Report: Developers are steering away from PS3

[Jesus2006]

Potentially, but I think Kutaragi and co. were probably thinking/hoping to make money on both software and hardware but you may be right they they will try to get an edge on their competition with smaller royalties.

´
No, seriously, that's not possible. The hardware is much more expensive than PS2 and they didn't make it with the PS2 so it's impossible to do that shortly after the PS3 launch - no never.:smile:

 

[pc999]

WRT whether developers will leave the PS3 or not, one thing which is unknown to media, analysts and developers who are not privy to publishing deals is the royalty for a PS3 software. If you believe what Kutaragi said in an interview about making profit from the hardware, it's possible that the royalty is set relatively low.

That wouldnt mean a really long long long term investiment? That may be hard to do, only in last case. And wouldnt also mean long time before we saw a PS4 (last time they proffit had been about 1,5%).

BTW didnt MS did the same for japanese devs

Also , it is not in the same bag but, Nintendo also said it is doing ways to let dev lower the cost and price of games (and they can have proffit with the HW easly).

IMO it wouldnt be the best plan to get proffit.

 

[StefanS]

That analyst's assertions are factually wrong. EA announced 6 Wii titles, not 6 launch titles. The fact that they seem already playable in comparison to the PS3 software is probably due to the GCN legacy within Wii. Anyone taking that as a sign of developers jumping ship is plainly delusional especially when sb from EA recently claimed that the EA efforts are split 40-40-20 between X360, PS3 and Wii at the moment.

 

[darkblu]

Anyone taking that as a sign of developers jumping ship is plainly delusional

'delusional' may not be the right word here..

just look at the number of 'ps3 is da doomed!!!!1111e+15' threads started by, erm, aficionados these days. lately it's been all:

f-bA: 'ps3 is da doomed! devs flee to 360 (and wii)!'
f-bB: 'wii is da doomed! kiddy and has a wand! sucks big time (cause i say so)!'
altogether: 'so kids, what are we left with?.. hail the mighty twopi - savior of the industry!'

..so how about 'fanboism'?

 

[EndR]

... EA recently claimed that the EA efforts are split 40-40-20 between X360, PS3 and Wii at the moment.

EA didn´t exactly claim this but more that the wording in the halls were "40/40/20".
This came from an interview with EAs Jeff Brown..

 

[StefanS]

EA didn´t exactly claim this but more that the wording in the halls were "40/40/20".
This came from an interview with EAs Jeff Brown..

Please look at my post above again I said "somebody from EA" not EA; I just was too lazy to dig up the name.

 

[Farid]

I enjoy the differences existing between the original article title from the mainstream economic magazine BusinessWeek: Will Sony's Pricey PS3 Pay Off?
And the title of the derived article from a videogaming website: Report: Developers are Steering Away from PS3.
'Videogaming journalism' can't get any better than that.

The Sopranos game was cancelled for the PS3 and moved to the 360 instead.

The reason invoked by THQ was that they didn't received enough PS3 Devkits and therefore they couldn't provide the studio (7 Studios, IIRC?) they committed to the development enough, if any, Devkits.
That said, The Sopranos game started as a PS2/Xbox/PC project, the "next-gen" ports were announced later, maybe because the project was late on schedule or maybe because THQ saw some of Activision's "next-gen" products, which are sold at a premium, and thought "Good idea!".


Anyway, there's quite a few articles lately concerning the PS3's expensive princing model. While it's a fact that, at launch, the entry point for the PS3 product is substantially higher than PS2 and X360's ones - 66% higher to be precise -, the real question one should ask concerning the product's future marketshares, market penetration and Publisher relations is: "How fast can Sony Corp price the PS3 competitively".
The first months for the machine shouldn't mean much, given that most expect the machine to be a success with the first wave of buyers, the gaming and CE enthusiasts, even with a $500 entry point.
The real market penetration problem Sony would be facing concerns the other segments of the market, the hardcore gamer, the mainstream and the casual. A $500 price point is not an option here.

Now remains the question, could Sony drop the price of the machine if they were forced to and could Sony take the losses that would imply?
The only way to specualte about that last question would be to know what's the real BOM of the machine, the issue here is that Sony, like what they done with the PS2, is using their own fabs for a lot of their important parts, making any estimation works difficult, for various reasons, add to that the unknowns concerning the date when we could expect to see a price drop on the BRD diodes and when the sillicon yields for the CPU would ameliorate significantly.

