Kutaragi refutes $1 billion PlayStation 3 hole will bring SCE to its knees
Analysts warn of pre-marketing $100 unit loss lead...
Analysts have warned that the release of the PS3 could backfire on gaming giant Sony Computer Entertainment, bringing the Sony subsidiary to its knees. Merrill Lynch Japan has stated it expects Sony to lose more than $1 billion on hardware manufacturing alone during its next-gen console's first 12 months on sale, a figure that may prove unrecoverable.
Merrill Lynch Japan Securities, quoted in the latest issue of Toyo Keizai, states that it expects core production costs of PlayStation 3 to be around $500, with the machine likely to ship at $399 – equating to a loss of around $1.18 billion in the first year the machine goes on sale. It should be noted that these losses are based purely on manufacturing costs and do not factor in the colossal marketing budget SCE has undoubtedly prepped for it's next home console launch.
Merrill Lynch warns that these losses would normally be absorbed with ease by Sony as it has previously entered markets lacking any serious competition. This time however, it will put a new machine on sale, its most expensive to date, to consumers who, in the West, have shown eager acceptance of Microsoft's Xbox 360 and a worldwide audience showing interest in Nintendo's budget innovation machine. Analysts warn that should Microsoft cut the price of Xbox 360 when Sony launches, the entire project could backfire. Should consumers be tempted with a next-generation console at a budget price, complete with a significant library of high-quality software and the option to augment this with something new, as offered by Nintendo, Sony might find its space under televisions around the world, its own for more than a decade, has been usurped.
Toyo Keizai goes on to publish comment from SCE head Ken Kutaragi, who 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."
As you will have noticed, there are few sizable holes in Kutaragi's assertions. To equate the PlayStation launching against the Super Nintendo, a machine towards the end of its lifecycle and with less than half the power, to the PlayStation 3 entering the market against Xbox 360 is absurd. Again, to compare the PSP's launch against the Game Boy Advance, another machine nearing the end of its lifecycle and, interestingly enough, loosely based on the SNES from almost two decades ago is again, unquestionably ridiculous.
SPOnG has predicted for sometime that this generation may see Sony dealt a knockout blow. The organic cycle of the market seems to dictate that any one company, Atari, Nintendo, Sega (to a lesser extent), can only maintain domination of the industry for a limited time and that eventually, consumers move on, mistakes are made and the two factors combine to crown a new king. Of course, it may only be a temporary setback, a time to evolve, as was the case radically with Sega and less so with Nintendo.
The end of PlayStation? Surely not... Stay tuned for full, dedicated coverage of all things PlayStation 3, right here on SPOnG.
Merrill Lynch Japan Securities, quoted in the latest issue of Toyo Keizai, states that it expects core production costs of PlayStation 3 to be around $500, with the machine likely to ship at $399 – equating to a loss of around $1.18 billion in the first year the machine goes on sale. It should be noted that these losses are based purely on manufacturing costs and do not factor in the colossal marketing budget SCE has undoubtedly prepped for it's next home console launch.
Merrill Lynch warns that these losses would normally be absorbed with ease by Sony as it has previously entered markets lacking any serious competition. This time however, it will put a new machine on sale, its most expensive to date, to consumers who, in the West, have shown eager acceptance of Microsoft's Xbox 360 and a worldwide audience showing interest in Nintendo's budget innovation machine. Analysts warn that should Microsoft cut the price of Xbox 360 when Sony launches, the entire project could backfire. Should consumers be tempted with a next-generation console at a budget price, complete with a significant library of high-quality software and the option to augment this with something new, as offered by Nintendo, Sony might find its space under televisions around the world, its own for more than a decade, has been usurped.
Toyo Keizai goes on to publish comment from SCE head Ken Kutaragi, who 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."
As you will have noticed, there are few sizable holes in Kutaragi's assertions. To equate the PlayStation launching against the Super Nintendo, a machine towards the end of its lifecycle and with less than half the power, to the PlayStation 3 entering the market against Xbox 360 is absurd. Again, to compare the PSP's launch against the Game Boy Advance, another machine nearing the end of its lifecycle and, interestingly enough, loosely based on the SNES from almost two decades ago is again, unquestionably ridiculous.
