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PlayStation 3 to Sell For $399, Going Underground
Merrill Lynch Japan has conducted research that indicates that the PlayStation 3 will retail for $399. According to Gamespot's coverage of the paper, the unit will cost $494 to manufacture. Sony will thus be taking an almost $1 Billion loss in the first year of the PS3's lifespan. From the article: "It is normal for game companies to take a loss on hardware whenever a new console launches, since they typically focus on acquiring market share rather than generating a profit during the first year. During the second year and afterward, they can recover the losses with the savings that come from mass production and with licensing fees from publishers." Meanwhile, Press the Buttons is reporting on a Pro-G article in which SCEE Chief David Reeves states that "I feel proud that E3 went well from the presentations that they did...I feel very happy about that, but I told the troops: OK now we go underground. The PS3 goes underground until it comes out next year."
Don't get me wrong, I'm not saying that video games only take a nickle/disc to make, there are so many games out there that fail, even to the point of being fully developed but never shipped, that these companies need to balance the costs.
do.what.promptcmds
A $1 billion loss in the first year of production? That's going to hurt a lot, considering how much cash they had to dump to get Cell production ramped up this early. Their ability to mass-produce the processor was supposed to help them keep costs down and let them recoup the investment of building fabs in the first place. So much for the economy of scale.
With all these consoles coming out in such a spread-out schedule, I wonder if it will be possible for anyone to keep the hype up.
Yup. That's what I like about electronics... the "First on the Block" tax. Perfectly voluntary. If it is important enough for you to be the first to have it, then you can pay. If not, then you don't.
It helps to subsidize electronics for the masses without a convoluted gov't based needs program.
See my journal for slashdot ID's by year. Mine created in 2005. http://slashdot.org/journal/289875/slashdot-ids-by-year
I have to hand it to Sony.
...
... the KillZone trailer. Which is not a bad situation to be in, because that trailer was pretty amazing.
They really know how to do this "business" thing.
Microsoft comes to E3 with a console that is looking amazingly polished, down to the extensive new XBox Live features, and with tons and tons of in-engine first looks.
Sony comes to E3 with a gigantic press event held at their cinema, with 2 simple real-time tech demos, prerendered (although using PS3 hardware) gameplay footage that blows away any other *footage* to date, and a bunch of video clips featuring their spider-man franchise.
There is no doubt about it -- MS is shipping earlier, MS has a better online infrastructure, and many of MS' games are already playable
But Sony won E3. All anyone wanted to talk about was the KillZone trailer.
Now, to keep anyone from pointing out that the Emperor has no clothes, they're disappearing. So all anyone will talk about, until they're ready, will be
It's absolutely a great idea. For the record, I have nothing against MS, but I'm WARY of them. Anything, even something unfair, that keeps them on their toes is probably a good thing for the rest of the world.
I won't buy either until they're both out next summer, though, so it's sort of moot.
It is normal for game companies to take a loss on hardware whenever a new console launches, since they typically focus on acquiring market share rather than generating a profit during the first year. During the second year and afterward, they can recover the losses with the savings that come from mass production and with licensing fees from publishers.
Nintendo will probably launch the Revolution somewhere between $200 and $300 and still manage to make a profit on every console they sell. A while back there was an excellent article on /. that explained how Nintendo's business model was different from Sony and Microsft, and that even though they came in third place against the Xbox and PS3, they were still the most profitable.
For Sony to release a console after Microsoft and for a higher price could cause problems for them like the article stated. Microsoft has deep enough pockets to launch the console at around $350 when it comes out and cut it down to $300 when the PS3 launches. They'd be taking some huge hits in the pocketbook, but it would probably get more people to buy Xbox 360's.
However, as illustrated with the PSP, some people will buy something no matter how much it costs just because they want it. Sony is really going to need to count on its fan base to help out a lot.
What was smart about Nintendo, is instead of joining the fray and getting bashed by Sony and Microsoft (three companies in cutthroat competition means profits drop considerably...) Microsoft didn't make any money, and Sony didn't mint money the way they did with the Playstation.
:) I loved Blu-Ray, and was saddened to see adoption by Apple, because I feared that it would go like Firewire/iLink that Apple/Sony managed to kill through poor technology marketing (they both rock at consumer marketing, but technology marketing is NOT their strong point). Note, I am typing this from my Powerbook. :)
Nintendo took their limited Monopolies (Mario, Metroid, Zelda, Pokemon, etc.) and pushed them into that market. They made money along the way, kept their costs down, and sold most of their own titles. Sony/MS make something like $8/game on third-party games. Nintendo makes considerably more per game.
Even if customers bought fewer games/console, Nintendo probably made more per customer, and wasn't trying to recover a $100/customer acquisition cost.
Sony ONLY makes money on its fan base. A recreational player that buys a few sports games each year will never pay Sony enough in its fees to cover the $100 Sony spent subsidizing their hardware.
HOWEVER, in this case, Sony has another advantage. Getting the PS3 out means getting Blu-Ray DVD players into millions of homes. When the HD-DVD crew comes out with their $1000 HD-DVD players, and Apple and Sony have moved their Blu-Ray DVD machines (including Apple machines that will no doubt let you burn HD Blu-Ray DVDs of your kid's little league game), this might be the first time that the superior technology wins DESPITE being backed by BOTH Apple and Sony...
Alex
This time round, looks like it's Sony coming out second with the advanced yet fridge-sized beast & freakshow controllers, and it's going to really cost them a bundle, while the Xbox 360 seems to taking it more carefully...
I'm guessing that Nintendo will stay right where they were before though.
Why would anyone engrave "Elbereth"?
OK, let's play a simplified math game.
Let's pretend we have a game console, and it's planned competitive lifetime is 4 years. It introduces at $400, and a year later it's available for $300. But really, $400 for a 4 year lifetime means you're "writing down" $100/year. In that case, the early-adopter and the wait-for-the-price-to-drop users have gotten equal value out of the consoles. In fact, the early-adopter may have gotten better value, because his first game is being written down over 4 years instead of 3, so it costs less per year.
I know it's overly simplified, but there is one point that lasts... The early adopter does fork out the big bux, but he also gets that early usage out of the console, and perhaps more usage than the price waiter. The latter argument has holes too, in that the early adopter probably adopts the next generation early as well, so both get about the same amount of usage. Still, you buy it to use it, and if you buy early, you get to use early. The idea model, from a cost basis, would be to be an early adopter for every other generation, either skipping the in-between generations or getting them really cheap on eBay.
But if you're strictly on a cost basis, skip the game consoles entirely, and take up real-world activities that also improve your fitness.
The living have better things to do than to continue hating the dead.