DFC Report: "Clear possibility that PS3 could end upthird in market share"

[Geo]

Could you maybe upload the documents that have that indicate this will be the case? Given that the largest difference in cost is the BluRay drive which will be a commodity part at that point . . .

Only if it "wins" the format war. Might also be a boat anchor, and they'd be looking at having to go to a hybrid-drive to provide both PS3 functionality and HD home entertainment functionality.

I could be entirely wrong about this, but I just have a feeling that the public is not going to tolerate an extended format war. I think we're going to have winners and cryers on HD-DVD vs BRD by early 2008 (post 2007 holiday season).

Edit: The middle case, of course, is that the format war does rage on relatively evenish over the life of PS3 and BRD costs come down, but never quite as much as they would have if it'd truly reached the kind of commodity pricing it could achieve if everybody and his brother was making them.

 

[Acert93]

145Million....? Last I was aware it was pushing 170Million- and that was Q1 of this year. Sony has roughly 60% of the market this generation.

The last published numbers I read (and these are 2006 numbers):

103M - PS2
24M - Xbox
20M - GCN
-------------
147M

You will have to provide links to the 170M figure as none of the sites that track this indicate anything remotely close to that for home consoles.

There is a flip side to that. PS2 managed to retain a decent premium over a dedicated DVD player- this time it comes with a hefty discount. If it ends up being a solid BluRay player then that will likely be a fairly major factor.

And yet still LESS of a factor as DVD in the PS2/Xbox, which was the point to begin with. DVD players + added features above and beyond those of VHS + added quality on every TV + worked on every TV in the market + was a stable format with broad support. Blu Ray/HD DVD -/+ adds fewer features - has intrusive DRM and wants online access - the core benefit is not viewable on 90% of the installed televisions - and is in the middle of a PR and movie studio war, and notably the "DVD" brand has sided on the Toshiba (HD DVD) side.

Again, the impact of BluRay will be less significant than the impact of DVD. DVD was already a market reality when the PS2 launched and was high on casual consumer demand.

50%....? Did you add a zero by accident?

Then you missed the notes at E3 where MS was claiming 50% Live attach rate with the 360; notably MS is projecting 6M Live users on the 360 by E3 2007 which would be ~50% based on their sales projections.

WHAT PRICING MODEL? Since you have the documentation demonstrating when they are going to make price moves or for what particular trigger points- tell us the pricing model.

Go back and read context and the last 6 months of discussion on the hardware costs.

The PS3 is obviously more expensive to manufacturer than the 360. The standard HDD -- as last gen demonstrated -- is a significant hurdle to cost reduction. BluRay will drop in price but will continue being more expensive than a standard DVD drive, etc.

Only hardcore Playstation fans are in denial that Sony's hardware choices will result in a pricing model that will result in higher retail console costs. It is palpably obvious the PS3 is more expensive to produce than the competing consoles -- the components and PS3 price itself clearly confirm this.

There is only a $100 gap to start with....?

No, as I said the minimum entry price on the two consoles is a $200 gap. $299 X360 Core and $499 PS2-20GB. This is not to deny the difference in features. The bottomline is that as you move into price conscious markets some consumers are going to be looking for a console that plays their favorite games.

It is called an impulse buy: What is the cheapest way I can get GTA4 or Madden 2008?

You do bring up a good point though. Look at how badly the GameCube decimated Sony and MS last generation. Price point is very clearly everything in this market.

I never said it was the only important factor or even hinted at such.

Obviously even a person with a closed head injury can understand there are many dynamics that go into this industry and market adoption. If you look closer at my posts you will see I note many of those factors. It is pretty clear you have read my post, took snippets to create strawmen, and are argueing with yourself.

 

[RancidLunchmeat]

No, as I said the minimum entry price on the two consoles is a $200 gap. $299 X360 Core and $499 PS2-20GB. This is not to deny the difference in features.

I still cannot fathom the constant arguments that the $399 Bundle needs to be compared to the $499 crippled PS3.