SPOnG has predicted for sometime that this generation may see Sony dealt a knockout blow. The organic cycle of the market seems to dictate that any one company, Atari, Nintendo, Sega (to a lesser extent), can only maintain domination of the industry for a limited time and that eventually, consumers move on, mistakes are made and the two factors combine to crown a new king. Of course, it may only be a temporary setback, a time to evolve, as was the case radically with Sega and less so with Nintendo.
The end of PlayStation? Surely not... Stay tuned for full, dedicated coverage of all things PlayStation 3, right here on SPOnG.
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Comments
Showing the 20 most recent comments. Read all 26.
LordVader717 19 Dec 2005 14:23
7/26
$500 over the counter doesn't equate to $500 for Sony.
It say's these are just production costs. So, Sony has to package and ship the units, and then sell them to vendors, who will expect a nice profit margin for themselves so that it makes sense for them.
If these numbers are true, the losses made on PS3s are staggering to say the least.
Kutaragi is highly overstimating the buying power of consumers. If workers are lucky enough to be able to work overtime for full, that's good for them.
But he seems to be ignoring the fact that most PS2 owners haven't even got a jobs yet.
He's isolating himself from casual consumers, who make up the biggest part of the gaming industry.
It say's these are just production costs. So, Sony has to package and ship the units, and then sell them to vendors, who will expect a nice profit margin for themselves so that it makes sense for them.
If these numbers are true, the losses made on PS3s are staggering to say the least.
Kutaragi is highly overstimating the buying power of consumers. If workers are lucky enough to be able to work overtime for full, that's good for them.
But he seems to be ignoring the fact that most PS2 owners haven't even got a jobs yet.
He's isolating himself from casual consumers, who make up the biggest part of the gaming industry.
Saryel2005 19 Dec 2005 20:02
8/26
First off the guys at Merrill Lynch of Japan dont know their heads from their @$$. Goldman-Sachs and Smith Barney have been tracking the price of the PS3 at $499 and after Kutaragi's last meeting with the board have gone up to $550 and $600 respectly. The original Xbox released with a hardware loss price of about $200 per system. Microsoft's idea was to flush Sony out of the market by throwing money at everyone, which of course Bill & Co. can do effectively with their deep pockets, but has not proved very successful in their Home Console venture. Sony is notorious for not losing money on any of its hardware with the exception of the recent PSP. (This is one of reasons Kutaragi criticized Sony's handheld plan, and one of the things that kept him from becoming CEO of Sony Corporation.)
Second, off the main loss for Sony is not the hardwware directly, but the R & D costs for the Cell Chip, $1.9 billion from Sony alone, ~$6 billion more from Toshiba and IBM (IBM also made a new factory specifically for this development work.) Sony Corp. has had to eat this R&D cost for the past to 2 years with no revenue to counter balance it. That is reason PS3 is being "rushed" with a 2Q 2006 release (Sony's Financials look bad and so does it stock.) Sony needs something to counter this loss, and now that Samsung and LG have been destroying their consumer electronics market the need is becoming more desperate.
Third, the primary audience for PS2 was 21-26 year old crowd the fell in love with PS1, its been six years folks, those people are now the 27-32 year old crowd in the land were $200 blue jeans are the norm. If people are paying $900+ on Ebay for a Xbox 360, do you think Sony is going selling their hardware for $399 at a loss, so some sleepless college kid can make $500 off the resale? HA HA! At worst Sony will come away breaking even on the hardware or make a small profit on it. Sony's big problem is making sure the hardware is bug free as IBM was having issues with the chip manufacturing considering the new 65 nanometer format.
Finally,Kutaragi refuting a billion dollar loss further proves the PS3 with expensive. I feel bad for the small kids that want to play with Dad's new PS3, as Im sure he'll have it chained to the entertainment and kept under lock and key.
Second, off the main loss for Sony is not the hardwware directly, but the R & D costs for the Cell Chip, $1.9 billion from Sony alone, ~$6 billion more from Toshiba and IBM (IBM also made a new factory specifically for this development work.) Sony Corp. has had to eat this R&D cost for the past to 2 years with no revenue to counter balance it. That is reason PS3 is being "rushed" with a 2Q 2006 release (Sony's Financials look bad and so does it stock.) Sony needs something to counter this loss, and now that Samsung and LG have been destroying their consumer electronics market the need is becoming more desperate.
