RSSAnalyst: PS3 Delay Likely, Cost at $800
By Ed Oswald | Published February 20, 2006, 5:07 PM
Microsoft may end up the only manufacturer with a next-generation game console on the market for at least another six months, says Merrill Lynch. A delay in Sony's PlayStation 3 could cause the electronics giant to miss the crucial holiday season in a majority of the major markets, according to analysts.
Merrill Lynch Japanese analyst Hitoshi Kuriyama told clients in a research note late last week that he was seeing evidence of a delay in the PS3 that could push the launch into autumn in Japan and late 2006 in the US. Any further delays would mean the console's debut into 2007, he warned.
Rumors of a delay in the console's development first began to circulate shortly after the launch of Microsoft's Xbox 360. However, Sony dismissed such talk, saying it was on track to release the PS3 in the spring of this year.
Behind the delays is Sony's choice to use the Cell processor and Blu-ray drive, Merrill Lynch said in a follow-up report. The initial bill of materials for the console could also reach $800, with that figure gradually falling to $320 within three years.
A delay in the PS3 could have effects on Sony's business elsewhere as well, analysts say. Supporters of Blu-ray, the Sony-backed high definition DVD format, are quick to point out a flood of the new PlayStation in consumers' hands would give the format an advantage over HD DVD.
Without the PS3, the only entry point into Blu-ray would be the prohibitively expensive units offered by Pioneer, which told BetaNews at CES 2006 that its units would retail for $1,800 USD.
However, analysts suggest a delay may be strategic, as Sony could wait until materials become less expensive before producing the systems in bulk. Sony currently faces potential hardware shortages that could limit the company to selling two to three million consoles this year.
"From a hardware standpoint, the largest exposure outside of Sony itself is Microsoft, which could benefit if the company is able to overcome supply problems with Xbox 360," Merrill Lynch wrote.
The firm estimates that Microsoft may sell as many as 10 million consoles by the end of the year. However, if the company ups its production to meet demand, some gamers may tire of waiting for the PS3 and opt for the Xbox 360.
It's an interesting problem for Sony, industry watchers say. "Sony, it seems, might have over shot in setting a technology bar, making the device quite expensive and difficult to make," wrote technology pundit Om Malik.
"The impact of this could be felt through the entire food chain - impacting graphics chip makers to software companies to even retail outlets. In other words, there should be a whole slew of fiscal resets coming."
Standing to lose the most, according to Merrill Lynch, is Nvidia, which supplies the graphics chipset for the PS3. While Nvidia says a delay in the launch of the PS3 console would not significantly affect its bottom line, Merrill Lynch disagrees.
"We think the absence of a significant PS3 ramp could hurt NVIDIA's progress towards the corporate gross margin target," the firm said. "We also think there may be a longer term impact if PS3 loses its competitiveness to Xbox360."
Nvidia rival ATI produces the graphics chipset for Microsoft's Xbox 360.
Don't you find it odd that they left out the Blu-Ray players that are $1,000 and $1,200?
Sony makes the $1,200 one.
Also, they left out that Sony will take a major cut of the cost of the PS3's which will make them probably be $400-$500.
And, kholdstare, I have checked on how much Xbox 360's are selling for on ebay for the past month, and I have never seen one go under the MSRP, including shipping, or over $300 over the normal price.
In the past two or three weeks, I haven't seen any Premiums go over $600, or any Cores go over $450.
I have seen cores go for as little as $345, and Premiums go for as little as $450.
So, slowly, as more 360's come in, people are realizing how crappy of a product they actually are.
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|So....
They will sell at a loss for the first 3 years and make it up in software.
Nothing new here, consoles have been that way for quite a while.
*shrugs*
Although it would be funny to see them try to sell it at $800 a unit. Or sad...if it succeeded.
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|fanatics will probably spend the 800 just to say they had it first
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|Yeah. We prefer to call them "Early Adopters".
Also known as "Cannon Fodder", "Beta Testers", "Bug Hunters", and "Criminally Stupid, but too rich to care".
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|yea just take a look at ebay im sure they are still actioning off xbox360's for at up till $1500 U.S. or at least thats how it was at Xmas
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|So....
They will still earn about $2-$3 billion dollars in 2006, and that doesn't include the money they will get through both BD (Blu-Ray Discs), the yet un-named PS3 online thing, and PS2 and PS3 games.
Nothing new here, except that Sony won't be making as much money, at least that's what we think.
*shrugs*
Although it would be funny to see them try to sell it at $800 a unit. or sad... if it succeeded, which it will, and they won't be $800, because Sony will take a major cut of the price, which would make them sell it at a loss of $300-$400 each for the first year, with Xbox 360's probably having a $50-$100 price drop.
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|The Merrill Lynch report states $900 not $800.
