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PS3 Japanese Price Drop 'Ridiculous'

Zonk posted about 8 years ago | from the no-more-so-than-anything-else-they've-done dept.

70

Gamasutra reports on comments from a Japanese analyst group, characterizing the pre-launch price drop for the Japanese market as ridiculous. From the article: "Meanwhile, Naoki Fujiwara of Shinkin Asset Management suggested that the price reduction was 'negative for the short term because the company may not be able to sell enough consoles to cover an instant loss caused by the price cut.' The PlayStation 3 was already expected to be sold at a loss, with Sony allowing up to five years to recoup the costs. Shares in Sony fell 1.9 percent following the announcement, although this coincided with a generally poor day for the Tokyo Stock Exchange and may not be entirely related to the price cut."

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PS3 Ridiculous (0)

Anonymous Coward | about 8 years ago | (#16168455)

The PS3 is just ridiculous in general... MS:Cairo [wikipedia.org] = Sony:PS3

Re:PS3 Ridiculous (0)

Anonymous Coward | about 8 years ago | (#16168575)

Thanks for telling us that. We are glad to have restated what has been stated on EVERY SINGLE DISCUSSION ABOUT THE PS3. Personally, I think it looks like an interesting machine, and if the linux thing dosen't fall through, it might be good for video rendering or whatnot.

Hm (0)

Anonymous Coward | about 8 years ago | (#16168463)

Well, I guess when you're Zonk, you have to find some way to make a price drop after eight months of bitching about price seem like a bad thing for Sony anyway.

Re:Hm (2)

nuclearpenguins (907128) | about 8 years ago | (#16168553)

If it's not Nintendo don't bother looking for any positives about it. Is that the rule around here nowadays?

Re:Hm (0)

Anonymous Coward | about 8 years ago | (#16169435)

Yes, he does, by referencing a Gamasutra post discussing an article from Bloomberg. Zonk just posts the news he doesn't write it. If you want positive PS3 news then submit it. If not; shutup.

Wait what? (1)

KDR_11k (778916) | about 8 years ago | (#16168483)

So they are selling the PS3 at a loss yet:
the company may not be able to sell enough consoles to cover an instant loss caused by the price cut.

What the? Wouldn't selling more units mean more loss if the thing's sold at a loss per unit?

Re:Wait what? (1)

nebaz (453974) | about 8 years ago | (#16168495)

I assume they think that more units sold = more games bought, which are not sold at a loss, which would profit them.

Re:Wait what? (1)

EvilIdler (21087) | about 8 years ago | (#16168507)

More units = more potential game sales. You'll buy at least one game when you buy the
console normally, and that's where they intend to make the money.

Re:Wait what? (3, Insightful)

SkullMac (420520) | about 8 years ago | (#16168513)

Ah, but in order to sell more units, they must order more parts to manufacture the extra units. A larger order for parts means a larger bulk discount, thus reducing the loss per unit. As component prices continue to fall over time, this can eventually become a profit per unit.

Re:Wait what? (0)

Anonymous Coward | about 8 years ago | (#16171237)

It's not a matter of them ordering enough of the hardware components in bulk--the problem is the hardware components are all relatively new and expensive themselves.

For the PS 3, and for the Xbox 360, experience and other shifts in the manufacturing (time) will cut more costs than simply bulk ordering.

If it was a matter of ordering enough parts, then I can guarantee that both Sony and Microsoft would have done so.

Obligatory (3, Funny)

UbuntuDupe (970646) | about 8 years ago | (#16168519)

What the? Wouldn't selling more units mean more loss if the thing's sold at a loss per unit?

It may be a loss, but they make it up in volume, goddamnit!

Re:Obligatory (1)

Keeper (56691) | about 8 years ago | (#16168881)

The "volume" is in game sales. Basically, they're increasing their initial losses without providing a mechanism to recover those losses more quickly.

Re:Obligatory (0)

Anonymous Coward | about 8 years ago | (#16169919)

What sense of this word "funny" still applies to this old joke?

Re:Wait what? (4, Funny)

Pharmboy (216950) | about 8 years ago | (#16168621)

I still say they did this in response to Nintendo's new commercial [google.com] comparing the Wii to the PS3... ;)

If that doesn't sell more Wiis, nothing will.

Re:Wait what? (0)

Anonymous Coward | about 8 years ago | (#16168685)

"damn you. now i must wank."

Re:Wait what? (1)

DDLKermit007 (911046) | about 8 years ago | (#16168765)

Hahaha! I wish I hadn't just spent my last mod point! lol

Re:Wait what? (0)

Anonymous Coward | about 8 years ago | (#16169491)

Hmmm, that commercial doesn't do anything for me. Maybe it's my age showing I don't know. I am probably going to buy a Wii but this commercial makes me want to buy a PS3. I don't like overweight women but I don't like trashy women either, at least one has substance. But I've been around the block with women (again, my age showing) so I'm probably not in the target demographic for that commercial.

Re:Wait what? (0)

Anonymous Coward | about 8 years ago | (#16169745)

It's not a real commercial, idiot.

Re:Wait what? (1)

Pharmboy (216950) | about 8 years ago | (#16170315)

Hmmm, that commercial doesn't do anything for me. blah blah blah blah....