Third, the primary audience for PS2 was 21-26 year old crowd the fell in love with PS1, its been six years folks, those people are now the 27-32 year old crowd in the land were $200 blue jeans are the norm. If people are paying $900+ on Ebay for a Xbox 360, do you think Sony is going selling their hardware for $399 at a loss, so some sleepless college kid can make $500 off the resale? HA HA! At worst Sony will come away breaking even on the hardware or make a small profit on it. Sony's big problem is making sure the hardware is bug free as IBM was having issues with the chip manufacturing considering the new 65 nanometer format.
Finally,Kutaragi refuting a billion dollar loss further proves the PS3 with expensive. I feel bad for the small kids that want to play with Dad's new PS3, as Im sure he'll have it chained to the entertainment and kept under lock and key.
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Saryel2005 19 Dec 2005 20:08
9/26
I almost forgot. Vendors dont make profit off the system or the games. Those have small margins attached to them which vendors are usually prohibited from changing or adjusting in order to sell the item. Vendor's primary profit comes from all the accessories and other random junk they sell to with the system or force customers to buy in order to get a system. Example, peon at store "You cant buy Halo 2 were are sold out, but we do have the Halo 2 gamers pack which includes the game, strategy guide and Collectors pencil for $79.99"
jodo4 19 Dec 2005 20:59
10/26
I realized the PSP wasn't being compared to the DS, which happens to be doing better in Japan..... eh I'm a fanboy, might as well let it out, I see a drop in Japan's support from sony, although sony currently does hold 80% of the market in japan, I see a slow, dip from its current position, the third generation blues..... like the N64. just my cup of tea.
wanderingsoul 20 Dec 2005 04:18
11/26
I somewhat think that Merryl-Lynch may be correct in their assessment. I haven't been very devout following next-gen lately. School has been taking up most of my time, but please help me out if I state something incorrectly or if I have twisted the manufacturing processes. Thanks, and now my response.
#1. Supply and demand. Why are Xbox's being resold at such a high price? Because there simply wasn't enough at launch. We still have yet to see what Sony will do definitively during the launch of the Playstation 3, if they will unleash massive quantaties of units to combat Xbox360 (which it probably would to make up for lost ground), or launch with limited hardware only to have Xbox360 continue to climb in sales because it is the only alternative available. Xbox360 is the only next-gen console on the market right now, and therefore consumers do not have the luxury of turning to an alternative. This is why they pay $900 on Ebay for the system.
#2. Losses are losses no matter how you slice it. R&D is factored into the price of the console. New features such as blue-ray technology etc. add up and are thus factored into the consoles price. The problem however is Microsoft will have a strong foothold on the market. Kutaragi mentioned there needs to be a balance between "appeal and price." I'm not so sure consumers will want to shell out more money for a system that may turn out to be marginally better than Xbox360 and therefore will not want to work extra hours for an extra feature or two if they can get all they need from the Xbox360 for a more economical price.
#3. I admit that I haven't followed the Playstation3 extraordinarily closely, but from reports the development costs to manufacture games and optical disks are higher on the PS3 than Xbox360. I could be wrong, but if this is the case then the PS3 will have an even tougher time re-gaining their massive loss with software sales. Furthermore if this turns out to be true, it is logically sound to believe that because the system will cost more and games will cost more, consumers will have less money to buy games to counteract Sony's loss. If Sony has higher manufacturing costs with their software yet attempt to remain competitive by keeping prices on par with competitors then climbing out of the red and into the black will be ever more difficult.
Please correct me wherever you can, I haven't been following next-gen developments much lately.
tyrion 20 Dec 2005 09:25
12/26
I've trimmed your comments to headings since my replies were getting long!
Demand is always higher at launch than at any other time in a console's lifetime. This is a simple "it's new" effect happening.
Manufacturers have to stockpile a bit in order to make enough of a product to cover launch demand. Either that or have many more production lines in place before launch than they need to maintain normal demand. The second option costs a hell of a lot more than the first. This is why most products get a staged roll-out over several months, you need to build up another stockpile to cover each launch.
There will be shortages of PS3s for each launch, I'm sure of it. The only recent launches that haven't sold out or had shortages were the Japanese launches of the two XBox machines. And I'm not touching that "why" with a bargepole!