Titano - You're right, I was crossing timelines at the PS2 4M sales figure was after the $199 price cut.

Obviously even a person with a closed head injury....

<snicker>

 

[kimg]

Ken Kutaragi did say in one of his japanese interviews posted on this site, PS3 is a computer, and thus, needs to use a computers model for pricing, and not a console.
That is, traditionally, console machine has been sold with loss, while earning on the games. But, this time, he hinted they calculates price as with a computer, and thus sells it with profit.

This maybe dont affect the sale, or how the public views PS3, but, if i remember correctly, in japan the PS2 was bought by ppl who wanted it not just to play games, so, i expect sony belive PS3 will sell to ppl who want a "home media center computer", a Blue ray player, users who want a simple internet browser machine who can play borrowed DCD's, etc.

If we assume 1/4 of every PS3 owner never will buy one single console game, but play casual games on WWW, and use PS3 online's services, and blueray, it need to carry its price, and gamers shouldnt be expected to pay for the PS3's of ppl who dont buy games.

Shure its a expensive console, but other consoles has been equally expensive, specially among the first ones.

 

[Gradthrawn]

I still cannot fathom the constant arguments that the $399 Bundle needs to be compared to the $499 crippled PS3.

Hmmm.. how is the $499 PS3 crippled compared to the Premium 360? Or are you speaking comparatively to the $599 PS3? In which case, it is crippled. But then again could it not be said that the Premium 360 is crippled compared to the $600 PS3? Lowest cost of entry is one thing, in which case it is $300 vs $500, but in terms of feature set, should the base PS3 not be compared with the Premium 360?

 

[RancidLunchmeat]

I''ll stick it in here since we've mentioned the ability (or lack) of the PS3 to drop in price in the same manner as the PS2 (or 360)

http://www.next-gen.biz/index.php?option=com_content&task=view&id=3340&Itemid=2

"While Sony has certain manufacturing advantages at the end of the day, this is a very complex process, and they’re going to be limited to the yields that they can come up with."

McNealy said that he expects the PS3 ramp-up to hit its stride sometime in 2007. At that point, he said, "the wild-card becomes, [whether or not] people still want to spend six-hundred bucks on the box."

“Sony, we don’t think, is going to be in assembly for another four to six weeks--end of July, early August."

Are manufactured numbers supposed to be the same as shipped numbers? Sony wants to ship 1M units per month, has a target of 6M units shipped by the end of Mar 2007.

This guy is saying Sony isn't going to start assembling the units until Aug.. if we assume manufactured/shipped are the same thing, Sony should be able to ship 5M units by Dec 2006, and 8M units by Mar 2007.

 

[RancidLunchmeat]

Hmmm.. how is the $499 PS3 crippled compared to the Premium 360? Or are you speaking comparatively to the $599 PS3?

Apples to Apples, as always. The $499 is crippled compared to the $599. Not simply because it has a lesser feature set, but because it is physically impossible for it to ever match the feature set... therefore, it's crippled.

But then again could it not be said that the Premium 360 is crippled compared to the $600 PS3?

No, it couldn't. The 360 Bundle lacks nothing that can't be added on that the $599 PS3 provides except for HDMI.

 

[Geo]

Are manufactured numbers supposed to be the same as shipped numbers? Sony wants to ship 1M units per month, has a target of 6M units shipped by the end of Mar 2007.

This guy is saying Sony isn't going to start assembling the units until Aug.. if we assume manufactured/shipped are the same thing, Sony should be able to ship 5M units by Dec 2006, and 8M units by Mar 2007.

I would assume, with a decent amount of confidence, that it's going to take a few months to ramp assembly to 1M/month. It won't be in the first month, nor probably even the second, that they hit that kind of volume.

Do we know how many plants they have doing assembly?

Edit: Personally, they'd get "Well done, Sony!" points from me for getting there in the third month even.