The purpose of the *fake* commercial was NOT to give you a chubby. It was to compare the differences in the two systems, using "Apple" methods, in a fun way. IE: let you decide which girl (game system) was more fun to be with, the overly complex and bloated PS3 or the "peppy and cute" Wii.

But perhaps that is too complicated for you, like logging in with a user name. That or you are suffering from what is ailing many slashdotters in the last few months: an abject lack of imagination and sense of humor, combined with the inability to understand sarcasm. Go smoke a joint or something. Really, I am saying this with love, man. Pop open a six pack or whatever works for you. Relax, the whole world isn't literal.

Re:Wait what? (1, Interesting)

Anonymous Coward | about 8 years ago | (#16172399)

Ummm...I think the GP got the "metaphor" just fine. The point of the Apple commercials is not to make John Hodgman look ugly. We never see the "mac" doing a striptease. The point would have been better served with the "wii" in clothing and saying more lines, like the "mac" character she was modeled after. Instead we have the camera scanning her titties and the PS3 jealously shouting because she can't get enough attention. It's not funny, it's not stylistically correct enough to be a parody, and it's insulting to most women. It makes you feel sorry for the PS3, which is not the intended purpose. In short form, it fails at pretty much everything it attempts to do.

But then again, it was from G4, so you know...expectations...

Re:Wait what? (1)

kmhebert (586931) | more than 7 years ago | (#16206893)

Waah, waah, waaah, waaaaahhhhh..... Oh, wait a minute. Wii, wii, wii, WIIIIIIIIIIIIIIIII!!!!!!!!!!!!!!!!!!

Re:Wait what? (0)

Anonymous Coward | about 8 years ago | (#16170627)

I agree. The dialogue wasn't good enough to offer a second point of focus and the entire thing devolved into ogling. Given that it was a fake commercial (and therefore could be seen as an editorial) it makes more sense, but they still could've spent more than 15 minutes writing the damn thing.

Re:Wait what? (1)

The Man From Sears (936506) | more than 7 years ago | (#16177489)

It definately had it's moments, but I have to agree. I think the commercial would have been much more driving if they put the "Wii" in some actual clothes and held off on all the slapping and close ups. Heck, I'd probably be converted right now, with all the lame crap Sony is putting it's self through at the moment.

Re:Wait what? (1)

justchris (802302) | more than 7 years ago | (#16194437)

That presupposes that this was meant to show that the Wii is "better" than the PS3, when I took the thrust of the parody to be making fun of both options relatively equally. So the PS3 is shown as a "large", "ugly" system with a "bad" attitude, while the Wii is shown as "fun", but ultimately "cheap". Nobody wins!

Re:Wait what? (1)

VertigoAce (257771) | about 8 years ago | (#16168665)

The point was that they would have sold out in Japan at the higher price anyway. So cutting the price results in a loss with no real benefit. If losing more money on the consoles resulted in more units being sold then they may make up the difference in extra game sales (difference between the two sale prices, not the discount from manufacturing cost).

Re:Wait what? (1)

Nazmun (590998) | about 8 years ago | (#16168895)

Well, primarily analysts were expecting a sellout of the meager 100k units being supplied their at launch.

More importantly however your point is flawed, startup costs like factory tooling/building are far greater then cost per unit without that built in. Sony's already spent billions before even making one ps3 unit, that is where most of the money went.

You will get far closer to profitability if you keep on churning units at the max capacity of the factory to regain the cost of building it.

Re:Wait what? (0)

Anonymous Coward | about 8 years ago | (#16170273)

They make back the loss from software, accessories (controllers, memory sticks, etc.), and eventually by having the hardware cheaper than the price.

The instant recouping would only be possible at the beginning by releasing enough consoles (albeit, at a loss) to allow for enough people to get the console and a bunch of games.

After all, of the 500,000 early adopters, there are simply not enough people to expect them to buy enough stuff to recoup the losses. This is why game adoption ratios are such a big deal in the industry now because the loss on the console can be forgiven, if the console owners buy enough games to cover it...

In other words, having more consoles on the market even at the same price would mean higher losses on the console itself, but they would be making more money from other things that will now likely go unsold for a long time.

I wonder how many games that could have been major games will go almost unnoticed because of the low number of adopters, thus losing both Sony some per-copy-sold money and these software companies a boat load of money.

Re:Wait what? (0, Flamebait)

ClamIAm (926466) | about 8 years ago | (#16170819)

So they are selling the PS3 at a loss

Holy shit, did you just get off the phone with Sony? Wait, you didn't? Oh, ok.

Newsflash: Sony has not said how much each unit costs to make. The only prices ever mentioned when talking about the PS3 are ones that bullshit "analysts" pull out of their asses, with no knowledge of what's actually going on inside Sony. The *real* article that Gamasutra links to says:

"Sony forecast costs of developing the PlayStation 3 will widen the games division's losses this quarter and may take five years to recoup."


This is different from each unit costing $800 to manufacture. The "instant loss" comment comes from some financial/business moron, and the comment may also have been mistranslated.

Seriously what is getting attached to that HDTV (2, Insightful)

linzeal (197905) | about 8 years ago | (#16168491)

Slashdot users have always been at the bleeding edge of technology adoption and sometimes we understandably are willing to pay the premium for features but this time Sony I think has overestimated the response of their base. It is not exactly lean times for many of us yet a wary eye has been placed on new formats that come out at 10x the price they will be in a year. If the blu-ray technology is anything like DVD tech, we will have ~100 dollar players next Christmas. The playstation does have an alluring bunch of exclusive games such as metal gear, but Final Fantasy [xbox365.com] will be coming to other next-gen consoles as well now. The only real selling point of the PS3 is the blu-ray and I simply do not have any need to go beyond the res current-gen DVDs can provide as I only have a 27" LCD.

