seems to have drifted in that direction too. [It's hardly a sure thing -- apparently the "mainline" management at Sony loathes Kutaragi -- but I guess in the absence of a strong leader, they end up following the money in the end...]
        [ Parent ]
      • Re:Apple to Sony? by mink (Score:1) Wednesday February 22 2006, @05:04PM
    • Re:Apple to Sony? by ceoyoyo (Score:3) Saturday February 18 2006, @05:24PM
    • Re:Apple to Sony? by Jezza (Score:2) Saturday February 18 2006, @07:48PM
      • 1 reply beneath your current threshold.
    • What's with the delay? by wormnet.org (Score:1) Saturday February 18 2006, @08:32PM
    • Re:Apple to Sony? by Onuma (Score:1) Sunday February 19 2006, @11:01AM
    • Apple to Sony? by umbrellasd (Score:2) Sunday February 19 2006, @03:07PM
    • Re:Apple to Sony? by damiam (Score:2) Saturday February 18 2006, @05:53PM
    • Re:Apple to Sony? by Yocto Yotta (Score:2) Saturday February 18 2006, @06:32PM
    • 2 replies beneath your current threshold.
  • No worries (Score:4, Funny)

    by Squishy Eyeball Jeff (796823) on Saturday February 18 2006, @03:54PM (#14751228)
    Maybe by 2007 Xbox 360s will actually be in some stores around here, and then I can have my choice.
    • Re:No worries by geekd (Score:2) Saturday February 18 2006, @04:42PM
    • Re:No worries (Score:4, Funny)

      by Belseth (835595) on Saturday February 18 2006, @06:35PM (#14752096)
      Maybe by 2007 Xbox 360s will actually be in some stores around here, and then I can have my choice.

      I hear by then they are supposed to have the Duke Nuke Em Forever port done as well.

      [ Parent ]
      • 1 reply beneath your current threshold.
    • 1 reply beneath your current threshold.
  • So.... (Score:4, Insightful)

    by gclef (96311) on Saturday February 18 2006, @03:56PM (#14751237)
    ...the report says basically "we don't know anything, but we think it's hard, so they won't make it."

    Right. Remind me to call them nextx time I need random guesswork done.
    • Re:So.... by dlasley (Score:1) Saturday February 18 2006, @04:48PM
      • Re:So.... by dlasley (Score:1) Saturday February 18 2006, @05:01PM
    • 1 reply beneath your current threshold.
  • This sounds... (Score:3, Insightful)

    by demondawn (840015) on Saturday February 18 2006, @03:57PM (#14751242)
    (Last Journal: Monday December 18 2006, @12:45AM)
    ...more than anything like Merril Lynch is trying to get people to dump Sony stock so they can buy it up, then make a killing if the PS3 matches their REAL expectations. Or maybe I have my tinfoil hat wrapped a little tightly?
  • $900? (Score:3, Funny)

    by general_re (8883) on Saturday February 18 2006, @03:57PM (#14751245)
    (http://blog.darwincentral.org/)
    Damn, my first car cost less than that. Granted, it was a piece of shit, and it didn't have the latest and greatest Cell HypeEngine® built in, but it did have a nice big back seat (wink, wink), which produced a lot more fun than any Sony equipment I've ever owned.
  • Great Marketing by Anonymous Coward (Score:2) Saturday February 18 2006, @03:58PM
  • $900???? (Score:5, Interesting)

    by phlegmofdiscontent (459470) on Saturday February 18 2006, @03:58PM (#14751247)
    Shit, for that amount of money, I might as well just get a new PC.
    • Re:$900???? by azpenguin (Score:2) Saturday February 18 2006, @06:53PM
      • Re:$900???? by laffer1 (Score:2) Sunday February 19 2006, @12:48AM
    • 1 reply beneath your current threshold.
  • by Trespass (225077) on Saturday February 18 2006, @03:58PM (#14751248)
    Maybe call it the 'Neo Geo'. :P
  • Before we all go nuts... (Score:5, Informative)

    by Snamh Da Ean (916391) on Saturday February 18 2006, @03:58PM (#14751251)
    ...pointing out that this is clever marketing from Sony, or this is just some whacky stuff from Wall Street, remember that the analysts who wrote this report make their livings and substantial salaries from analysing their target companies. They know these companies inside out, because if they didn't they would be out of a job before they knew. When you consider their balls are really in a vice grip because if they get their predictions their wrong, their companies stand to lose a lot of money, then you give a bit more credence to reports of this nature.

