Following on from our report last week that the PS3 is definitely to launch in 2007 in Europe a new report by investment banking firm Merrill Lynch suggests that the launch may well also be delayed until next year in Japan and the US, and that the initial cost to Sony of producing the PS3 may be as alarmingly high as $900 per unit.
"It's now clear that the box is prohibitively expensive to make", the firm said in the report. You can download the remarkable 8-page PDF document here. Read it and weep fellow gamers, the PlayStation's future is looking increasingly bleak.
The report is clear that the estimated per-unit cost of $900 is the cost to Sony and not to end-users. However, this still means that, should the costs in the report be anywhere near an accurate prediction, Sony is going to have to swallow some significant losses for a considerable time after the PS3’s launch in order to ensure that the console can be competitively and attractively priced for consumers.
If, for example, Sony wishes to launch at the same price point as the Xbox 360, the firm would have to be prepared to take a loss of US$400 on each PS3 sold. And if it decided, for example, to take a loss of $200 per unit, US gamers would be looking at an initial price point of $599. To put this in some kind of context, bear in mind that a recent analysis of the 360's component costs showed that Microsoft was taking a US$126 hit on each high-end Xbox 360 sold.
As time passes and components get cheaper, the PS3 will of course become far less expensive to manufacture, the report estimating that the cost per console would be around US$320 three years after launch.
The cost issues lie with the PS3’s two key components: the Blu-Ray optical drive and the IBM Cell processor. The Blu-Ray drive is going to cost around $350 per unit (which may drop to $100 in three years) as it's such a new standard. The Cell could cost around $230 per unit initially (dropping to $60 in three years) according to the report.
Of course, Microsoft execs are rubbing their hands with glee at this news. As the report notes: "A delay in Sony's launch of (PlayStation 3) would give Microsoft additional time to capitalise on its first-mover advantage. This would be particularly true if Sony does not launch in North America and Europe until late 2006 or spring 2007, giving Microsoft a key second holiday season to sell game consoles and software." If this was the case the report estimates that Microsoft could well have sold over ten million Xbox 360’s by the end of 2006!
Sony has declined to comment on the report, reiterating the now familiar line that it will be releasing more details about PlayStation 3 at E3 in May. Strangely, the company is also sticking to its announced launch schedule of ‘spring’. Sony shares slipped in Tokyo trading earlier today (Monday) following publication of this report, ending the day down ¥200 at ¥5,300.
"It's now clear that the box is prohibitively expensive to make", the firm said in the report. You can download the remarkable 8-page PDF document here. Read it and weep fellow gamers, the PlayStation's future is looking increasingly bleak.
The report is clear that the estimated per-unit cost of $900 is the cost to Sony and not to end-users. However, this still means that, should the costs in the report be anywhere near an accurate prediction, Sony is going to have to swallow some significant losses for a considerable time after the PS3’s launch in order to ensure that the console can be competitively and attractively priced for consumers.
If, for example, Sony wishes to launch at the same price point as the Xbox 360, the firm would have to be prepared to take a loss of US$400 on each PS3 sold. And if it decided, for example, to take a loss of $200 per unit, US gamers would be looking at an initial price point of $599. To put this in some kind of context, bear in mind that a recent analysis of the 360's component costs showed that Microsoft was taking a US$126 hit on each high-end Xbox 360 sold.
As time passes and components get cheaper, the PS3 will of course become far less expensive to manufacture, the report estimating that the cost per console would be around US$320 three years after launch.
The cost issues lie with the PS3’s two key components: the Blu-Ray optical drive and the IBM Cell processor. The Blu-Ray drive is going to cost around $350 per unit (which may drop to $100 in three years) as it's such a new standard. The Cell could cost around $230 per unit initially (dropping to $60 in three years) according to the report.
Of course, Microsoft execs are rubbing their hands with glee at this news. As the report notes: "A delay in Sony's launch of (PlayStation 3) would give Microsoft additional time to capitalise on its first-mover advantage. This would be particularly true if Sony does not launch in North America and Europe until late 2006 or spring 2007, giving Microsoft a key second holiday season to sell game consoles and software." If this was the case the report estimates that Microsoft could well have sold over ten million Xbox 360’s by the end of 2006!
Sony has declined to comment on the report, reiterating the now familiar line that it will be releasing more details about PlayStation 3 at E3 in May. Strangely, the company is also sticking to its announced launch schedule of ‘spring’. Sony shares slipped in Tokyo trading earlier today (Monday) following publication of this report, ending the day down ¥200 at ¥5,300.
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Comments
schnide 20 Feb 2006 13:08
1/11
I'm sure that similar reports were coming out before the PS2 and where exactly is it finishing in the console race again?