I have misgivings about Microsoft as much as the next Slashdotter but given the Xbox 360 [amazon.com] has already seen price breaks in some of its games and it has a price that I more typically associate with something that I "play" with. I think I am going with Microsoft this time. I might get a Wii [amazon.com] as well, because I find it offers much better multiplayer games for parties.

Selling points of the PS3 (2, Interesting)

SuperKendall (25149) | about 8 years ago | (#16168889)

For me the selling point of the PS3 is that I can be pretty sure I will get some interesting games from Japnese developers, perhaps the next Ico or Katmari Damacy. And since the PS3 is region free (in regards to games) I am not even at the mercy of game developers to bring ports over to the US.

Also Blu-Ray is going to provide a much better display that DVD's even on lower end equipment - I have an 600x800 projector and 1080i content downsampled to that device looks MUCH better than DVD's. You don't have to buy a 1080p display to take advantage of the PS3 (or 360 for that matter), a 720p screen or even less will do quite well.

It all really boils down to games of course, but the Blu-Ray player is a powerful incentive and a reason I'll be getting the PS3. I don't think $100 players by next christmas is realistic; probably still more like $300 by then.

Re:Selling points of the PS3 (1)

Babbster (107076) | more than 7 years ago | (#16180293)

For me the selling point of the PS3 is that I can be pretty sure I will get some interesting games from Japnese developers, perhaps the next Ico or Katmari Damacy.

How can you make that assertion? It only works if, somehow, the PS3 manages to obtain a dominant position in the [Japanese] marketplace (more consoles = better chance an offbeat title will make money). There are many reasons to think that the Wii is in a far better position to get these "interesting games" you speak of, given its more attractive price, its "new" controller, the general ennui regarding the PS3 and its price, as well as what will presumably be lower (non-HD) development costs.

Heck, Nintendo is already showing off these kind of "interesting games" in both the upcoming Wii titles and the DS titles that have been released so far.

Maybe if Sony actually developed some of the awesome "weird games" that showed up on the PS2, I'd buy into this idea. As it is, though, the third-party developers can't take for granted that the PS3 is going to be a success.

Re:Selling points of the PS3 (1)

SuperKendall (25149) | more than 7 years ago | (#16180793)

How can you make that assertion? It only works if, somehow, the PS3 manages to obtain a dominant position in the [Japanese] marketplace (more consoles = better chance an offbeat title will make money). There are many reasons to think that the Wii is in a far better position to get these "interesting games" you speak of, given its more attractive price, its "new" controller, the general ennui regarding the PS3 and its price, as well as what will presumably be lower (non-HD) development costs.

I did not say that the PS3 will get ALL of them. Just some, and indeed it still seems likley that a lot of Japanese developers are still working with the PS3, if nothing else based on momentum. Furthermore why are you discounting the PS2 market? There are far more PS2's around so we may see games from smaller developers come out for that platform for years to come, which will also play on the PS3.

The Wii should get some very inetresting games as well, I am sure of that. But the PS3 also has a motion sensitive controller (of a different nature, but still motion sensitive) and there's no reason to think a few studios will not take some inetresting steps with that. Personally I am probably going to get a Wii as well as a PS3 soit hardly matters to me which platform these future games come out for.

It's not like the situation with the 360 where Microsoft has trouble convincing Japanese developers to jump on board in large numbers.

Re:Selling points of the PS3 (1)

Breakfast Pants (323698) | more than 7 years ago | (#16180573)

"I have an 600x800 projector and 1080i content downsampled to that device looks MUCH better than DVD's."
Please explain how. I'm gonna assume you mean 800x600, a typical DVD is 720 × 480. The most you can get out of a 800x600 projector widescreen is 800x450. Unless you are viewing fullscreen HD content and comparing it with fullscreen DVDs, I don't think the difference is as drastic as you claim. I think you are likely playing the DVDs on a composite output DVD player and comparing it to a computer hooked up with HDMI or RGB.

Re:Selling points of the PS3 (1)

SuperKendall (25149) | more than 7 years ago | (#16180747)

"I have an 600x800 projector and 1080i content downsampled to that device looks MUCH better than DVD's."
Please explain how. I'm gonna assume you mean 800x600, a typical DVD is 720 × 480. The most you can get out of a 800x600 projector widescreen is 800x450. Unless you are viewing fullscreen HD content and comparing it with fullscreen DVDs, I don't think the difference is as drastic as you claim. I think you are likely playing the DVDs on a composite output DVD player and comparing it to a computer hooked up with HDMI or RGB.


Yes, 800x600 of course.

You said it yourself - a typical DVD is 720x480, well within the 800x600 resolution of this projector. A widescreen projection from a 1080i source (in my case a DishTV HD receiver) is of course downsampled to 800x450 (roughly, the vertical resolution may be a bit higher) (both using component as input to the projector). Why would I not be viewing this content fullscreen? That is the point of a dedicated home theater projector, which is what this is for.