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|But we all know that neither the highest nor the lowest projected costs will be a reality. :P
Edit: The Article originally stated $900, but the title did not. It has since been updated.
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|I thought is said $920. I thought I was losing it.
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|Merill Lynch made an error in the calculation. Their actual bill of materials adds up to $800.
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|Sony has already denied this claim...
http://www.gamesindustry...tent_page.php?aid=14821
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|I'm not surprised. They'll deny it until the last possible second if it is true, because call sony whatever you want, they're not bafoons when it comes to marketing. They know how important it is to get the PS3 released as early as possible without selling a disaster. However good or bad XBoX 360 is or will be, the fact remains that the longer the gap, the more sony has to play catchup.
MS has made some critical mistakes with the 360 as well which may be adventageous to sony. Still, if sony releases the PS3 the way that MS released the 360, and does not have enough supply to meet demand, they'll be in trouble. I think sony may possibly wait a touch longer just to prove that MS was stupid to release the system that could not meet demand. In Microsoft's defense, it appears IMO that Infineon are the ones who screwed them (http://www.theinquirer.net/?article=29706). True or not, this XBoX 360 vs. PS3 war is far from over.
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|I will easily pay $800+ for the PS3, no problem
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|I'm sorry.
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|It's OK, thats how much it will cost Sony.
Consoles are always loss leaders, they make money on the games. It will not retail at anywhere near that price ($450 /£400 I reckon).
The ex-box360 costs significantly more to make that what it sells for..
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|Microsoft must be loving that report...
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|Merrill Lynch eh? Sounds like stock talk. Probably trying to scare certain people to make a buck.
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|Lol, yeah whatever. They could be wrong of course, but I doubt they just conjure up a bunch of $hit in their spare time to make money. That'd be on CNN/FoxNews/whatever news channel, wouldn't you think?
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|Moving the date back and uping the price is not a smart move on their end. By the time it comes out, X-Box 360 will have more games and it be easier to get ahold of one. That's one of the reasons people get consoles, so they don't have to spend a grand or so to play the hottest games on their PCs.
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|Exactly. For that price, a gamer might as well buy a good gaming PC.
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|Wake up people. This is COST price, not RETAIL price.
Nothing in the report says it will retail at $800. That would be comercial suicide for Sony. More like $500 tops..
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|Sony have done far stupider things in the past few months, look at the whole rootkit fiasco. I wouldn't be surprised if Sony released the PS3 at $600-700 considering all the extra crap they are sticking in.
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|Yawn, rootkits. Are people still on about this? What on earth does this have to do with PS3?
a) totally different companies
b) totally unrelated
c) exactly what is so bad about a rootkit? (by itself it's not destrictive or invasive).
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|1) Sony's logo is on the Sony BMG page, so yes they are affiliates
2) Unrelated? PS3 will use BD-ROMs and you think that it won't have at least DRM?
3) Apparently the government thinks rootkits are pretty bad: http://www.technewsworld...sider-Rootkit-Ban.xhtml
Sony BMG is a division of sony, yes that means Sony BMG is part of Sony.
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|Rootkit and DRM are toally different things! Of course PS3 and BDROM will have DRM (as will HD-DVD), but this is nothing todo with rootkits.
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|Rootkits are nothing more than a steathing tecnique, by itself, it's harmless.
Sony's rootkit is harmless, all it does is mask it's DRM technology from the user.
HOWEVER, virus writer do take advantage of the same techology, but that's a different issue.
Rootkits don't kill people, viruses do...
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|It was still installed without anyone's permission and that is/was the biggest issue with it.
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|http://today.reuters.com...US-SONY-PLAYSTATION.xml
http://arstechnica.com/n...post/20060219-6216.html
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|Any chance we can get links to the sources for this article?
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|Hilarious! Die Sony! :D
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|i figured it would cost anywhere form $1000 to $1500. sony was saying no but it was obvious that its going to cost a lot.
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|The Sony implosion continues...
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|Ouch--so much for bluRay...at the moment anyway.
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|why would Nvidia loose anything ????
whatever sony decides to sell the PS3 for, nvidia would have gotten paid FULL for each chip sold ...
whats everyone drinking nowadays :P ...
*** hic !! hic !! ***
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|Where in the article does it mention $800? Title should be changed!
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|4th paragraph
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|Fourth paragraph into the story. It said console could reach $800 eventually falling to $320 in roughly three years. NO THANKS!!! I'll hold onto my PS2 for now!! :P
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|Bill of materials is $800... That's not the end user's cost...
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|hehe that meen over 1000$
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|Do I hear $1200?
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|SOLD! Now where's my $1200? :)
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|That's 1200 yen!! Equal to around $10.15 American! :P
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|No it doesn't, in fact the system will cost well under $800 for the end-user. Gaming consoles are always sold at a loss, especially initially. The money comes from the games. Games are only one-time development, initially cost $50+, and therefore create a lot of profit that pays for the gamesystem.
