$399 PS3; $299 Xbox Expected

[Jose Liz]

According to the latest issue of Japanese magazine Toyo Keizai, Merrill Lynch Japan Securities has recently calculated an analysis that the production of a single PlayStation 3 console will cost Sony approximately 54,000 yen to make ($494), as of its initial release in 2006.

Given that Sony's PS3 will face stiff competition from Microsoft's Xbox 360, the chances that Sony will release its console at its production cost is slim. Under the assumption that the Xbox 360 is expected to sell at around $299, Merrill Lynch Japan predicts that Sony will sell each PS3 at the price of 44,800 yen ($410) in Japan and $399 in America. That would mean Sony would suffer a loss of more than 130 billion yen ($1.18 billion) during the first year of the PS3's release. ( http://www.gamespot.com/news/2005/06/28/news_6128295.html )

Meanwhile, an analyst report quoted by the Toronto-based newspaper The Globe and Mail (registration required) claims to answer another burning question regarding the Xbox 360. The tech-savvy Canadian daily cited a report by UBS Securities analysts Patrick Parr and Martin Cecchetto, which estimated that Microsoft "will pay its manufacturing partners about $375 (US) a unit and sell them to consumers for $299." ( http://www.gamespot.com/news/2005/06/06/news_6127039.html )

I expected the loss on the PS3 to be greater, but I'm not sure that the PS3 can penetrate the market as well as the PS2 did with a $399 price point. Then again, Sony may not be able to afford a cheaper launch price.

[RepoMan]

Looks like Microsoft was determined to avoid the mistake they made the first time (of building the more expensive box). And it looks like they succeeded.

All things being equal, if these figures are correct, it means Sony will be bleeding money relative to Microsoft for this entire PS3/XB360 generation. :shock: (There's little reason why the PS3 would have a steeper cost-savings curve than the XB360... Lord knows the Xbox is still more expensive to produce than the PS2.)

Ouch!

Wonder if it's true :twisted:
Cheers!
Rob

[Charles]

If MS can consistantly undercut sony, sony is going to have some serious problems on their hands.

[Andrew Mallon]

I'd be shocked if the PS3 is priced higher than the 360. Look at the PSP: everyone predicted that it would be priced anywhere from $299 to $450.

[Uncle Larry]

Well, unless those games really do end up looking like the Killzone 2 video. I mean sure, the Saturn comes to mind with that $100 higher price point, but then again that it was in some ways technically inferior to the PSX didn't help its plight. The PS3 is also a high-end DVD player, and it doesn't look like they're skimping out on the functionality and features this time around.

Still, there's no way in hell I'm paying $400 for that crap. Shit, that's a new cpu+mobo or an abortion for the babysitter or something.

[Ben]

That's the best news Nintendo has ever heard.

[Kitsune]

Its currently due to launch at 39,800 yen, just like the previous two PlayStations over here. That hasn't changed at the time of this report, both previous PlayStation eventually retailed for less on their launches in other territories. Nothing is likely to change this time.

-Kitsune

[Draikin]

Its currently due to launch at 39,800 yen, just like the previous two PlayStations over here.
still pretending to be japanese heh ...

That hasn't changed at the time of this report, both previous PlayStation eventually retailed for less on their launches in other territories.
not in Europe. It was 3000F (457€) at launch.

Nothing is likely to change this time.
exept that:
- Sony is a worse financial shape now
- PS2 is not as profitable as PS1, which covered the cost of PS2 launch
- PSP are sold at a loss
- $ is weak
I guess Sony is thinking about it at least.
"Whether consumers think a product is expensive or cheap all depends on the balance between its appeal and price," he said. "Our ideal [for the PS3] is for consumers to think to themselves, 'OK, I'll work more hours and buy it.' We want people to feel that they want it, no matter what."
PS3 could be 500$ at launch, Sony will sell everything they can produce in 2006.

[Qenan]

If they are $500 at launch in the US, the PS3 will sink like a stone. But they won't be.

[SpoofyChop]

still pretending to be japanese heh ...

This is at least the second time I've heard some reference to the idea that Kitsune is only pretending to be a japanese guy.

Great. Now in addition to at least two freakish Irishmen, 76 identical Starbucks drinking fart whompers from Seattle, 2000 lurkers, one batshit insane guy, and Gary Whitta, we've also apparently got a guy pretending to be Japanese.

Why do we all have to be so damn dysfunctional around here?!

:cry:


Also:

:wink:

[Dave Long]

Gamecube was a full $100 cheaper than both PS2 and Xbox when it launched. It sold well, but it didn't rule the world. Microsoft needs more than just a cheaper box to outsell the market leader. In fact, a higher price for PS3 may make it seem even more desirable because at $299 or $399, it's still a luxury purchase of the first degree.

--Dave

[Moggraider]

still pretending to be japanese heh ...

This is at least the second time I've heard some reference to the idea that Kitsune is only pretending to be a japanese guy.