I did not say the dfference was huge, but it was very noticable for any kind of HD content. Of course more resolution would bring a much greater increase in quality, but do not discount what a few hundred pixels can do for a large moving image.

Also don't forget that you get some compression artifacts that show up full size in DVD viewing at this resolution, whereas artifacts are also downsampled from 1080i sources and so are less noticable leaading to cleaner looking video.

Re:Selling points of the PS3 (1)

Breakfast Pants (323698) | more than 7 years ago | (#16261435)

"Why would I not be viewing this content fullscreen?" Fullscreen is generally a synonym for '4:3'. I assume you aren't scaling and cropping to fit 800x600 as you said yourself '800x450 [roughly]'. That's all I meant by fullscreen. For example, the game Soul Calibur II on the original Xbox can output to HD in a 4:3 aspect ration, and it indeed would look significantly better at 800x600 than at standard resolution.

No cropping... (1)

SuperKendall (25149) | more than 7 years ago | (#16261733)

The fullscreen is handled by the computer, basically it is being cropped a little with bars at the top and bottom - as you noted the absolute resolution availiable is still only 800x600, so something has to give!

Re:Seriously what is getting attached to that HDTV (0)

Anonymous Coward | about 8 years ago | (#16169969)

With this strategy, it seems like they are not even banking on PS3 games to be revenue driving until later on in its life. Sony keeping HDMI on the low end PS3 is then probably to help drive Blu-Ray and HDTV sales.

I do not believe Blu-Ray will be compelling to people who already are accustomed to DVD-quality. I believe Blu-Ray's disc capacity will be exploited to provide entire series of DVD-quality shows on fewer or a single BD-ROM disc. If PS3 becomes the cheapest BD player, then people will buy it for that purpose. This would then provide people with a reason, no.., excuse to buy an HDTV.

They will probably have some plan to make PS3 be the ultimate up-res scaler for DVD-quality shows on HDTV, somehow using Cell.

the north will rise again! (-1, Offtopic)

Anonymous Coward | about 8 years ago | (#16168493)

too many people cower to criminals and government crap.

From the Article: (2, Interesting)

Garrett Fox (970174) | about 8 years ago | (#16168531)

The cheaper of the two hardware variations was originally priced at ¥59,800 ($515) but was reduced to ¥49,980 ($430), at the same time as a HDMI video port was also added to the unit.

That's an improvement, but $430 is still very high for a game system! Yes, yes, it's also a Blue Laser media player, but since I had no plan to buy one of those, I still think of the PS3 as a vastly overpriced gaming system.

As a side note, given that Dead Rising for the X-Box 360 apparently requires HD [slashdot.org] to dispay some of its text properly, the implication is that I'll need a whole new TV just to play some PS3 games. Since I had no play to buy an HDTV either, that's yet another cost. No thanks.

This may be the first generation of consoles since the 8-bit era that I don't jump into!

Re: Don't forget the Wii. (1)

trdrstv (986999) | about 8 years ago | (#16169419)

The Wii will have plenty of games that will look great on a SDTV...

Yes it is. (1)

WindozeSux (857211) | about 8 years ago | (#16168589)

Of course it's ridiculous. Why do the Japanese get a price drop and the rest of the world has to pay $600(or similiar in different currencies)? It seems like Sony is desparate to get marketshare and has carelessly discarded the rest of the consumer base.

Re:Yes it is. (0)

Anonymous Coward | about 8 years ago | (#16168659)

Cause they know they have to keep up with the Wii in Japan.

Re:Yes it is. (5, Interesting)

ArwynH (883499) | about 8 years ago | (#16169359)

Tough isn't it? We in Japan got to play the system 1st as well. I've just gotten back from the Tokyo Game Show. Played a few PS3 demo's there. Nice graphics, reminds me of PC games. But to be honest, the thing I noticed most about the PS3 was that it felt and played almost exactly like a PS2. That isn't really a bad thing, the PS2 was a nice system, but the PS3 doesn't really offer that much more than the PS2 does as far as game experience goes.

Overall impression? I'll probably end up buying a PS3, it's a nice gaming machine, but not at launch. Even with the price drop, it's still more expensive than Wii with 4 games and a few extra controllers. I'll wait for the 1st or 2nd price drop before buying or until a killer game comes out. There were quite a few there that I'd like to play, but none that sold the system.

Back on topic, market share is everything at this stage of the game. Japanese have a tendency to follow trends. The console that gets the largest market share at the start will set the trend. This means Sony have thier work cut out for them because not only does thier closest competitor have a cheaper console, it's also smaller, cuter and it's controller has a larger 'wow' effect than the PS3's graphics do. This doesn't even take into account that Nintendo will probably out produce Sony. So every little helps I guess.

As for why Japan is important, well it's Sony's home market. It's also the home to the development teams for a fair number of core PS franchises. If it loses Japan the effect on the other markets will be significant.

Wii conspiracy (0)

Anonymous Coward | about 8 years ago | (#16168595)

I mentioned this on a Wii thread (after the price was announced) to be mostly ignored (because I'm AC and Wii threads become huge) but I always suspected that the Wii was priced at $250 (American) because they're anticipating a price drop from the XBox 360 in the near future; if they were at a smaller price (say $199) they might not be able to cut the price further.