As far as I'm concerned, if I had to make a strategical choice for Sony, I would at least drop the price of the $499 SKU to $399 and that before launch. If only to give a signal to the market --which didn't respond positively to the price announcement _at all_.

 

[archangelmorph]

In the end if Sony don't decide to drop the price point of the console for launch I highly disagree that it will affect sales of the console negatively for quite some time..

Consider this fact:

Xbox360 shipped in December of 2005 in the UK and Europe with SKU models £209 & £279.99

By Christmas time the lack of availability of the console was huge and many customers became aggresive in their pursuit of an early purchase

Smart customers predicted such high demand for the systems and as a result purchased initial units in high volumes only to sell them on ebay at twice (and some even three times) the retail value..

Now PS3 will be shipping also in time for xmas and with the estimated production numbers we can expect units to be limited in number (& because its playstation) leading to an even higher demand for it than that of the Xbox360

Sony released the official price points early this year giving customers ample time to save for a console many have been waiting almost 2 yrs for now since it was first announced (absence makes the heart grow fonder..?)

So taking all this into consideration, Sony are benefitting themselves since they can afford to price high and recoup more money early considering the fact that customers are clearly willing to pay such high amounts (Sony are basically taking a leaf out of the ebay sellers books)..

If Sony do plan to drop the price of the PS3 early I'd expect an announcement no earlier than E3 2007 considering the time Sony has given the consumer to get used to idea of a high price point and ultimately cave into forking out for it provided the launch lineup and attractiveness of Blu-ray at that time are appealling enough to consumers..

 

[archangelmorph]

ADDITION:

Personally as much as I object to paying £425 for a games console (half the price of my PC) i'm sure if by late october I have roughly £300 of disposable cash lying around I won't mind too much to save another £125 to pick one up..

I'm pretty sure most consumers would probably do the same.. (unless they are working class mothers buying the console for their children.. however such makes up a very low percentage of the gaming demographic since the majority are between 16-30 IIRC)..

 

[Shifty Geezer]

Anyway, there's quite a few articles lately concerning the PS3's expensive princing model. While it's a fact that, at launch, the entry point for the PS3 product is substantially higher than PS2 and X360's ones - 66% higher to be precise -, the real question one should ask concerning the product's future marketshares, market penetration and Publisher relations is: "How fast can Sony Corp price the PS3 competitively".

Exactly. Look at XB360. People were willing to pay $750, even $1000 to get it at launch off eBay. As I said along with many then, MS could have and should have charged more for XB360 at launch to get a decent profit (or less loss) knowing that first-unit sales for anticipated hardware always sell.

What none of these analyses seem to be considering is long-term price drop. If they presented an argument that price drop would be minimal and result in a continued high price, they'd have a better argument. As it is, they're moaning about launch price (which likely won't deter initial sales) as though that's the price PS3 is stuck with forever.

I'm wondering how much demand there'll be for PS3 in the 'no price is too high' sector? Is it enough to sustain 6 million sales? If so, even at the high price-point Sony will have a substantial user base within 6 months of launch (if all goes according to plan). And heck, if PS3 doesn't sell they'll drop the price anyway, like XB had in the EU. Sony can't afford to keep the price high and sell nothing - it'll lose them a massive part of their long-term business strategy. From a business POV, starting as high as you can and dropping makes more sense than starting lower than people are willing to spend. First rule for milking the markets is to charge as much as people are willing to pay!

Now remains the question, could Sony drop the price of the machine if they were forced to and could Sony take the losses that would imply?

I think they'd have to. If they're to get PS3 as the content delivery platform, and promote BluRay as the standard for 10 years of Hi-Def movies, they need PS3. Low volume sales will potentially lose them 3 markets. If they've actually sorted out a decent online content service yet, spanning PC, PS3, PSP and MP3 players (read 'not CONNECT!') the potential for greater revenue is already there. Obviously there's no point starting the machine at $300 is people are willing to pay more, but when that sector is exhausted, a significant price drop to get to $300 as quickly as possible is needed, and I think they'll do it, dropping the price as needed to keep sales bouyant.

As far as I'm concerned, if I had to make a strategical choice for Sony, I would at least drop the price of the $499 SKU to $399 and that before launch. If only to give a signal to the market --which didn't respond positively to the price announcement _at all_.

