Archive for December, 2005

Not long ago I mentioned that Merrill Lynch Japan is predicting a $1.18 billion dollar loss for Sony on the PS3 during its first year. Mr. Ken Kutaragi has responded:

Ken Kutaragi … understandably refutes MLDS’ analysis; “Whether consumers think a product is expensive or cheap all depends on the balance between its appeal and price,” said Kutaragi, again hinting that the PlayStation 3 may indeed be a pricy piece of kit. “Our idea is for consumers to think to themselves, ‘Right, I’ll work more hours and buy it.’ We want people to feel that they want it, no matter what. When Nintendo was selling its 16-bit machine at around 12,500 yen ($114), we sold the first PlayStation at 39,800 yen ($364). The press was saying that it was expensive, but it was a huge hit. It’s the same thing with the PlayStation Portable from last year. The Game Boy Advance is a similar handheld gaming machine, and it costs less than 10 thousand yen ($91). On the other hand, our PSP had cost 25,000 yen ($229). And there were people lined up overnight to buy it, and it sold out on the day of launch. It all depends on whether people want it. Of course, I’m confident that PlayStation 3 is a product that people will definitely want.”

SPoNG points out that Mr. Kutaragi is making some orange-to-apple comparisons here, but that doesn’t mean we can’t see what Sony is thinking. They obviously believe the PS3 will be something everybody wants. They obviously believe that gamers will be willing to pay a premium for it. This is not unlike Apple’s strategy to date. Give consumers an exceptional product, and expect them to pay for it.

Will it work?

On the hardware side alone, I think they have a little more work to do. Sure, the specs show that it’s about as powerful as an Xbox 360. (Once developers learn how to use all 7 SPE’s, that may change.) But it also has some extra gadgets on it like memory card readers, BlueTooth, Wi-Fi, and dual HDMI outputs. So I guess you can give a slight edge to the PS3.

But that’s not enough.

What Sony really needs is knock-out games. So far we’ve had hints that games like Unreal Tournament 2007, Lair, Fatal Inertia, and WarHawk will be launch titles. Unless the developers haven’t been showing us the real goods, those titles don’t really seem like killer-app games to me. So where are the killer-app games? Sony needs titles like MGS4, Gran Turismo 5, Heavenly Sword, MotorStorm, and Killzone. At launch. Actually, just three, or maybe even two, of those titles would be good enough to make the PS3 a must-purchase at launch.

Do you agree?

Kutaragi refutes $1 billion PlayStation 3 hole will bring SCE to its knees – News at SPOnG.com

Us PS3 fans are hoping we won’t be like the many rabid Star Wars fans exiting theatres after seeing The Phantom Menace. Disappointed. Sony is attending CES 2006 in January, and they’re getting one of the largest pavillions they’ve had in a long time, and right in the middle of the show floor. Big things are brewing in the Sony camp, and we’re all hoping that some PS3 details will be revealed.

And to that end, Sony has created a website for Sony CES 2006 information. Right now there’s not much there, but hopefully soon it’ll be full of Jedi PS3 goodness.

Sony CES 2006

PS. I just finished watching the Clone Wars cartoon episodes I hadn’t seen before (20 – 25). Man they’re good! I need the DVD.

Financially things aren’t looking so good for Sony. According to Merrill Lynch Japan the cost of a PS3 is about $494 and it will sell for $410 in Japan and $399 in North America. That will result in a loss of $1.18 billion in the first year.

Merrill Lynch Japan thinks it’s in the know when it comes to both the retail cost of the PlayStation 3, and the manufacturing cost. According to Toyo Keizai, the investment firm is saying that the PS3 is going to cost roughly US$494 to manufacture, but will retail for about $100 less, at the $399 price point. We’ve previously suggested that this would be the ideal price point for Sony, although it’s hard to know what Ken Kutaragi means when he says that the PS3 will be expensive. The fact of the matter is that the success of the Xbox 360 (or lack thereof) will probably have as much to do with the pricing of the PS3 as its manufacturing cost.

Given that Sony’s PS3 will face stiff competition from Microsoft’s Xbox 360, the chances that Sony will release its console at its production cost is slim. Under the assumption that the Xbox 360 is expected to sell at around $299, Merrill Lynch Japan predicts that Sony will sell each PS3 at the price of 44,800 yen ($410) in Japan and $399 in America. That would mean Sony would suffer a loss of more than 130 billion yen ($1.18 billion) during the first year of the PS3′s release.

Hmm, let me see. Assuming we take the $399 cost, where Sony would lose more. Divide $1.18 billion by ($494 – $399 =) $95, and you get 11,768,421. Wow. Does that mean that Sony will sell almost 12 million PS3 consoles in the first year? Wow. That would almost be worth the $1.18 billion loss!

Am I missing something? Or did Merrill Lynch Japan miss something?

ars technica – Sony PS3 could take years to break even