Now, I could be wrong, but if Sony is cutting the price of the PS3 (whether in Japan or North America) it would encourage Microsoft to cut the price of the XBox 360; wouldn't it be odd to (after all these months of speculation) see the Wii at $199, XBox 360 at $250/$350 and PS3 at $450/$600 come november?

well, (1)

joe 155 (937621) | about 8 years ago | (#16168645)

Reductions in price are always good. For the sell more and sell more games idea I'm not too sure, if we believe the marketing then the PS3 is meant to do everything and be a "media centre" and everything else, I think that even from what's been coming from Sony I've not seen them pushing the games

I've actually been thinking of getting a PS3 (or at least looking into it when they come out). I've heard that it can run linux and that the hardware seems pretty good. If I could get Fedora to work on it I could run it on a LCD HDTV and use the USB ports for the keyboard and mouse I could get one and a new HDTV cheaper than I could just buy a new PC. Even better it'd be subsidised by Sony and they'll lose money because I'll never buy a game or use any of their services.

Re:well, (1)

The Man From Sears (936506) | more than 7 years ago | (#16177545)

I originaly wanted to get a PS3, but every day I don't have one is another day I'm happier with my Xbox 360 and more content with the idea of missing out on Sony's next greatest console. I really hope Sony can pull their crap together, because from what I've been reading here, I'm not the only person to feel this way.

Great (2, Funny)

Ant P. (974313) | about 8 years ago | (#16168771)

1. Import region-free Japanese PS3s
2. Sell Japanese PS3s
3. ???^WPROFIT!!!

We need a new term to replace "region free." (2, Informative)

Anonymous Coward | about 8 years ago | (#16169069)

Why do people believe in these "region free" claims?

Both Sony and Nintendo(before Nintendo corrected their mispoken PR person) heads said that "region free" support was up to the developers/publishers. In other words, companies can decided whether or not to let their games work on -- still region encoded -- consoles from different regions.

Does that really sound like being REAL "region free" to you? Because it sure doesn't to me.....

Not sure what it should be called, maybe "region friendly"?

Re:We need a new term to replace "region free." (1)

rolfwind (528248) | about 8 years ago | (#16169367)

Agreed, because DVDs are the same way. The makers of those can decide if they are region free or not.

Re:We need a new term to replace "region free." (1)

cortana (588495) | about 8 years ago | (#16169387)

I would call it defective.

Not Blu-Ray movies (1)

Namarrgon (105036) | more than 7 years ago | (#16181913)

Even if US games work on your imported Japanese console, are local Blu-Ray movies going to play?

From what I've heard, game region locking is optional for the publisher, but Blu-Ray movie region locking is still there.

Besides, good luck trying to import one of those 100K launch units.

Given the option between 2 scenarios... (1)

r_jensen11 (598210) | about 8 years ago | (#16169285)

I do believe it's better business practice to run out of the product you're selling and backorder instead of not being able to sell what's on the shelf. That is, unless for every unit of something you sell, you're losing (net long-run) money rather than gaining money.

Re:Given the option between 2 scenarios... (1)

lolocaust (871165) | about 8 years ago | (#16169705)

They don't lose money per sale, because they've already spent money to manufacture the thing. When you buy a ps3, all that happens it that their losses are decreased. When they manufacture a ps3, it'll cost them $900 (made up figure). They are $900 in the red, until you buy one for $600, which now makes them only $300 in the red. So basically, for every ps3 sold, the less money they lose.

Re:Given the option between 2 scenarios... (1)

Watson Ladd (955755) | about 8 years ago | (#16170737)

Unless they are manufacturing new ones. Then buying more means more of a loss.

Recall: Intel's Free 4004 CPU, You buy the RAM (1)

ivi (126837) | about 8 years ago | (#16169631)

Cel tel carriers subsidize handsets & sell air-time...

Free razor, you buy the blades...

Sony subsidizes the PS3 & wants to sell content...

---

All examples of tried & ture business practices

So, what's newsworthy here?

Or... is this another "sponsored news article"...? :-/

Re:Recall: Intel's Free 4004 CPU, You buy the RAM (5, Interesting)

tilandal (1004811) | about 8 years ago | (#16170503)

No consol maker has ever made a profit by selling units at a loss. What exactly makes this tried and true?

Idiots keep quoting the razorblade thing. Guess what. The razor is just a handle. Its is the CHEAP part of the package. You can afford to give those away because the next time someone buys a blade you make a profit. Sony only makes about $10 per third party game sold. If they are loosing an extra $85 per consol sold that means they must sell an additional 8 games before they break even. This mean the consumer has shelled out more then $900 and you have yet to see any profit. Here is the worst part. The average attach rate for a consol is only 9-10. The highest attach rate has been the PS1 at 13.2 games per consol (as of June 2005 in Japan) and this is only after a decade of being on the market. What does this mean? If Sony losses $100 per consol they will probably NEVER see a profit. And we are only talking about hardware here. This does not take into account the cost of marketing, shipping, QA, or the initial development costs.

The dirty secret of the consol business is HAVING A LARGER INSTALL BASE DOES NOT SELL GAMES!

Here are a list of attach rates from the last generation.

GameCube (End of 2005)
Japan - 6.693
America - 9.838
Other - 8.550
Total - 8.945

PlayStation 2 (End of 2005)
Japan - 8.454
America - 11.222
Europe - 9.294
Total - 9.885

Xbox (Unofficial, End of 2004)
Asia - 4.706
America - 9.773
Europe - 8.200
Total - 8.945

What does all this mean? The average consumer will only buy 9-10 games! The time you own the consol makes no difference either. (The PS1 average attach rate is only 9.3, The NES rate was about 8, SNES 7) Each consol sold has a total expected revenue from games of only $100.