This may not mean an inevitable rise in 360 sales, by the time PS3 launches in the US and EU, most people who desperately want a 360 or are desperate for a "next-gen" experience will have bought a 360. I can't see the current level of supply for 360s lasting until Spring, never mind Summer (which is when I expect the earliest of the US or EU launches will take place).
This will mean that the people buying PS3s will be those that held out for a PS3 or those that believe that PlayStation is the only gaming brand worth noting at all. Sure there will be the confused parent syndrome, "Timmy wants a 'playing station', but there are none. We'll get him a 'next box' - it has all the same games." However, that won't account for all of the people out there.
It;ll be interesting to see the prices of PS3s on eBay after the JP launch. That may become the new measure of how successful a launch is!
I believe the expression here is "Never underestimate the power of PlayStation" - and by that I mean the brand. At least in the EU, the PlayStation brand has a load of kudos, in the US the XBox brand is catching up and in Japan it's more or less equally split with Nintendo. That's purely on the strength of the brand, I know that games sales reflect a different picture.
That huge kudos will sell PS3s, never mind the, sure to be, huge marketing blitz, starting at CES.
You just have to look at the eBay prices for PS2 and XBox 360 to see that people will spend stupid money to get "hot" items.
Well, nobody knows what Sony pays for components except Sony and their suppliers. I'm sure those costs are covered by NDAs and can't be released to Merril Lynch. Therefore ML will just guess.
Also a lot of PS3 components will be made in Sony plants, with these the "cost" is the basic manufacturing cost plus the mark-up they would have made selling to someone else in the case of a general component. If it's a PS3 specific component there is only the basic manufacturing cost. Remember, Sony will be manufacturing the Cell and Blu-Ray drives for the PS3.
The costs of producing a Blu-Ray disc may be high compared to a DVD, but even a 300% cost comparison will make it about 30p per disk, not much cost to add on to a game that costs, say, £50. The disc costs will be far outweighed by the costs of generating the high-res assets required by the higher resolutions the 360 and PS3 will be pushing.
OK, long post, I'll leave other points to other people, who'll probably rip me to pieces as well!
wanderingsoul wrote:
#1. Supply and demand.
Demand is always higher at launch than at any other time in a console's lifetime. This is a simple "it's new" effect happening.
Manufacturers have to stockpile a bit in order to make enough of a product to cover launch demand. Either that or have many more production lines in place before launch than they need to maintain normal demand. The second option costs a hell of a lot more than the first. This is why most products get a staged roll-out over several months, you need to build up another stockpile to cover each launch.
There will be shortages of PS3s for each launch, I'm sure of it. The only recent launches that haven't sold out or had shortages were the Japanese launches of the two XBox machines. And I'm not touching that "why" with a bargepole!
This may not mean an inevitable rise in 360 sales, by the time PS3 launches in the US and EU, most people who desperately want a 360 or are desperate for a "next-gen" experience will have bought a 360. I can't see the current level of supply for 360s lasting until Spring, never mind Summer (which is when I expect the earliest of the US or EU launches will take place).
This will mean that the people buying PS3s will be those that held out for a PS3 or those that believe that PlayStation is the only gaming brand worth noting at all. Sure there will be the confused parent syndrome, "Timmy wants a 'playing station', but there are none. We'll get him a 'next box' - it has all the same games." However, that won't account for all of the people out there.
It;ll be interesting to see the prices of PS3s on eBay after the JP launch. That may become the new measure of how successful a launch is!
wanderingsoul wrote:
#2. Losses are losses no matter how you slice it.
I believe the expression here is "Never underestimate the power of PlayStation" - and by that I mean the brand. At least in the EU, the PlayStation brand has a load of kudos, in the US the XBox brand is catching up and in Japan it's more or less equally split with Nintendo. That's purely on the strength of the brand, I know that games sales reflect a different picture.
That huge kudos will sell PS3s, never mind the, sure to be, huge marketing blitz, starting at CES.
You just have to look at the eBay prices for PS2 and XBox 360 to see that people will spend stupid money to get "hot" items.
wanderingsoul wrote:
#3. I admit that I haven't followed the Playstation3 extraordinarily closely,
Well, nobody knows what Sony pays for components except Sony and their suppliers. I'm sure those costs are covered by NDAs and can't be released to Merril Lynch. Therefore ML will just guess.