This is the reason Microsoft doesn't want people running Linux on the Xbox. They are losing money for the Xbox on that Xbox they sold because no games are bought for it, its just a cheap computer and only cheap because Microsoft is shouldering most of the bill expecting the user to buy games.
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|" No it doesn't, in fact the system will cost well under $800 for the end-user."
"WELL" under huh? I agree it'll be less since they DO make it up in games/licensing, but I slightly doubt it will be WELL under the production cost. Lets see now...assuming $600 as your "well" under figure...sony expects to sell what, 10 million units withing the first year?
10,000,000 units x $200/unit loss = $2 billion in losses on sales in the first year! That doesn't include R&D, marketing, or anything other then hard material...sony stock holders will love that! :)
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|The title doesn't say whose cost it is, just that the cost will be $800.
Likely, it means Sony's cost will be at $800.
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|Sony is a big company. $2 billion won't really make much of a dent in their bottom line, as long as it doesn't last for more than a year or so.
I question how the cost of components could vary so greatly. Not even retail computer components go down that quickly, so I can't help but wonder if they have an expensive prototype production line making them right now.
The PS3 is supposed to come with all peripherals required for enjoyment. I doubt Sony would kick it up much(if any) higher than the XBox360+All Accessories.
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|I highly doubt it will come with all accessories. There is a big market for extra accessories. Things like "Official Gold Plated Oxygen Free Advanced SCART Cable" for $50 is good business when it only costs them $2 to make per unit. Also memory cards will not be supplied, etc. Granted Microsoft didn't supply any of that either (again because its good business not to). The PS2 will come with the basics you need to play. Wireless controllers are standard now, Microsoft tried a new idea with the whole Core package and it didn't work, perhaps in 2 years a Core package will be better suited for the market but not at release.
For me the lack of people actually being able to play on the PS3 is what is worrying me. If they are ready to go then why the hell are they not letting people play it? Look at the PSP, they gave everyone a chance to play months before its release as they were worried about the DS, I would have thought they would be just as worried about the 360 and would be giving as many people as possible a go on a PS3 to hit the 360 where it hurts. I just find it very hard to beleive Sony anymore, in the past 6 years they have just got worse and worse. I love my PS2 but I feel that maybe the Playstation time is coming to an end.
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|The PS3 will probably lack an HD, but many places, including Sony, said they might put one in the system, but I don't think they will put it in as anything other than an add on.
The PS3 will have a hell of a lot more things like programs and it will be a lot stronger than the Xbox 360.
That's right, Sony makes about $4-$5 billion each year, it would put a big dent in how much they would make, but they would win in the end.
KILLING XBOX!!!!!!!!!!!!
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|Very interesting indeed.
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|Well It's Sony, what more do you ask? Nvidia will not be hurt as they are the best hands down, even if they can't make TV cards worth crap.
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|NVidia is hurt when a major customer for their chips doesn't order because they aren't ready to make the box.
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|"Nvidia will not be hurt as they are the best hands down"
C'mon! Do you have the SLIGHTEST idea of how business work in the real world????
Go tell your stockholders "We didn't make any money from the PS3 in 2006 but, hey, we're the best hands down" and see what you get ...
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|I must know more that you! Seeing how if they haven't paid anything out they are not negative so how are they hurt? They are still making more profit daily then you will in your life, I wouldn't say that is hurtting.
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|They are still making profit everyday, they are not hurting at all.
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|I think what people are trying to say is...
They are not hurt but they are not as healthy as they could have been if PS3 was released and selling like hot cakes.
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|OK, I understand that, but the word that was used was "hurt" , so I was pointing out that it would not be hurting them. I never said that they wouldn't be better off, just that they weren't hurt.
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|They are not hurt, however, ATI will be outselling them by millions for the quarters that PS3 is not being mass produced. ATI is already getting uranteed millions in sales from the XBOX. So nVidia will not be hurt, but they will have bad numbers compared to there competitor. And numbers matter in the world of business not which is better hands down.
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|I guess you have never traded stock in your life? Without highs and lows there would be no point in doing so as there would be no money made. Nvidia will make it in the long run. As for your "And numbers matter in the world of business not which is better hands down.", that is only true in the short term as it has been proven time and time again that even if you get great #'s for a year by making all of those cuts or changing the company around to make it look good, but killing every product or employee's motivation; the company will fall and a lot harder. Numbers have nothing to do with anything other than the short term money that will pass to one another's hands. Nividia is not losing money and they do the best job, they will have nothing to worry about and they aren't going to go anyplace anytime soon. When all of these people that bought the Xbox 360 get sick of the ATI crap over heating and causing all the damn glitches, they will sue ATI and then you can say a company is hurting.
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