So what exactly are Microsoft and Sony doing?

Microsoft is simply trying to buy mindshare. They expect to eventually make money on selling services over Xbox live and software that ties your Xbox to your PC (running windows) and your set top box (running Media center). They are willing to pour money into the black hole because in order to sell you high margin item at a later date. Microsoft has the financials to support this indefinably by using their profits from Windows and Office.

Sony is a different beast. Sony intends to make money off of Blueray royalties. As it stands, if Blueray fails (like betamax, Memory Stick, Atrack, and UMD) Sony will be in deep financial trouble. On the other hand if Blueray takes off like DVD did Sony stands to reap huge profits.

Personally I do not see Blueray being the next big thing. Consumers are not going to shell out real money on HD yet. The players are expensive, the standards are confusing, and most people don't yet have a HDTV. It will be years before the number of households with HDTV reaches the critical mass needed to make Blueray a success. In that time, it is likely that there will be other options. Blueray may very well turn out like laserdisc and VCD did.

Re:Recall: Intel's Free 4004 CPU, You buy the RAM (1)

ivan256 (17499) | more than 7 years ago | (#16174439)

Sony is a different beast. Sony intends to make money off of Blueray royalties.

With the PS2, Sony actially made a profit on the hardware for a signifigant portion of the console's lifespan (which isn't over yet). They started making a profit on the hardware well before they said they were going to be able to. Perhaps this is their plan now, as well.

Also, you forgot to include accessory sales in your numbers. PS2 memory cards wre 70-80% profit from the beginning. Controllers, extension cords, S-Video cables... It adds up. This generation you also have the online component which will bring in advertising and 'micro'-payment revenues. Thos things are what will keep me away fron this generation though. (However I see people I know with 360s blowing live points for the tiniest bits of excuses for content, so who knows, it could be a gold mine)

The razors and blades analogy is dumb though, and it's certanly not "tried and true". Most consoles weren't sold at a loss, and of the few that were, most of them were either spectacular failures or would have been if their manufacturer didn't have billions of dollars of cash reserves to blow.

Re:Recall: Intel's Free 4004 CPU, You buy the RAM (1)

tilandal (1004811) | more than 7 years ago | (#16187361)

I do agree with you on the ps2. It was sold at a modest loss initially and became profitable later in its lifespan. The problem with the PS3 is it may not become profitable to make, ever. Since it comes with a hard drive, there wont be any profits from memory cards. Sony has not shown any unified online system so profits fron micropayments are questionable. So, Why won't the PS3 be profitable? Analists are predicting that each consol loses from $300-$500 (thats before the price cut). This number seems in the ball park because Blueray Players sell for $1000. Lets assume Sony is getting discounts beyond even what the analysts predict so the loses are only $200 per consol. That puts the total price of the consol at $700 for the base version. Lets look at the ps2 price history now: US$299.99 (October 26, 2000, Launch Price) (CAD$449.99) US$199.99 (May 14, 2002) (CAD$299.99) US$179.99 (May 13, 2003) (CAD$249.99) US$149.99 (May 11, 2004) (CAD$179.99) US$129.99 (April 20, 2006) (CAD$139.99) (from wikipedia) Over 4 years the price dropped by 50% If the ps3 follows the same pattern it will cost $250 in 4 years. Now the question is: Can Sony reduce the manufacturing cost from $700 to $250 in 4 years? I don't think they can. Here are the reasons: #1) Hard drive. As Microsoft found out, there is a minimum cost associated with a hard drive and it is substantial. Just because the price/Gig goes down does not mean the price per unit will. #2) Blueray drive. When the PS2 came out at the end of 2000 DVD players were already cheap. You could pick one up for less then $250 and the DVD format was clearly the way the market was going. The first DVD players and discs were already available in November 1996 in Japan and March 1997 in the United States. (from wikipedia) That is 4 years before the ps2 hit the market. The first Blueray Movies and players are JUST coming out now. If Blueray follows the same adoption rate as DVD then in four years Blueray players will still cost $250! I see no reason why Blueray will become popular any faster. In 4 years it is estimated that only 55% - 65% of US households will own at least 1 HDTV. Blueray also hase competition from HD-DVD. Competition from HD-DVD is sure to slow adoption of both formats leading to higher component costs. HD-DVD might kill off Blueray all together. HD-DVD is cheaper and easier to manufacture. Blueray could go the way Betamax. Sony does not exactly have a good track record when it comes to picking winning formats. Finally there is the off chance that both Blueray and HD-DVD will fail. The question is: Does Blueray offer enough of an advantage to consumers that they will abandon DVD? It is possible that Blueray and HD-DVD will both fall the way of Laserdisk and VCD. They could be suplanted by a new format in the next few years that offers better value. A breakthrough in video compression or Video on demand could kill both formats as they flounder around waiting for HDTV penetration to go up. #3) More competition. Both Microsoft and Nintendo are looking much stronger this round. Microsoft already has a good userbase started and Nintendo will beat Sony to market and ship more units this year. Can Sony maintain thier current market share even though they are starting out with the smallest userbase? Personaly I think Sony has no where to go but down this generation. High price and unit shortages are going to leave a sour taste in many consumers mouths this holiday season. I dont think people will be happy to swallow Sony's premium pricing on games either. It is especially bitter when you realize these are the same games you played on the PS2, only prettier. In the last two generations Sony has beaten Nintendo to market and won some good mindshare but this time around things are different. Sony is last to market and, with the success if the DS over the PSP, Nintendo is the company everyone is talking about now. It seems like dejavu. Nintendo comes out with a less powerful but more unique and affordable offering to Sony's much more powerful, but more traditional and much higher priced media center offering. If Nintendo can come up with another game, like Nintendogs, that realy clicks with people and shows off the potential of the Wii, Sony could be in deep trouble.