Also a lot of PS3 components will be made in Sony plants, with these the "cost" is the basic manufacturing cost plus the mark-up they would have made selling to someone else in the case of a general component. If it's a PS3 specific component there is only the basic manufacturing cost. Remember, Sony will be manufacturing the Cell and Blu-Ray drives for the PS3.
The costs of producing a Blu-Ray disc may be high compared to a DVD, but even a 300% cost comparison will make it about 30p per disk, not much cost to add on to a game that costs, say, £50. The disc costs will be far outweighed by the costs of generating the high-res assets required by the higher resolutions the 360 and PS3 will be pushing.
OK, long post, I'll leave other points to other people, who'll probably rip me to pieces as well!
fluffstardx 20 Dec 2005 14:32
13/26
I vote "Our idea is for consumers to think to themselves, 'Right, I'll work more hours and buy it'" as quote of the gaming year. It's right up there with MS's reasoning for the Windows pricing: "because people need it".
wanderingsoul 20 Dec 2005 18:07
14/26
Oh, I'm from N.America, I was speaking from a North American stanspoint where Xbox is making pretty big strides. But I do agree with your post. Good point/counter point there.
I agree, the statement Kutaragi made was very bold and perhaps even egotistical. I'd rather see a humble gaming company, but I don't think there's room for that in such a competitive, cutthroat business.
I agree, the statement Kutaragi made was very bold and perhaps even egotistical. I'd rather see a humble gaming company, but I don't think there's room for that in such a competitive, cutthroat business.
Ditto 20 Dec 2005 20:24
15/26
When counting in the Cell's R&D budget, you have to remember that the Cell will more than pay for itself in due course due to the sheer number of applications and appliances the processor can be put into.
Thus, you cannot put Cell development as just a PS3 cost.
Thus, you cannot put Cell development as just a PS3 cost.
tres3d 22 Dec 2005 14:16
16/26
Any Gamer knows- that the power of Playstation 3 will be staggering. Xbox- though powerful ( hey I even bought a couple of them) will be pale in comparison. It also boils down to the library of games available for the platform
I can GUARANTEE that Playstation 3 will release to more than just a handful of games. The problem with the Xbox was always the quality / number of games ratio.
And wait a minute - how about BlueRay? 25gig DVD built into the system? I mean- for the meager cost of the unit I think that I will buy a number of them just for the ability to play High Def movies
I can GUARANTEE that Playstation 3 will release to more than just a handful of games. The problem with the Xbox was always the quality / number of games ratio.
And wait a minute - how about BlueRay? 25gig DVD built into the system? I mean- for the meager cost of the unit I think that I will buy a number of them just for the ability to play High Def movies
OptimusP 22 Dec 2005 18:14
17/26
Any gamer, with a bit of brain in his head, knows that power doesn't tell the whole story, not even by a longshot (you have to consider bottlenecks in the hardware, more power= higher prizes= possible lower marketpenetration ect.).
Cell is Sony's gamble (bigger then Nintendo's one) for the next 5 years, if it fails Sony is bankrupt, will be split up and sold to the highest bidder.
Blu-Ray isn't that big of a gamble but could hurt Sony enough to also go bankrupt if it fails to win over HD-DVD (or that holographic disk they got going). There is a very good chance that while the PS3 sells good, even be the marketleader but that Sony would still go bankrupt because they can't recover the costs. R&D is one, building special factories for producing Blu-Ray readers is another one (goes into the hunderds of millions) then special factories to build the PS3 's Cell (yes there are different kind of Cell-chips, the one going to be used in the PS3 does not have those "Skynet" communication properties Sony likes to rant about) again hunderds of millions...
I can understand why Sony is not going to put up a online infrastructure like Xbox Live... it cost Microsoft billions to put it up and is the second reason (behind the in-built harddrive) why MS has been losing a billion a year over the Xbox-project.
Cell is Sony's gamble (bigger then Nintendo's one) for the next 5 years, if it fails Sony is bankrupt, will be split up and sold to the highest bidder.
Blu-Ray isn't that big of a gamble but could hurt Sony enough to also go bankrupt if it fails to win over HD-DVD (or that holographic disk they got going). There is a very good chance that while the PS3 sells good, even be the marketleader but that Sony would still go bankrupt because they can't recover the costs. R&D is one, building special factories for producing Blu-Ray readers is another one (goes into the hunderds of millions) then special factories to build the PS3 's Cell (yes there are different kind of Cell-chips, the one going to be used in the PS3 does not have those "Skynet" communication properties Sony likes to rant about) again hunderds of millions...
