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Kutaragi Speaks on $1 billion Loss

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