    Having read the pdf file, the analysis seems quite reasonable, and well considered, and utltimately quite persuasive. Whether it persuades you is a different matter, but before you dismiss the report out of hand, remember that the authors spend a lot of time trying to understand and predict what Sony is going to do, and therefore are better qualified than most third parties to reach conlcusions about slippages and prices.
  • Why bothering with non-official reports? by lbbros (Score:2) Saturday February 18 2006, @03:58PM
  • Price (Score:3, Informative)

    by truthsearch (249536) on Saturday February 18 2006, @03:59PM (#14751254)
    (http://seenonslash.com/ | Last Journal: Friday May 11 2007, @04:02PM)
    the console will be somewhere in the neighborhood of $900 when it launches.

    Somewhere in the neighborhood of $900 to build when it launches.
    • Re:Price by jericho4.0 (Score:2) Saturday February 18 2006, @04:11PM
    • Re:Price by TrappedByMyself (Score:2) Saturday February 18 2006, @05:22PM
  • Remember: Sony, unlike Microsoft, is a hardware company, and it still owns its own chip fabs. In fact, its a direct investor in the IBM East Fishkill Fab where the Playstation processor will be made. [techweb.com] That would suggest that Sony will be getting their Cell processors at pretty cost to cost.

  • Amazing (Score:3)

    by maynard (3337) <maynard@jCHICAGOmg.com minus city> on Saturday February 18 2006, @04:01PM (#14751262)
    (http://www.daduh.org/ | Last Journal: Friday July 20, @11:20AM)
    IBM must be having fab problems with Cell at 90nm. Perhaps they want to wait for the transition to 65nm for better quality control. I bet if IBM and Sony had decided to go with six SPEs per Cell rather than eight, and cut the die down in size, they wouldn't be having these problems.

    If this is true it will give MS and the 360 a huge advantage in the marketplace. Further, I don't think Cell is going to be significantly more powerful than the Xenon, even with single precision floating point (the vast majority of Cell die space). I think IBM and Sony really stumbled here, both from a technology perspective - and now from a manufacturing and quality control perspective.

    Wow. Maybe Microsoft really has kicked both their asses. In everything, from new technology, manufacturing, and time to market. Sheesh!
  • Massive Inflation? (Score:5, Funny)

    by Absolut187 (816431) on Saturday February 18 2006, @04:02PM (#14751269)
    Don't worry. By 2007, a Big Mac will cost $35.

  • Good for Nintendo (Score:5, Insightful)

    by diamondmagic (877411) on Saturday February 18 2006, @04:02PM (#14751271)
    (http://redjacket.ws/)
    The Revolution is definitely coming out before at least thanksgiving, and definitely under $300. Why get somthing with fewer but more expensive games that, all on top of that, costs 2-4 times more?
  • Cost estimates (Score:4, Insightful)

    by Jarlsberg (643324) on Saturday February 18 2006, @04:05PM (#14751289)
    I'm not surprised by these numbers, though I'd point out that the report provides only rough estimates of the costs to build the units. Still, Sony is building this unit with a new unproven processor, a first-to-market Bluray drive and some expensive ram kits, on top of everything else, so I'm not really blown away by these numbers.

    Of course, to stay competetive, Sony will never sell the PS3 for what it cost to build it, but this really does put a question mark on how low they can afford to go.

    The report also speculates on the ramifications for other companies, such as Nvidia, ATI, EA and others. It's a good read.

  • by G3ckoG33k (647276) on Saturday February 18 2006, @04:09PM (#14751308)
    Anything above 600$ will hurt, as my wife would try to kill me...
  • The report comes up with the $900 estimate by summing up cost estimates for each of the components, but its estimates for the prices of those components is overly pessimistic. In particular, it predicts that the Blu-Ray drive will cost $350 initially (!?), that the CPU will cost $230 initially, and that the unit will not be sold at a loss. They don't say how they arrived at those, but $350 for an optical drive in bulk is not believable at all. If Blu-Ray drives cost anywhere near that much, then the PS3 will ship without them. A more reasonable estimate is that the PS3 will cost $500 at launch, and come down to $300 quickly.
  • $900? Not a chance. (Score:3, Interesting)