Sony, Analysts React To PS3 Launch

cdneng2 writes "Sony may be aware that something is just not right. There's a reshuffling of management occurring within Sony. Kazuo Hirai is set to head their videogame unit, as Ken Kutaragi has been bumped to the Sony board. Jack Tretton, former COO for SCEA, is now the president and CEO of that arm of the company. There's no word on the reasoning behind these position shifts. On the same day, Namco announced that they must sell 500,000 games to begin making profit on PS3 games. A Financial Times article confirms speculation on how hard it will be for Sony to make money, as analysts with UBS predict that 30 games must be sold per PS3 for them to break even." To add insult to injury, EA CEO Larry Probst has said PS3 numbers were lower than expected. Current thinking is that Sony managed to ship roughly half of the 400,000 units they were promising.

Re:What is going on here?

[PygmySurfer]

Why? The PS3's performance effect's Sony's bottom line NOW. We know plenty, like the significant loss Sony is taking on each console sold, the exceptionally low number of units available, and the increasing number of former exclusives dumping Sony and going multi-platform. The linked stories include facts such as Sony having to sell 30 titles per console to make a profit, versus 8 for the PS2, Namco has to sell 500,000 units to break even, etc. There are also educated guesses (not just fanboy guesses but educated guesses by top people at EA, who would know this sort of thing) that Sony has shipped about half of the units they claimed they were going to ship (which was already cut drastically prior to launch). We also have other launches to look at, like the 360 (not so great), Wii (pretty good), and the PS2 (pretty good). Microsoft sold 900,000 units in North America by the end of 2005, another 500,000 in Europe (Can't find much for 2005 in Japan - 62,000 units in the first 3 days, and 103,000 units by April of '06). Sony probably won't even sell as many Worldwide (well, Japan and North America, since they cut out Europe) by the end of '06 as MS did in North America alone in '05.

Nintendo sold 600,000 Wii's in North America in the first eight days of it's launch, and they're aiming for 4 million worldwide by the end of '06. Obviously, it's been a success for Nintendo. Since they've been on the market for the same amount of time, can we not claim the PS3 launch hasn't been that great, and that Sony is hurting?

Re:Alas...

[Anonymous Coward]

I don't know how everyone is talking about a mass shortage of nintendo controllers for the Wii. Every walmart in my area has full racks of Wii nunchucks and Wiimotes as well as the skins and lanyards.

Re:Let's see

[calbanese]

Now, right before Christmas, the 360 is selling for $100.00 many places. If it is doing well, the price would stay high until after the first of the year.

Please tell me where. Microcenter has the "best deal" and that requires $100 rebate, $100 voucher for getting opening a credit card, and a $200 voucher for getting Vonage for 2 years. That's ONE place and its Microcenter, not Microsoft, offering the deal. The best you can do is about $340 from Overstock or Dell, though I think those deals are over now. Amazon had its $100 deal for 1000 Core systems - and Amazon's servers were hosed, along with endless bitching about it being a scam on digg. Amazon's server crashed. That just doesn't happen unless demand is there.

But please tell me where I can get a $100 Xbox 360. I would bet 75% of slashdot readers would get one at that price as well.

Re:PROMOTED???

[the Brightside]

Hara kiri, actually, is the transliteration, though in Japan you'd say seppuku.

Re:Why do these pixels cost more

[NeutronCowboy]

Here's the problem with high-resolution graphics and lots of polygon-pushing: someone has to create the art for it. In Mario's times, you only needed to be able to approximate a plumber using about 200 pixels and 256 colors. Quite frankly, I can do that. In about 1 hour. For $5. Well, okay - I probably would have to get an artistically inclined friend to do it who knows how to handle Paintshop. But the point is that I don't have to worry about shading, proportionality, or anything like that. Compare that with today's creatures: they need to look good while at a resolution of 1920*1080, have proper normal maps, be based on great-looking models made by quality artists (no sucky part-time artist will be able to make stuff that looks good with these requirements). Not only that, but you need lots of art. Far more than for other games that didn't have that space or that processing power. Let's see - 6 million dollars, assuming 50K per artist, that comes to about 50 artists working for 2 years on a game. Sounds about right these days, especially when you're talking big-budget game.

Can you make low-budget games? Sure can. But expect to get ripped on sucky graphics, just like the Wii Sports series did.
 

30 games to break even on the PS3?

[sycomonkey]

Damn. I would consider myself a rather big fan of the Gamecube, it is the console I own the most games for, and I own far less than 30. It's more like 18 or so. I only have 6 or 8 PS2 games. I don't know how Sony is going to pull themselves out of this mess, but they better think fast...

Re:Ouch

[frederec]

Over the life of a system, thirty really isn't that bad. I mean, I recently counted that I have just a tad under one hundred ps2 games (not a single one of them a sports game). That's more than any other console I've owned, though I easily have more than half that number in PS1 games as well as Game Boy Advance games. My DS library is moving up too.

My point is, thirty games does seem like a hell of a lot when a console first launches, but over the life of a system it's a lot easier to do that than you may think. If the PS3 lasts about as long as the PS2, then this might be fine. Of course, I'm also one of the people that won't even think about buying one at $600, so who knows.

Re:Let's Googlewhack!

[HappySqurriel]

... easily could have sold them for over $1,000 a piece. That is still less than the average price on e-bay for the premium units.

Maybe I have odd timing but lately when I search eBay for 'PS3' I see that most of the PS3 units with less than 10 minutes remaining on the auction have bids in the $700-$800 range for 20GB model and $800 to $900 for the 60GB model; most of the auctions that have starting bids at $1000 or higher end without a single bid on them. Now, I don't doubt that some systems have sold for more than $1,000 but I think that those are becoming the exception not the rule.

If Sony set the MSRP at higher than $1,000 it would have been a disaster even if the system sold out initially because for the next 2 to 3 years any advertizement on TV that showed a PS3 game people would think "I don't wat to spend $1000 for that;" even if they reduced the price when supply went up (and advertized it heavily) all people would think is "The PS3 went from $1,000 to $600 in 6 months so it should be down to $300 by next christmas. I can wait for that before I buy the system". I believe it was Iwata who said that it wasn't a good idea to reduce the price of a system too early or too often because customers would begin to anticipate price drops.

Re:Just how do you win something like this?

[datawhore]

Just FYI, according to the same iSuppli article, Microsoft is actually making a profit now on each Xbox 360. I believe the # for the premium unit was around $325.
Microsoft has done an excellent job managing their supply chain and manufacturing risk. They knew what it took early on to make a technically advanced yet low risk and relatively unchallenging platform to program for, and they're reaping the rewards now. They negotiated good contracts w/ IBM and ATI, while Sony went the bleeding edge route with the Cell and in turn a) came out with an inferior and costlier product than what was planned (less powerful, terrible yields), and b) had to come back to Nvidia last minute paying through the nose for the graphics that the Cell couldn't do.

I'd say most of the goofs are not on the marketing end at Sony - the product basically sells itself given the 110m install base of PS2s. By merely existing it was destined to become #1, but unfortunately it doesn't exist for most people, and even when it does it is out of reach for most previous customers. Marketing played the cards they was dealt from the manufacturing end. Sure they took some risks in hyping things up, but they were following the same basic (successful) strategy as the PS2 (anyone remember the marketing for the emotion engine?)