I don't think I would. It's quite a tough position to be in I guess. Like XB360 could have been more expensive and MS have lost $millions by underpricing what the market was willing to pay, you want to start as high as possible. I don't know what the backlash would be to a short and dramatic pricedrop though. If after 6 months, it's down to $400, will that matter? XB had a massive price drop (33%, £100), and rather than damaging the brand image, in resulted in actual sales. Such a price drop ater 6 months might spawn some 'Sony Worried - Desperate Price Drop is a Last Ditch Attempt to Save the Company' web reports, but it wouldn't cost Sony anything more than loss-per-unit. The brand wouldn't be hurt, and Sony's image probably wouldn't be either.

The Internet is a weird monster. In days gone buy, companies made and released products. All people knew of it was the price in the high-street, and it either sold in the shops at the price you set, or didn't, at which point you adjusted accordingly. Nowadays every decision is scrutinised and criticised, before anything is available for sales, and before anyone can see how well a product is or isn't selling, and then for every change to a strategy, a price drop or a bundle, yet more criticism. Running a product successfully means being adaptable, working to maximise profits, adjusting pricing and marketting and so forth to keep the money coming in. It's has nothing to do with keeping some pundits happy, such as giving PS2 a price drop because some people say it's high time it had one, when it's selling at it's current price quite nicely thank-you-very-much. Likewise, complaining about PS3's price because it sounds too much, and is too much for most, is suggesting Sony lose more money at launch than they would make. What business is willing to lose money just to keep a few vocal internet sites happy? Once upon a time, pretty much never. Such criticisms only came from financial/business journals, where the authors and readship actually understood business and aren't short sighted. But nowadays, the negative comments are loud and understanding is slim. Maybe companies will have to adapt their strategies to follow the vocal majority for fear of stirring up a ruckus? Or maybe they'll just ignore it all and do their own thing, setting their own price, adapting policy based on adoption and sales figures and costs...

 

[Angelcurio]

Even though i concur with the notion thar the ps3 price is a little too high, i dont think that sony will have problems during the first 6 months of the consoles life. People say that $600 is too much for a games machine, but then you buy a new camera, and you dont argue, you buy a new ipod video, and you dont argue, but then when a console whose life cycle goes as fas as 6-7 years, suddenly we are all complaining.

Anyway, Sony is a big corporation with a lot of market experience, with all the negative impression it has received, i suppose that they have a backup plan just in case, i wouldnt be too surprised if during e3 2007 we hear the first price drop announcement.

 

[TheChefO]

the real question one should ask concerning the product's future marketshares, market penetration and Publisher relations is: "How fast can Sony Corp price the PS3 competitively".

Now remains the question, could Sony drop the price of the machine if they were forced to and could Sony take the losses that would imply?

As far as I'm concerned, if I had to make a strategical choice for Sony, I would at least drop the price of the $499 SKU to $399 and that before launch.

As far as I know, Sony corp currently is not very healthy financially. Putting that aside for now, it is difficult to judge exactly what the bom is for ps3, it is clear from their financial report they plan on losing money on ps3 initially. Perhaps this is a smoke screen and they "plan" on losing x dollars based on a lower price than they have publicly stated (genius marketing) but this current negative view (high price) is currently making many question whether they will buy ps3 and actively looking at the alternatives. This is spilling over into devs and retailers as well.

How quickly can Sony drop the price? Well when one also considers Sony's position on profitability with hw it seems they are not too keen on dropping the price significantly soon.

Realistically I can't see them dropping the price more than $100/yr. At this aggressive pricing model they will be at:
2006: $500
2007: $400
2008: $300
2009: $200

Even if they could afford to be more aggressive than this, it would leave a bad taste in the mouths of those who purchased early if the machine dropped price quicker than this.