I can understand why Sony is not going to put up a online infrastructure like Xbox Live... it cost Microsoft billions to put it up and is the second reason (behind the in-built harddrive) why MS has been losing a billion a year over the Xbox-project.
Ditto 22 Dec 2005 23:03
18/26
OptimusP wrote:
Any gamer, with a bit of brain in his head, knows that power doesn't tell the whole story, not even by a longshot (you have to consider bottlenecks in the hardware, more power= higher prizes= possible lower marketpenetration ect.).
Unless you have such unique features and strong brand you can command a higher price (I think that Sony can charge nearly whatever they want and it won't hurt them too much).
Cell is Sony's gamble (bigger then Nintendo's one) for the next 5 years, if it fails Sony is bankrupt, will be split up and sold to the highest bidder.
Cell isn't just Sony's gamble though. And it's not just a gaming gamble. It's an IBM gamble too - and IBM rarely make mistakes. And it's going to be used in almost every consumer electronics market Sony is involved in. That's a lot of markets, and IBM will expand Cell's range far beyond Sony's markets...
I will bet you that Cell will make Sony, IBM and company a huge profit. They have the potential to refine the architecture and use it in basically any electronics kit.
Blu-Ray isn't that big of a gamble but could hurt Sony enough to also go bankrupt if it fails to win over HD-DVD (or that holographic disk they got going). There is a very good chance that while the PS3 sells good, even be the marketleader but that Sony would still go bankrupt because they can't recover the costs. R&D is one, building special factories for producing Blu-Ray readers is another one (goes into the hunderds of millions) then special factories to build the PS3 's Cell (yes there are different kind of Cell-chips, the one going to be used in the PS3 does not have those "Skynet" communication properties Sony likes to rant about) again hunderds of millions...
Sony will not go bankrupt. Investors would simply rescue it.
I think it would be safe to say that HD-DVD has lost now, with more major Hollywood studios supporting Blu Ray. Some converted simply because the drive will be in the PS3. (This ignores the possible senario of Sony making the mistake of prohibiting porn... ;))
Remember again, this isn't just gaming. Blue Ray has wider implications beyond and into the whole areas of film, computing etc - and in all of those Sony has massive power and support and can use Blu Ray in more than enough products to justify the investment.
I can understand why Sony is not going to put up a online infrastructure like Xbox Live... it cost Microsoft billions to put it up and is the second reason (behind the in-built harddrive) why MS has been losing a billion a year over the Xbox-project.
If it would provide them with a method to distribute media into homes through PS3, Sony set-top boxes and Blu Ray players, PSP, Sony MP3 players etc, then I think it's safe to see Sony investing heavily in online facilities, but only when it's worth their while.
Remember, Sony isn't a gaming company, it's a consumer electronics and media giant.
config 23 Dec 2005 12:05
19/26
Adam M wrote:
I think it would be safe to say that HD-DVD has lost now, with more major Hollywood studios supporting Blu Ray. Some converted simply because the drive will be in the PS3. (This ignores the possible senario of Sony making the mistake of prohibiting porn... ;))
Yup. I too believe that HD-DVD is a dead duck. As for the pornography, I doubt Sony would prohibiting it given its attitude to porn on UMD.
OptimusP 23 Dec 2005 16:54
20/26
Maybe i didn't imply it enough but all the stuff i said in the last post is all based on huge "IF"s. That's why i said "possible lower market penetration". I'm studying history so what I write that implies to the future is always a possible, potentially scenario, i know there is also the complete opposite that's possible. But it's always nice to have someone making the nuances.
IBM does take risks, they tried to launch a low-cost PC once, it failed miserably. Thing is Cell is a huge risk for all companies involved (Sony, IBM and Toshiba) because Sony is a company that's getting its ass kicked in every bussiness it has once entered. iPod and iTunes (and piracy) cuts in their music division revenues big time. LG and Pioneer and Philips are stealing more marketshare every year from Sony's electronics division (which runs on a HUGE loss) and Sony's movie division only makes a profit when a new Spiderman movie has been released.