Do not forget for a second that the PS3 is a Blu-Ray unit and doubles as both a games machine and a high end movie player in the way that the Xbox 360 isn't (well yet, anyway). PS2 started off in the same position with DVD and that capability saw it through the early days when the games line-up was a bit ropey.
Now Sony is selling the PS2 for silly money and is market dominant..
Do not forget for a second that the PS3 is a Blu-Ray unit and doubles as both a games machine and a high end movie player in the way that the Xbox 360 isn't (well yet, anyway). PS2 started off in the same position with DVD and that capability saw it through the early days when the games line-up was a bit ropey.
Now Sony is selling the PS2 for silly money and is market dominant..
tg0006 20 Feb 2006 13:22
2/11
I can see the cell processor costing that much, but the blu-ray? I know its a new device, but why so much? its basicly the same with a new way of reading and a new lazor. and even with all of this, i doubt that the concol will realy have an initial cost of $900
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tyrion 20 Feb 2006 13:40
3/11
schnide wrote:
I'm sure that similar reports were coming out before the PS2 and where exactly is it finishing in the console race again?
Yep, the initial parts costings for the PS2 came out at $800, these costings were by "analysts".
On another matter, does anybody else feel a little uncomfortable trusing a merchant bank and market analsis company that can't add up? The "at launch" column "only" adds up to $800, not $900!
[Edit] I've just found this page that says:
Philips also displayed their BD recorder (IPS01) and BD triple writer (SPD7000). The BD triple writer which reads and writes BD/DVD/CD is scheduled to be released before the summer and will cost about $500.
If Philips can sell - at retail - a three way BD/DVD/CD writer for $500, I don't think it will cost Sony $350 for a BD/DVD/CD reader.
YenRug 20 Feb 2006 16:45
4/11
tyrion wrote:
[Edit] I've just found this page that says:
If Philips can sell - at retail - a three way BD/DVD/CD writer for $500, I don't think it will cost Sony $350 for a BD/DVD/CD reader.
Philips also displayed their BD recorder (IPS01) and BD triple writer (SPD7000). The BD triple writer which reads and writes BD/DVD/CD is scheduled to be released before the summer and will cost about $500.
If Philips can sell - at retail - a three way BD/DVD/CD writer for $500, I don't think it will cost Sony $350 for a BD/DVD/CD reader.
I notice you missed these on the same page, seeing as they are probably the comparable ones, to the PS3, as they have full 1080i/p output:
Pioneer
Pioneer showed off the final design of their BD player (BDP-HD1), which won the "Home Video" category of CNET's "Best of CES 2006". The player is top of the line and truly lives up to the name "Elite" with features such as 1080p output via HDMI, upconversion of DVDs to 1080i/1080p and networking features for playback of HD video. The player is scheduled for US release in May 2006 and will retail for about $1,800. Please note that this price isn't representative of a standard Blu-ray player, it's an Elite-brand player which usually costs at least two times what a standard version does. Pioneer also displayed their BD/DVD writer (BDR-101A), which is scheduled for US release Q1 2006 and will retail for about $1,000. The BD writer supports recording of BD-R/BD-RE at 2x speed (72Mbps), DVD±R at 8x speed and DVD±RW at 4x speed. The drive also reads BD-ROMs at 2x speed and DVDs at 8x speed.
Pioneer showed off the final design of their BD player (BDP-HD1), which won the "Home Video" category of CNET's "Best of CES 2006". The player is top of the line and truly lives up to the name "Elite" with features such as 1080p output via HDMI, upconversion of DVDs to 1080i/1080p and networking features for playback of HD video. The player is scheduled for US release in May 2006 and will retail for about $1,800. Please note that this price isn't representative of a standard Blu-ray player, it's an Elite-brand player which usually costs at least two times what a standard version does. Pioneer also displayed their BD/DVD writer (BDR-101A), which is scheduled for US release Q1 2006 and will retail for about $1,000. The BD writer supports recording of BD-R/BD-RE at 2x speed (72Mbps), DVD±R at 8x speed and DVD±RW at 4x speed. The drive also reads BD-ROMs at 2x speed and DVDs at 8x speed.
and
Samsung
Samsung displayed their upcoming BD player (BD-P1000), which supports 1080p output via HDMI as well as upconversion of DVDs to 1080i/1080p. The player which is likely to be the first Blu-ray player on the market is scheduled for US release in April 2006 and will retail for about $1,000. Samsung also displayed their BD/HDD recorder (BD-HR1000), which features a 400GB HDD and wired/wireless networking capabilities for transferring video, music and photos. After the show we found out that they showed off their BD/DVD/CD writer (SH-B022A) as well, but unfortunately we completely missed it. We also spent some time talking to a Samsung representative at the show who informed us that they are 100% committed to Blu-ray and have no plans to market or manufacture any HD-DVD products.