The problem they have is even with this aggressive pricing model they will still be trailing 360 price significantly. If Sony were in a bubble that would be great and it would just take a bit more time to reach their sales goals. But they are not in a bubble and are facing tough competition with Wii and 360 who will not be sitting idly by waiting for Sony to become mainstream priced. In the meantime they will be getting additional dev support which will lead to games which will lead to more sales and also dropping in a price cut or two themselves.

consider ps2 sales:
2000 6.4 $300
2001 18.5 $300
2002 24.4 $200
2003 19.87 $180
2004 11.93 $150
2005 19.98 $130

I think we can use this model as a best case scenario for ps3 considering its high price and assuming no manufacturing issues with br or cell. This translates to roughly:

Ps3 best case:
2006 3 $500 (later launch)
2007 18 $400 21m
2008 24 $300 45m
2009 20 $200 65m
2010 12 $180 77m

compare to:

xbox360 likely:
2005 1.5 $300
2006 8.5 $300 10m
2007 16 $200 26m
2008 16 $180 42m
2009 12 $150 54m
2010 12 $130 66m

By 2010 77m vs 66m and that's pretty generous (in my opnion) for Sony considering the price. Now even given these best case numbers for Sony, they would still be only 11 million units above 360 and publishers with exclusive games on ps3 would be missing out on a 66million unit userbase. How many pubs/devs do you know that would ignore this potential profit from simply porting their game to 360?

This is my argument. In a best case scenario for Sony, they will sell just as well as ps2 did and still not be significantly ahead 360 unit sales. this will translate into games selection on 360 and that will translate into gamers and so on and so forth.

 

[jb]

People say that $600 is too much for a games machine, but then you buy a new camera, and you dont argue, you buy a new ipod video, and you dont argue, but then when a console whose life cycle goes as fas as 6-7 years, suddenly we are all complaining.

We are only complaining as we can get about the same deal, Next Generation Console for less money. The problem with your counter points is those ipod/cameras are priced competitivly with other products on the market that do the same basic thing. Where as most would agree the PS3 is priced too high.

 

[Shifty Geezer]

this current negative view (high price) is currently making many question whether they will buy ps3 and actively looking at the alternatives. This is spilling over into devs and retailers as well.

In what way? Have we heard of any retail chains that have said they won't stock PS3 because it's too pricey? How many launch titles have been canned because the devs have decided the machine costs too much?

 

[TheChefO]

Anyone taking that as a sign of developers jumping ship is plainly delusional especially when sb from EA recently claimed that the EA efforts are split 40-40-20 between X360, PS3 and Wii at the moment.

EA's Fall lineup:
8 - 360
4 - Wii
3 - ps3

This doesn't translate into 40/40/20. The 40/40/20 statement was more thoughts on how the market will shape up eventually. They said they will develop to the userbase. So if by 2010 the market is 40/40/20 then they will produce games to match.

 

[TheChefO]

In what way? Have we heard of any retail chains that have said they won't stock PS3 because it's too pricey? How many launch titles have been canned because the devs have decided the machine costs too much?

Is this all you will comment on from my post?? lol ... geeze ...

The "spilling over" is caution on the part of retailers and developers at this point from what I can tell. I did not say retailers and devs will not support ps3 at all did I?

The point of my post was in a best case scenario ps3 will not significantly outsell 360 and would leave many pubs/devs who chose to release exclusives on ps3 with significantly less profits than they would gain otherwise by simply porting their currently in development ps3 games.

 

[pc999]

I dont think that analyst dont take in consideration PS3 price drops, but there is two things that you should consider, first the others will always have a price advantages , ie when PS3 hit the 400-500$ XB360 will probably be 200-300$ (or at least till a long time), second at the begining it will have a big advantage on market and that mean less exclussives then less reasons to buy a PS3 then you can enter in a vicius circle etc...

BTW do you realise that EA investing only 20% (1/2) can have the same product (nº of games) than in the others.

 

[RancidLunchmeat]

Exactly. Look at XB360. People were willing to pay $750, even $1000 to get it at launch off eBay. As I said along with many then, MS could have and should have charged more for XB360 at launch to get a decent profit (or less loss) knowing that first-unit sales for anticipated hardware always sell.

I see the 'early adopter shortages/ebay' argument everywhere to explain the genius behind Sony's absurd price point.

Do we have any actual numbers to support this? Yes, some people were paying hundreds of dollars over retail to get their hands on a 360 through Ebay. But how many actually changed hands that way?

IIRC, that craze lasted all of maybe a week or two, before the 360s listed on Ebay for $600+ were sitting there without bids.

So how many actually were willing to pay that price? A thousand? A couple thousand? Ten thousand?

I'd be willing to bet that if you counted all the people who were willing to buy a 360 over retail, (not including store "required" bundles.. I mean just people who were paying more than MSRP for the system), it would be only a fraction of a percent.

Hardly a successful strategy, or a phenomenon that I'd witness as Sony and would expect could be duplicated market-wide.

