Sony, Analysts React To PS3 Launch

cdneng2 writes "Sony may be aware that something is just not right. There's a reshuffling of management occurring within Sony. Kazuo Hirai is set to head their videogame unit, as Ken Kutaragi has been bumped to the Sony board. Jack Tretton, former COO for SCEA, is now the president and CEO of that arm of the company. There's no word on the reasoning behind these position shifts. On the same day, Namco announced that they must sell 500,000 games to begin making profit on PS3 games. A Financial Times article confirms speculation on how hard it will be for Sony to make money, as analysts with UBS predict that 30 games must be sold per PS3 for them to break even." To add insult to injury, EA CEO Larry Probst has said PS3 numbers were lower than expected. Current thinking is that Sony managed to ship roughly half of the 400,000 units they were promising.

Comments

30 Games

[MadUndergrad]

30 games per PS3 is really a lot. Not being much of a console gamer myself, I don't know what the average games-per-console is, but that seems pretty high. Of course this figure depends on how much Sony can bring the cost of manufacturing down. Did the analysts assume that they would and factor it in, or did they assume a constant cost/console?

Re:30 Games

[Chris Burke]

It's interesting that no-one ever quotes the glowing praise for the PS3 in this isuppli article.

"While many fret over the high cost and price of the PlayStation 3 compared to the competition, iSuppli believes the console provides more processing power and capability than any consumer electronics device in history. Because of this, the PlayStation 3 is a great bargain, well worth its $599 price and $840.35 cost, iSuppli believes."

Of course the PS3 is a bargain, as they are selling it for less than it costs to produce. Hard to call that a bad deal.

Unless you don't have $600. Or the $800-$1000 needed to get one on Ebay if you want a non-hypothetical PS3. "Great deal for what you get" and "way too fucking expensive" are not mutually exclusive!

Nobody buys a console because its internals are architecturally pleasing (don't get me wrong, the Cell is a sweet chip, but that neither makes a PS3 cheaper nor does it make one appear on the store shelves so I can buy it). They buy it because of the games. And right now PS3 is in the same place Xbox was in. What great games did it have? Halo and... um... Halo.

So the reason so few quote the praise for the PS3 is because it's pretty much irrelevent. We're talking about a console launch. Few doubt that the PS3 is, hardware-wise, a very nice piece of machinery. I certainly don't doubt it. That doesn't make me want one, that doesn't mean I can afford one if I did want one, that doesn't mean I could find one to buy if I could afford one, and that doesn't make Sony lose any less money on the purchase if I am finally able to complete it.

It's simple: A console that is very expensive (limiting demand) and is difficult to produce (limiting supply) is headed towards a smaller marketshare, possibly meaning that fewer games are produced for it. As Sony loses a lot of money on each sale and has to sell many games to turn a profit, this means that if it plays out that way not only will PS3 be a failure in the marketshare sense but also in a financial sense. They need to increase the supply and reduce the price before they can attain a marketshare that will keep developers devoted to them, and thus keep consumers devoted.

Notice how whether or not the PS3 is an engineering masterpiece doesn't enter into it? As an engineer I would really like to live in the universe where whoever has the coolest microarchitectures wins, but sadly it doesn't work that way. A lot of times the coolest microarchitecture is the one that fails the hardest because it is difficult to manufacture and thus too expensive and too hard to supply in volume.

Now if the PS3 was a crappy piece of hardware, and still cost $600 with short supplies, then PS3 failure would be a forgone conclusion. However I don't think anyone worth mentioning is saying it's crappy hardware, so I'm not sure what "thesis" you think that part of the isuppli article is contradicting.

Re:30 Games

[heli0]

"random number an analyst pulled out of his ass"

How can this be modded to +5 when the exact methodology used is described in the article?
You may not agree with their assumptions, but it is certainly not "random".

30 games per console?

[Phoenix666]

Good lord, just how many new games do they think the average gamer buys? At $50 a pop that's $1500. I have that much disposable income, but I'd certainly not blow it on paying top dollar for games. I'm sure I don't have more than 20 games total for my PS2, and all but 2 of those I fished out of the bargain bin.

I am so happy I own no Sony stock, and even more optimistic about having bought Nintendo stock.