Samsung displayed their upcoming BD player (BD-P1000), which supports 1080p output via HDMI as well as upconversion of DVDs to 1080i/1080p. The player which is likely to be the first Blu-ray player on the market is scheduled for US release in April 2006 and will retail for about $1,000. Samsung also displayed their BD/HDD recorder (BD-HR1000), which features a 400GB HDD and wired/wireless networking capabilities for transferring video, music and photos. After the show we found out that they showed off their BD/DVD/CD writer (SH-B022A) as well, but unfortunately we completely missed it. We also spent some time talking to a Samsung representative at the show who informed us that they are 100% committed to Blu-ray and have no plans to market or manufacture any HD-DVD products.
and
LG
LG displayed their BD player (BD199), which supports 1080p output via HDMI and upconversion of DVDs to 1080i/1080p. The player is scheduled for US release in Q2 2006 and will retail for less than $1,000. LG also displayed their internal BD rewriter (GBW-H10N), which supports recording and rewriting of BD/DVD/CD media. The BD rewriter is scheduled for US release in Q2 2006 and will retail for about $500.
LG displayed their BD player (BD199), which supports 1080p output via HDMI and upconversion of DVDs to 1080i/1080p. The player is scheduled for US release in Q2 2006 and will retail for less than $1,000. LG also displayed their internal BD rewriter (GBW-H10N), which supports recording and rewriting of BD/DVD/CD media. The BD rewriter is scheduled for US release in Q2 2006 and will retail for about $500.
tyrion 20 Feb 2006 17:57
5/11
YenRug wrote:
I notice you missed these on the same page, seeing as they are probably the comparable ones, to the PS3, as they have full 1080i/p output:
I specifically ignored the players on the page since we are only talking about the drive component.
We aren't talking about a power convertor, video de-compressor, audio de-compressor, video output board, clock, motherboard, remote control, LED display or case, all of which will be included in the cost of a full player. These functions will be taken care of in the PS3 by other components such as the Cell processor, RSX GPU and game pad.
However, your own quote mentions
LG also displayed their internal BD rewriter (GBW-H10N), which supports recording and rewriting of BD/DVD/CD media. The BD rewriter is scheduled for US release in Q2 2006 and will retail for about $500.
Which is a similar spec to the Philips one I mentioned at the same price.
Again, I think the ability of LG and Philips to market PC components at $500 that support recording and re-writing make it unlikely that the component Sony will put in the PS3, which only needs to be a reader, will cost them as much as $350.
saurian 20 Feb 2006 18:12
6/11
schnide wrote:
Do not forget for a second that the PS3 is a Blu-Ray unit and doubles as both a games machine and a high end movie player in the way that the Xbox 360 isn't (well yet, anyway).
Yes, thats right. BUT what happens if Microsoft release a BluRay drive before PS3 finally comes out?
Or if HD DVD gets too big a foothold brfore PS3 finally emerges??
way 20 Feb 2006 18:19
7/11
Some of these things in the list look like retail pricing. The costs might be six times less than the retail for these items. Integration into one unit lowers cost again.
schnide 20 Feb 2006 23:37
8/11
tyrion wrote:
schnide wrote:
I'm sure that similar reports were coming out before the PS2 and where exactly is it finishing in the console race again?
Yep, the initial parts costings for the PS2 came out at $800, these costings were by "analysts".
I so 0wNz j00 aLL!!!!!!!!!!!!!!!!!!1111111
ozfunghi 21 Feb 2006 11:41
9/11
If, for example, Sony wishes to launch at the same price point as the Xbox 360, the firm would have to be prepared to take a loss of US$400 on each PS3 sold. And if it decided, for example, to take a loss of $200 per unit, US gamers would be looking at an initial price point of $599. To put this in some kind of context, bear in mind that a recent analysis of the 360's component costs showed that Microsoft was taking a US$126 hit on each high-end Xbox 360 sold.
Errr....
599 + 200 = 900?
399 + 400 = 900?
Glad i went to school.
Errr....
599 + 200 = 900?
399 + 400 = 900?
Glad i went to school.
tyrion 21 Feb 2006 13:36
10/11
ozfunghi wrote:
599 + 200 = 900?
399 + 400 = 900?
399 + 400 = 900?
Well, they both equal $800, which is what the numbers actually add up to, not what ML quoted everywhere else.
horngreen 21 Feb 2006 17:34
11/11
Yes, but the PS2 was taking us from VHS to DVD which is a much more desirable format (no rewinding, better picture, last longer). The PS3 is only taking us from DVD to high def DVD. Anyone who has a HDTV knows that a progressive scan DVD player already provides one hell of a picture without the added expense of a high def DVD player. These analyst come out every launch and state things that may or may not ring true but you can't deny the delays and lack of any real playable demos for the PS3 do tell a story. I think Sony has once again over promised what their console will be and this time consumers are paying attention and expecting to get what they are promised this time.