If i did a SWOT-analysis on Sony it wouldn't look good (remeber that Sony is a company with 60 billion dollar debt and is making losses every year). But true their brand name and marketing are very strong but that doesn't mean that investors are just going to jump in the hole. Most feasible scenario if the Cell doesn't deliver is that Sony gets carved up and its divisions get sold seperately (there were allready talks that its movie division was going to be sold). What will investors go after? Not the electronics division, more like the movie and game divisions.
You know how Microsoft and Sony want to control our living rooms with their consoles? Sony wants to control it the hardware way (MS the software way), your TV, DVD-player, stereo ect. and since it invested so much money in Blu-Ray it's going to try to make you buy as much audio and movie Blu-Ray stuff as possible, huge online service from Sony delivering content... not very likely, not with the financal situation they are in now.
IBM does take risks, they tried to launch a low-cost PC once, it failed miserably. Thing is Cell is a huge risk for all companies involved (Sony, IBM and Toshiba) because Sony is a company that's getting its ass kicked in every bussiness it has once entered. iPod and iTunes (and piracy) cuts in their music division revenues big time. LG and Pioneer and Philips are stealing more marketshare every year from Sony's electronics division (which runs on a HUGE loss) and Sony's movie division only makes a profit when a new Spiderman movie has been released.
If i did a SWOT-analysis on Sony it wouldn't look good (remeber that Sony is a company with 60 billion dollar debt and is making losses every year). But true their brand name and marketing are very strong but that doesn't mean that investors are just going to jump in the hole. Most feasible scenario if the Cell doesn't deliver is that Sony gets carved up and its divisions get sold seperately (there were allready talks that its movie division was going to be sold). What will investors go after? Not the electronics division, more like the movie and game divisions.
You know how Microsoft and Sony want to control our living rooms with their consoles? Sony wants to control it the hardware way (MS the software way), your TV, DVD-player, stereo ect. and since it invested so much money in Blu-Ray it's going to try to make you buy as much audio and movie Blu-Ray stuff as possible, huge online service from Sony delivering content... not very likely, not with the financal situation they are in now.
fluffstardx 23 Dec 2005 22:06
21/26
IBM is good at risk. OS/2 Warp. The old processors that were supposed to compete with Pentiums and K5s.
A lot is riding on PS3, and I kinda want to see it fail because of that. It'll clear up a lot of stuff; Blu Ray has issues, I keep hearing off various techy magazines, and the stats for PS3 show major memory bandwidth issues. Most people are very happy with DVD, and will be highly reluctant to trade up. HD is not as popular an idea as some people like to think. The cooling on it seems insufficient; all there is is some square holes at either end, and the power supply's internal (you can tell by the power socket hole). And that design is repulsive.
I really find it hard to wish them luck, especially after that quote.
A lot is riding on PS3, and I kinda want to see it fail because of that. It'll clear up a lot of stuff; Blu Ray has issues, I keep hearing off various techy magazines, and the stats for PS3 show major memory bandwidth issues. Most people are very happy with DVD, and will be highly reluctant to trade up. HD is not as popular an idea as some people like to think. The cooling on it seems insufficient; all there is is some square holes at either end, and the power supply's internal (you can tell by the power socket hole). And that design is repulsive.
I really find it hard to wish them luck, especially after that quote.
ps34less 26 Dec 2005 14:29
22/26
they will make back what they say they lose just on all accesories,games,toys,they will have it live right they will bank it.
Capital E.
My maths makes that a $1 loss per unit. I can't see Sony shipping 1.18 billion PS3s. Or even 0.18billion counting the above $1billion costs.
It's not really clear how this all fits together. Pretty poor writing.
Does anyone check content before you put it on?
Adam M wrote:
SPOnG wrote:
Sony Computer entertainment
Capital E.
SPOnG wrote:
expects Sony to lose more than $1 billion on hardware manufacturing alone during its next-gen console's first 12 months on sale, a figure that may prove unrecoverable.
SPOnG wrote:
production costs of PlayStation 3 to be around $500, with the machine likely to ship at $499 – equating to a loss of around $1.18 billion in the first year
My maths makes that a $1 loss per unit. I can't see Sony shipping 1.18 billion PS3s. Or even 0.18billion counting the above $1billion costs.
It's not really clear how this all fits together. Pretty poor writing.