Re:Recall: Intel's Free 4004 CPU, You buy the RAM (1)

ivan256 (17499) | more than 7 years ago | (#16202525)

If your assumptions are true, You're right, but I think you make some faulty assumptions. I think the analysts make some faulty assumptions too, and they certainly have a poor track record, so I see no reason to believe them. You also say some things that are plain incorrect.

If Blueray follows the same adoption rate as DVD then in four years Blueray players will still cost $250!

Unlike the previous generation of video players, the current generation re-uses most of the technology from high speed DVD readers. The manufacturing cost will drop on BluRay and HD-DVD *much* faster than DVD did.

HD-DVD is cheaper and easier to manufacture.

This is just plain wrong. They both use the same key expensive components: the laser, and the video decompression hardware. The PS3 has an advantage in the latter department in that the game playing hardware can play double duty as a video processor. This is a key area where the analysts have dropped the ball, The cost of a BluRay player doesn't have to be added to the cost of the PS3, only the cost of the reader, which is essentially a high speed DVD drive with an expensive blue laser. The blue laser won't be expensive for long, and HD-DVD uses the same one.

I dont think people will be happy to swallow Sony's premium pricing on games either.

This one is still too tough to call. Dispite all the made up trash talk on the internet, the fact of the matter is that PS3 games are almost certainly going to cost the same as 360 games. It is an absolute certainty that games which are released for both platforms will cost the same amount on both platforms. It is very likely that 90% of the libraries of the two systems will be ports between the two. This is still a premium price at $60 a game though, and it hasn't been working well for Microsoft thus far. I predict that within a year, PS3 and 360 games will have to drop to $54.99 in order to compete with Nintendo. I also see 'Greatest Hits' versions coming out even sooner, and having a pricepoint of $35.

Sony has another advantage this generation that they didn't have in the previous generation. In the long run, the most expensive component in their system will continue to be the CPU. They were smart and made the PS3 CPU sufficently flexable that it will be the brains of many of their other electronic devices. This should keep the scale high, spread the R&D costs to many product lines, and push manufacturing costs down through scale faster than previously possible. Can they build the PS3 for $250 four years from now? Sure they can, but they won't... They'll be building it for between $90 and $110 instead.

You are right about their competition though. It doesn't matter if they can give them away for free. If the good games are on their competitior's machine, they won't make any money. Sony has to look out for Nintendo. It is also true that they have nowhere to go but down... But that is always true when you're on top.

As a nitpick, you should consider breaking your posts up into paragraphs. It's really hard to read when it is all in one blob of text like that.

Re:Recall: Intel's Free 4004 CPU, You buy the RAM (1)

captain_cthulhu (996356) | more than 7 years ago | (#16202959)

The dirty secret of the consol business is HAVING A LARGER INSTALL BASE DOES NOT SELL GAMES!

I have to disagree. A larger install base DOES sell more games although indirectly. We see proof of this with the Gamecube.
gamecube with smaller install base = less 3rd party support = less games available = less attractive to potential adopters = weak overall sales = gamecube dies ugly slow death by starvation.
PS2 with huge install base = lots of 3rd party support = tons of available games and choices = attractive to potential adopters AND current owners = continued record-breaking sales = PS2 still competes even though it is old and the least powerful.
once either of these trends start to play out, the snowball just gets bigger... for better or worse. I agree that a larger install base does not *necessarily* increase the sales of any 1 particular game, but just by statistics alone, more sales are going to happen.

Re:Recall: Intel's Free 4004 CPU, You buy the RAM (1, Insightful)

ClamIAm (926466) | about 8 years ago | (#16170841)

Sony subsidizes the PS3 & wants to sell content...

Um, sure. Too bad Sony has said absolutely nothing about how much each unit costs to produce.

Re:Recall: Intel's Free 4004 CPU, You buy the RAM (1)

kirun (658684) | more than 7 years ago | (#16176623)

Compare and contrast the PS3 price with the price of a Blu-Ray player, take into account that those shiny Cell processors, video chips, etc. that will push up the cost of producing the PS3 and either Sony is making a loss on the PS3, Blu-Ray players are being sold at a massive profit, or Sony has some super-secret manufacturing method that means the PS3 can be profitably sold for significantly less than a internal Blu-Ray drive for a PC.

Now, which option is most likely?

Re:Recall: Intel's Free 4004 CPU, You buy the RAM (1)

ClamIAm (926466) | more than 7 years ago | (#16178329)

Or, maybe something else is going on.