Great. Now in addition to at least two freakish Irishmen, 76 identical Starbucks drinking fart whompers from Seattle, 2000 lurkers, one batshit insane guy, and Gary Whitta, we've also apparently got a guy pretending to be Japanese.

Why do we all have to be so damn dysfunctional around here?!

:cry:


Also:

:wink:

Gary Whitta is here?! Awesome. I grew up reading that guy's columns.

Anyway, there's no way in hell the PS3 would ever sell for $500 in the US. That would be like Sony taking a .45 and shooting itself in the foot. Practically the two most important factors for system adoption - price and release date - would be negatives for the PS3. Expensive first consoles have failed before - Saturn, Dreamcast - so MS knows better, and Sony should too. Some of you are mentioning Gamecube's lack of dominance, but what also confounded things was that it wasn't released first. Likewise, DS is beating PSP, largely probably because it was first.

[Kevin J Baird]

I've been thinking about this for awhile. Microsoft is very serious about moving a large number of consoles in the first year. Somewhere between 12 and 20 million are the numbers I've read. At a $300 price point, this would seem to be impossible if history is any guide. Plus, they face serious competition from their competitors launching shortly after.

But what if Microsoft ate an additional $100 off the speculation price? What if they launch at $199? They'd lose around 3 to 4 billion on total cost. Which is nothing for Microsoft. They probably have that in their petty cash drawer.

This would crush their competition. Giving Microsoft an early lead and a huge installed base.

K

[jpinard]

still pretending to be japanese heh ...

This is at least the second time I've heard some reference to the idea that Kitsune is only pretending to be a japanese guy.

Great. Now in addition to at least two freakish Irishmen, 76 identical Starbucks drinking fart whompers from Seattle, 2000 lurkers, one batshit insane guy, and Gary Whitta, we've also apparently got a guy pretending to be Japanese.

Why do we all have to be so damn dysfunctional around here?!

:cry:


Also:

:wink:

Who's the batshit insane guy? :?

[RedTide]

Which batshit insane guy are we talking about?

[Marcus]

all of the above.

Anyways its highly doubtful they will launch the 360 at 199. The ps3 at 399 is friggin retarded.

[RickH]

Yeah, jpinard, you're going to have to try MUCH harder to look nuts, let alone be a member of the elite batshit insane, after I got done reading Koontz's stuff in that innovation thread.

[Brad Grenz]

The analysts get paid to talk out their asses. They always made ludicrous assumptions and absurd predictions and they're always wrong. I wouldn't be surprised if both the Xbox360 and PS3 push above the $299 price point. That's just 10 years of inflation talking. I think Sony will be competitive with whatever MS prices at. Within $50. Pricing is tricky. I don't think MS wants to loose 2 billion in the first year on X360 in hardware alone which is what they'd be set to do at a $199 price point. But if you price too low people will believe your hardware is inferior. It's why Sony just matches the Xbox price with the PS2 rather than undercutting MS which they certainly could afford at that point. But by matching price they create a perception of equivalence. Sony can price higher with the PS3, pointing to Blu-ray and creating a perception of superiority. But a $100 delta is, I think, unlikely.

[Dave Long]

Expensive first consoles have failed before - Saturn, Dreamcast - so MS knows better, and Sony should too. Some of you are mentioning Gamecube's lack of dominance, but what also confounded things was that it wasn't released first. Likewise, DS is beating PSP, largely probably because it was first.

Dreamcast?! It was $199.99 when it launched. That was only $100 more than LAST generation consoles that were available at the time. It was the first truly mass market priced console when it shipped to retailers. Sega Saturn was the first to sell for $399.99 at launch but quickly dropped to $299.99 in the fall of that same year when PlayStation shipped for that same price.

As for Gamecube, if price were the truly deciding factor in videogame system sales, then it would have cleaned up. It featured similar technology for 2/3 the price of its competitors. Nintendo DS is doing well but it really has nothing to do with being first, rather it has to do with strong software, innovative design that offers something new and backwards compatibility with GBA. Price is just a bonus (and something that DOES matter, but not near as much as people think).

--Dave

[Jose Liz]

But what if Microsoft ate an additional $100 off the speculation price? What if they launch at $199? They'd lose around 3 to 4 billion on total cost. Which is nothing for Microsoft. They probably have that in their petty cash drawer.

A $3 billion first year loss isn't something even Microsoft can shrug off, particularly after 4 years of losses in the Xbox division. Microsoft wants to be profitable in this generation, and starting with a $3 billion loss isn't going to make it any more feasible.

[jpinard]

But what if Microsoft ate an additional $100 off the speculation price? What if they launch at $199? They'd lose around 3 to 4 billion on total cost. Which is nothing for Microsoft. They probably have that in their petty cash drawer.

A $3 billion first year loss isn't something even Microsoft can shrug off, particularly after 4 years of losses in the Xbox division. Microsoft wants to be profitable in this generation, and starting with a $3 billion loss isn't going to make it any more feasible.