Does anyone check content before you put it on?
ps34less 26 Dec 2005 14:39
23/26
they will dominate the game industry completely
OptimusP 26 Dec 2005 18:26
24/26
Great... you see that... that Cell chip is going haywire allready... posting dominance all over the forums. No one ever saw Terminator 3 or something?
Dude, chill and have some pie.
Dude, chill and have some pie.
Saryel2005 3 Jan 2006 23:53
25/26
Overall, I think Kutaragi is been arrogant in his statement, basically he’s telling the board and everyone else, he’s going to sell PS3 at a price that is going to make them back their money and keep Sony Corp from going bankrupted. Can you guess who is going to cough up the money to do that--everyone that loves their PS1, PS2 and has held out from buying a DOSBox1.5. Sony’s consumer electronics are getting beating to death by the Korean Samsung and LG (Lucky Goldstar). Sony financials look bad, the marketing for the PS3 launch is going to put them over the edge, and the Blue Ray disc manufacturing equipment is going to further propel their launch over that cliff of death (They might make some money back in BluRay licensing.) Regardless of how much they have spent on R&D, or will spend on marketing and manufacturing this is a win or die situation for Sony Corp. (Although, being one of the older Japanese companies the government might step in and save them.)
Now to some random tangents:
1. Sony isn’t manufacturing the actual chip they are using, NEC is responsible for that (NEC is also making the chips for Nintendo, and IBM’s MS chips.) IBM is manufacturing the Super Computer version in their new factory, somewhere in Upstate New York (I forget where exactly)
2. The Cell is huge risk for IBM, Toshiba and Sony. If Sony goes bankrupt, they arent going to be putting the Cell into anything. The patent technology for CELL will probably be the first thing they sell off.
3. If you didn’t know IBM is the leading Super Computer manufacture in the world, it receives government subsidies, like Lockheed Martin, to NOT sell its products to certain countries, groups, or Company’s. If you don’t know IBM sold its consumer PC business to Levono (Chinese Company.) They aren’t planning to put it in your Thinkpad ladies and gentlemen. The Super computer properties of CELL come to risk at the quantum physics and electrical engineering level, its not just a “oops, just turn it up a little and it will work problem” . What I can understand from my physics/engineering guys about the Cell. Those, “Super Computer” properties come at a lot of power and a lot of cooling, correct me if I miss understood this, the CELL chip being manufactured at the current 45nm chip is the smallest you can go before you start getting quantum interference or something of that sort (basically atoms and electrons start to interfere with the workings of the chip.) When you turn up the power all that electricity pumping through chip actually magnetizes the chip, increasing the chances for interference.
Now to some random tangents:
1. Sony isn’t manufacturing the actual chip they are using, NEC is responsible for that (NEC is also making the chips for Nintendo, and IBM’s MS chips.) IBM is manufacturing the Super Computer version in their new factory, somewhere in Upstate New York (I forget where exactly)
2. The Cell is huge risk for IBM, Toshiba and Sony. If Sony goes bankrupt, they arent going to be putting the Cell into anything. The patent technology for CELL will probably be the first thing they sell off.
3. If you didn’t know IBM is the leading Super Computer manufacture in the world, it receives government subsidies, like Lockheed Martin, to NOT sell its products to certain countries, groups, or Company’s. If you don’t know IBM sold its consumer PC business to Levono (Chinese Company.) They aren’t planning to put it in your Thinkpad ladies and gentlemen. The Super computer properties of CELL come to risk at the quantum physics and electrical engineering level, its not just a “oops, just turn it up a little and it will work problem” . What I can understand from my physics/engineering guys about the Cell. Those, “Super Computer” properties come at a lot of power and a lot of cooling, correct me if I miss understood this, the CELL chip being manufactured at the current 45nm chip is the smallest you can go before you start getting quantum interference or something of that sort (basically atoms and electrons start to interfere with the workings of the chip.) When you turn up the power all that electricity pumping through chip actually magnetizes the chip, increasing the chances for interference.
fluffstardx 4 Jan 2006 10:16
26/26
OptimusP wrote:
Great... you see that... that Cell chip is going haywire allready... posting dominance all over the forums. No one ever saw Terminator 3 or something?
Dude, chill and have some pie.
Dude, chill and have some pie.
He seems to have joined for 2 reasons: to try and sell his domain name and to troll.
PLEASE DO NOT FEED THE TROLLS.