The Blueray players out now are expensive for several reasons. One is simple economics, where we have a very small supply of players, driving up the price. Another reason is that the players you can buy today are basically "rough drafts", as Samsung et al basically slapped together a bunch of components to get them out the door as soon as possible. They now can refine their process, removing unneeded or overpowered components, and taking advantage of things like Moore's law and improvements in different aspects of the manufacturing process.

Now contrast this with Sony. They have spent millions already, researching components and building the infrastructure required to produce the PS3. This drives down the cost per unit substantially, and it isn't "super secret". This is the same reason the PS2 was profitable at launch.

take into account that those shiny Cell processors, video chips, etc. that will push up the cost of producing the PS3

Push up the cost? Compared to what? These components will replace most of the chips used in a standalone player, just like the PS2 did with DVDs. If you don't remember, the PS2 launch in Japan was huge because it was one of the cheapest DVD players available at the time.

Price drop meant to prevent Wii purchases (1)

ConfusedSelfHating (1000521) | about 8 years ago | (#16169915)

With only 100 000 PS3s available in Japan at launch, even people who would pay $600 for a console will not receive one. However, there will be plenty of Wiis available. This was designed to stop gamers from buying a Wii, encouraging them to hold off purchasing a next gen console until a PS3 is available. If Sony had not dropped the price, a lot of Japanese gamers would purchase a Wii and then consider purchasing a PS3 when the price dropped. Barring a miracle for Microsoft, the Xbox 360 will not be a factor in Japan.

Sony should just have one SKU and price it about $450. The two SKUs for the Xbox 360 have not helped Microsoft move consoles, it's just confused things. In the mind of most people the Xbox 360 is $400 not $300/$400 and the PS3 is $600 not $500/$600. Sony knew it would be expensive to include the Blu Ray drive and so they are going to pay through the nose to get it into millions of households. I think they would have been better off if everyone had agreed on a single high definition DVD format and they had taken their share of the profits.

Re:Price drop meant to prevent Wii purchases (0, Troll)

ClamIAm (926466) | about 8 years ago | (#16170885)

SKU ... SKUs

Dear god. Why do people keep using this acronym? I mean, other than the fact that it just rolls off the tongue, and makes written text simply flow with elegance.

Sony knew it would be expensive to include the Blu Ray drive and so they are going to pay through the nose to get it into millions of households.

What? When did Sony say they were selling the system at a loss? Oh wait, that's right, they didn't.

Wii vs Xbox360 vs PS3 prices in Canada (1)

Yvan256 (722131) | about 8 years ago | (#16171385)

Wii = 280$CAD
Xbox 360 = 500$CAD (Xbox360 core = 400$CAD, still 120$CAD more expensive than a Wii)
PS3 (20GB) = 550$CAD

IMHO, it's the Xbox360 that's overpriced. No wonder nobody's got one here (people rent them, nobody buys them).

Re:Wii vs Xbox360 vs PS3 prices in Canada (0)

Anonymous Coward | about 8 years ago | (#16171433)

Prices are from local Toys'R Us.

Re:Wii vs Xbox360 vs PS3 prices in Canada (0)

Anonymous Coward | more than 7 years ago | (#16175295)

It is overpriced but the bundle we get is better compared to the U.S. Anyway I don't know anyone who has ever rented a console, what part of Canada are you from? Maybe you shouldn't generalize like that. I have plenty of friends with 360's and I have one also. I like my 360 but I do plan to get either a Wii or PS3 at Christmas but havn't decided which yet.

PS3 = Sony's Bluray Strategy (0)

Anonymous Coward | more than 7 years ago | (#16174645)

For those that haven't clued into this already, the PS3 isn't about gaming - it's purely about Sony trying to win the next HD DVD format war...period. Owning the patient/rights to the Bluray format standard going forward (*if* it beats out HD-DVD) will be worth SOOOO much more money to Sony than the PS3, PS2, and all games combined. Sony owned the DVD format rights, which is why Microsoft did not include DVD playback support in the original Xbox (you had to buy the DVD remote separately). Because everytime you offer something that plays DVD movies, you have to put the DVD symbol on the drive and pay Sony money. Microsoft avoided paying Sony for every Xbox produced and passed that charge on to the consumers (and just to those who wanted it).

Sony's strategy is to use the demand of the PS3 and the market share it creates to OWN the next HD DVD format and thus support their company for years with the royalties it will bring (much like they have survived this long with DVD and CD formats). They really don't care about games or gaming (other than to sell more) - it is all about the Bluray.

As far as HD-DVD, it's easier and cheaper for manufacturers to retrofit their plants to produce HD-DVD than it is to produce Bluray DVDs. To burn HD-DVDs at a manufacturing facility, there is a module that can retrofit your existing DVD equipment to make HD-DVDs (cheaper). However, to make Bluray DVDs - you have to buy all new equipment (expensive). Sony knows it has an uphill battle, but if PS3 games build the demand, and the PS3 penetration gets decent marketshare - they can convince DVD manufacturers that the extra Bluray plant initial costs will be worth it.

For me personally, it's all about the Wii/360 combo! :) Screw Sony and their crappy Bluray format. In fact, this price break 'just for the Japanese' is BS. Mainly because the Japanese are so prideful and stubborn about their games and where they were made anyway. Americans, well we just play games that are good, regardless of who made them. Well you know what Japan? Fine - two can play that game: Buy Xbox 360, Support HD-DVD, Buy American!

Seriously, if national pride is gonna get called in, we do have a significant market here. :)

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