2005-06-29 00:57:13 UTC
http://www.gamespot.com/news/2005/06/28/news_6128295.html
Report: PS3 to sell for $399, cost $494 to make
Merrill Lynch Japan predicts Sony will lose more than $1 billion on hardware
during its next-gen console's first year on the market--a sum it may not be
able to recoup.
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.
Merrill Lynch Japan estimates that the machine's main components--namely its
Cell chip, RSX, and BD-ROM drive--will cost about 11,000 yen ($101) each.
After adding the other electronics that will be used in the PS3, the
machine's production cost goes up to 54,000 yen.
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.
By comparison, the PlayStation 2 cost 39,800 yen ($364) in Japan and $299 in
America when it launched in 2000. During its first year of release, Sony
Computer Entertainment suffered a loss of 51.1 billion yen ($458 million),
but it recovered the next year with a profit of 82.9 billion yen ($759
million), followed by 112.6 billion yen ($1.03 billion) the year after.
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.
However, Merrill Lynch Japan warns that the normal console business cycle
may be disrupted if Microsoft cuts the Xbox 360's price when the PlayStation
3 launches. The report goes on to say that such a move could hurt Sony's
plans, bringing an additional loss of 80 billion yen ($730 million) in its
second year and 50 billion yen ($457 million) in its third year. Thus far,
Sony has already invested 200 billion yen ($1.83 billion) into development
and production for the Cell chip alone.
Toyo Keizai goes on to interview Sony Computer Entertainment president Ken
Kutaragi, who avoided revealing the PS3's price but hinted that it would not
be marked down excessively. "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."
"When Nintendo was selling its 16-bit machine at around 12,500 yen ($114),
we sold the first PlayStation at 39,800 yen ($364)," continued Kutaragi.
"The press was saying that it was expensive, but it was a huge hit. It's the
same thing with the PlayStation Portable from last year. The Game Boy
Advance is a same handheld gaming machine, and it costs less than 10
thousand yen ($91). On the other hand, our PSP had cost 25,000 yen ($229).
But people lined up overnight to buy it, and it sold out on the day of its
launch. It all depends on whether people want it. Of course, I'm confident
that the PS3 is a product that people will definitely want."
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K1TE&.#EA`0`!`( ``,# P ```"'Y! $`````+ `````!``$```("1 $`.P``
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end
Report: PS3 to sell for $399, cost $494 to make
Merrill Lynch Japan predicts Sony will lose more than $1 billion on hardware
during its next-gen console's first year on the market--a sum it may not be
able to recoup.
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.
Merrill Lynch Japan estimates that the machine's main components--namely its
Cell chip, RSX, and BD-ROM drive--will cost about 11,000 yen ($101) each.
After adding the other electronics that will be used in the PS3, the
machine's production cost goes up to 54,000 yen.
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.
By comparison, the PlayStation 2 cost 39,800 yen ($364) in Japan and $299 in
America when it launched in 2000. During its first year of release, Sony
Computer Entertainment suffered a loss of 51.1 billion yen ($458 million),
but it recovered the next year with a profit of 82.9 billion yen ($759
million), followed by 112.6 billion yen ($1.03 billion) the year after.
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.
However, Merrill Lynch Japan warns that the normal console business cycle
may be disrupted if Microsoft cuts the Xbox 360's price when the PlayStation
3 launches. The report goes on to say that such a move could hurt Sony's
plans, bringing an additional loss of 80 billion yen ($730 million) in its
second year and 50 billion yen ($457 million) in its third year. Thus far,
Sony has already invested 200 billion yen ($1.83 billion) into development
and production for the Cell chip alone.
Toyo Keizai goes on to interview Sony Computer Entertainment president Ken
Kutaragi, who avoided revealing the PS3's price but hinted that it would not
be marked down excessively. "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."
"When Nintendo was selling its 16-bit machine at around 12,500 yen ($114),
we sold the first PlayStation at 39,800 yen ($364)," continued Kutaragi.
"The press was saying that it was expensive, but it was a huge hit. It's the
same thing with the PlayStation Portable from last year. The Game Boy
Advance is a same handheld gaming machine, and it costs less than 10
thousand yen ($91). On the other hand, our PSP had cost 25,000 yen ($229).
But people lined up overnight to buy it, and it sold out on the day of its
launch. It all depends on whether people want it. Of course, I'm confident
that the PS3 is a product that people will definitely want."
begin 666 b.gif
K1TE&.#EA`0`!`( ``,# P ```"'Y! $`````+ `````!``$```("1 $`.P``
`
end