Microsoft's petty cash drawer has been shrinking like mad the past few years. X-Box losses, and cash settlements with Japan, the EU, some SU states, etc etc have dug deep into MS's coffers. Remember, much of the money you hear the top guys at MS have is not "CASH" but "assets".

[Woolen Horde]

But what if Microsoft ate an additional $100 off the speculation price? What if they launch at $199? They'd lose around 3 to 4 billion on total cost. Which is nothing for Microsoft. They probably have that in their petty cash drawer.

A $3 billion first year loss isn't something even Microsoft can shrug off, particularly after 4 years of losses in the Xbox division. Microsoft wants to be profitable in this generation, and starting with a $3 billion loss isn't going to make it any more feasible.

Microsoft's petty cash drawer has been shrinking like mad the past few years. X-Box losses, and cash settlements with Japan, the EU, some SU states, etc etc have dug deep into MS's coffers. Remember, much of the money you hear the top guys at MS have is not "CASH" but "assets".

Those are nothing compared to the $30 billion stock dividend last year. Yeah, so the company only has about $30 billion of cash on hand instead of $60 billion. We should all be so lucky.

[jpinard]

But what if Microsoft ate an additional $100 off the speculation price? What if they launch at $199? They'd lose around 3 to 4 billion on total cost. Which is nothing for Microsoft. They probably have that in their petty cash drawer.

A $3 billion first year loss isn't something even Microsoft can shrug off, particularly after 4 years of losses in the Xbox division. Microsoft wants to be profitable in this generation, and starting with a $3 billion loss isn't going to make it any more feasible.

Microsoft's petty cash drawer has been shrinking like mad the past few years. X-Box losses, and cash settlements with Japan, the EU, some SU states, etc etc have dug deep into MS's coffers. Remember, much of the money you hear the top guys at MS have is not "CASH" but "assets".

Those are nothing compared to the $30 billion stock dividend last year. Yeah, so the company only has about $30 billion of cash on hand instead of $60 billion. We should all be so lucky.

I thought it was $3 billion not $30 billion :?:

[Woolen Horde]

Dude, it was $30 billion.

http://money.cnn.com/2004/07/20/technology/microsoft/

Gates alone bumped his net wealth up a nice percentage with the dividend. It's been estimated that he made $3 billion by himself (he gave it all to his charity).

Those settlements with Sun and the states are downright paltry in comparison. Call it the price of doing business. MS makes that money back every quarter.

That one-time stock dividend is the main reason MS' cash reserves dropped. But it was under pressure to do something with the money. I'm fairly sure that a corporation with absolutely no debt and $60+ billion in the bank had never happened before, and there are only so many T-Bills you can buy.

[Jose Liz]

We're not really arguing Microsoft's ability to take a $3 billion loss as much as we're arguing that it would still be fairly noticeable and unlikely given Microsoft's plans.

[Kevin J Baird]

Right, well I thought about the loss, and I agree that it's unlikely. But they could make the money back through Xbox Live subsriptions. If a Gold subscriber pays $50 a year... Over a 5 year lifecycle that's $250 in mostly profit. That doesn't count for profits from memory cards, larger hard-drives, extra controllers (Which Microsoft is not licensing the wireless controller technology to third parties. But wired controllers yes.), and possibly on-demand sales through Xbox Live.

Anyway, it's all speculation at this point. China could go to war with Taiwan tomorrow and the price of circuits will shoot the moon and Xbox 360 will be $2000 at launch.

K

[Robert Sharp]

How do you guys know how much would be lost? Do you have an accurate figure on the cost per Xbox that MS will have to pay?

[RepoMan]

one batshit insane guy, and Gary Whitta
Wait a second. We've got at least two batshit insane guys ASIDE from Whitta.

[Jose Liz]

How do you guys know how much would be lost? Do you have an accurate figure on the cost per Xbox that MS will have to pay?

We're going by the quote in the original post.

[McBain]

Who's the batshit insane guy?

I'm going to have to say Koontz.

[Robert Sharp]

How do you guys know how much would be lost? Do you have an accurate figure on the cost per Xbox that MS will have to pay?

We're going by the quote in the original post.

Sorry, what I meant is that many of you are suggesting the original post might be wrong about the selling price, but no one seems to be questioning how much MS really will spend per item. Is that really set in stone already, or is that also speculation?

[Robert Sharp]

How do you guys know how much would be lost? Do you have an accurate figure on the cost per Xbox that MS will have to pay?

We're going by the quote in the original post.

Sorry, what I meant is that many of you are suggesting the original post might be wrong about the selling price, but no one seems to be questioning how much MS really will spend per item. Is that really set in stone already, or is that also speculation?

[Rimbo]

Who's the batshit insane guy?

I'm going to have to say Koontz.

I was afraid to say it.

I have to admit that at first I felt that Koontz was being unfairly baited by the 75+ Seattle Starbucks crowd.

But no, he's batshit insane. He'll probably end up richer than all of us someday, and famous, too.