 

[patsu]

I dont think that analyst dont take in consideration PS3 price drops, but there is two things that you should consider, first the others will always have a price advantages , ie when PS3 hit the 400-500$ XB360 will probably be 200-300$ (or at least till a long time), second at the begining it will have a big advantage on market and that mean less exclussives then less reasons to buy a PS3 then you can enter in a vicius circle etc...

BTW do you realise that EA investing only 20% (1/2) can have the same product (nº of games) than in the others.

Analyst projections are based on their proprietary demand models (a set of statistical/regression formuli key'ed off 100s variables like product attributes, competing forces, content contributions, ... plus any other VooDoo variables).

So you're most likely correct: Their projection already assumed the sustained pricing advantage of Xbox 360s and Wii. However the price advantage may not be linear. e.g., If Sony drops its price, MS can follow suit in this case just because their consoles are cheaper to make and they are richer.

However once the price drops below certain level (say USD149.00 - 199.00), the price advantage may level off because (i) consumers consider PS3 a steal at USD199.00, and (ii) other attributes like build quality become more important.

Unfortunately dropping price too fast may cause a problem for early adoptors.

===================
Besides pursuing cost cutting exercises aggressively to make room for a lower price, I would explore the following. This is purely based on my speculation just for kicks. It will take many years to realize (if someone implements them).

I reckon it should be more interesting than the daily dose of "OMG, Sony is in trouble". It may also test people's perspectives and perception of the "gaming/entertainment market".

(A) Consolidation: None before has ever demonstrated the combined value of a convergence device. Most stopped at the product level, but they may need to take it further to realize the true potential. e.g., Leverage Sony's other divisions to establish the PS3 beach head. Do the easy ones first. This may mean cheaper digital content, exclusive movies and music content deals, celebrity participation and influences in the PS3 network; also coupons for memory sticks, digital cameras, ...

The consolidation here means consolidation of Sony's values/committment to their customers. NOT the consolidation of game consoles and Blu-ray players. The difference is: "We can do more for you now that there's a unified platform to serve you" rather than "We want you to pay for Blu-ray investment". Also, none of the "Ring of Light" or "Origen" nonsense, please.


(B) Don't just say. Demonstrate clear value for the extra cost. It is the attention to details that count here. Some of them don't have to be available at launch but they need to announce a ship date. e.g.,

* XMB interface set the visual stage. Afterall, Steve Jobs sold Mac OS X to his loyal fan base just on the Aqua look over a UNIX/Mach engine. Any old or new Minority Report-like UI demo experiments can be demo'ed and bundled into EyeToy as work-in-progress.

* Sexy 1st party games, in stiff competition against second gen Xbox 360 titles (even if the latter are unreleased). Best case is to bundle at least 1 game of users' choice at launch.

* Superb Blu-ray Live playback and experiences. Best case is to bundle at least 1 Blu-ray movies according to users' choice.

* "Beyond" mini-games for the motion sensing controllers, or even extension from Blu-ray Live.


(C) Don't just say. Make end users understand the real difference of an open platform/network approach. Network means the more the merrier. Announce partnerships (if any).

* DLNA + LocationFree to showcase living room network. Plug-and-play with any DLNA device on the gigabit or Wifi network. Highlight DLNA and vendor partnerships.

* Linux OS network to acknowledge and tap on homebrew developer network. Also announce Linux distro partnership.

* "Beyond" network platform seen as upgrade from homebrew developers.

* Finally, Playstation Online to show premium content download, free online games and gaming community network. Possibly, partner with Google, yahoo, ... for custom PS3 and PSP portals (living room applications and marketplaces).

(* At one point, there were also talks on myspace-like functionality for PS3 lifestyle "pods", I'll drop it for now since we have not heard news about it lately).

(D) Launch a campaign to brand the new "Playstation experience" w.r.t. hardware and service compatibility with PS3 to guarantee minimal quality amongst partners.

 

[ZiFF]

"At its autumn games preview on July 13, for instance, traditional Sony ally Electronic Arts spent far more time showing off innovative Nintendo games than it did titles for the PS3," emphasized BusinessWeek. "EA announced six Nintendo Wii launch titles and showed long working demos for two of those. But it offered only a short clip of a car-racing game for PS3. EA says it's still testing the potential of the PS3."

Wow, that was retarded.