 

[OtakingGX]

Ken Kutaragi did say in one of his japanese interviews posted on this site, PS3 is a computer, and thus, needs to use a computers model for pricing, and not a console.
That is, traditionally, console machine has been sold with loss, while earning on the games. But, this time, he hinted they calculates price as with a computer, and thus sells it with profit.

Sony may want to price the PS3 as a computer, and they may include Linux on it, but that still does not make it a computer. I have the feeling that a grand total of 0 percent of PS3 owners will have purchased the machine as a computer. The PS3 just doesn't cut it as a general purpose PC right out of the box. If you want something to surf the net, write e-mails and compose documents, then you can spend less than you would on a PS3, get a larger hard drive, Windows, a printer, a dual layer DVD burner, and a monitor.

Sony has enjoyed a higher pricepoint than their competition on their Vaio computers. People see their laptops as being better quality and are willing to pay more for them. That price difference cannot be applied to their console hardware, which they are trying to do in calling the PS3 a computer. There is a difference between the business professional who is willing to pay top dollar for a computer and gamer dude, who wants to get a great console, but the PS3 equals one week's paycheck.

Pricewise, I think Microsoft cut the legs out from under Sony this time around. Then Sony shot themselves in the severed foot when they did announce the pricing of the PS3. When Xbox 360 does drop in price and consumers are looking at $250/350 against $500/600 I think is when the 360 will really gain traction against the PS3.

 

[Geo]

Sony may want to price the PS3 as a computer, and they may include Linux on it, but that still does not make it a computer.

Misses his point tho. If Sony is thinking that way and using their pricing model that way, then presumably they have room on price (to return to the "console pricing model") should the market blow big fat raspberries at them after the initial rush of PS3 hardcore enthusiasts subsides.

Now, whether that's really true, or just Sony trying to find a plausible rationale to flog in public after the fact of getting jumped from all corners on price post-E3, would be a different question. . .

 

[kimg]

Sony presumably got lots of room, yea. But prices it, after Kutaragi's own words, higher than they usually do, not because of incompetence, but on purpose, due to expected user patterns, and sale.

So, they could drop the price drastically in theory, yes. If sony sells as number two, or tree, they earns money still. If microsoft sells as number two, or worst, tree, they loose money on production of console, and if game sales drop, 360 is a flop costing microsoft money.

 

[Geo]

Btw, have we heard anything about RSX vs C1+Edram on cost? I should think that has to be in Sony's favor cost-wise, both pre-launch NRE and manufacturing.

 

[Gradthrawn]

Apples to Apples, as always. The $499 is crippled compared to the $599. Not simply because it has a lesser feature set, but because it is physically impossible for it to ever match the feature set... therefore, it's crippled.



No, it couldn't. The 360 Bundle lacks nothing that can't be added on that the $599 PS3 provides except for HDMI.

I find this amusing. Let us summarize your logic:

PS3 Base:

• Can never have HDMI
• Can add on WiFi and Card readers.

360 Premium:

• Can never have HDMI
• Can add on WiFi and Card readers

PS3 Base - Crippled compared to $600 PS3.
360 Premium - Not crippled compared to $600 PS3.

What am I missing?

 

[scooby_dooby]

Apples to Apples, as always. The $499 is crippled compared to the $599. Not simply because it has a lesser feature set, but because it is physically impossible for it to ever match the feature set... therefore, it's crippled.

lol, you have to look at what the functionality is, and how integral it is, before you can write something off as crippled. HDMI, Wi-Fi and an extra 40gb on the HDD are very frivolous features.

Fact is, the premium PS3 is just not going to be as attractive as the core, it's a reverse situation to the 360. The functionality offered in the premium is completely unnecessary for gaming, and will only appeal to a small subset of users.

At launch they will probably sell the majority of the premium's, but I'm predicting a big swing towards the core later. All Sony really has to do is do a $100 pricedrop at E3 2007, they have an attractive $399 core console just as all the games start comin out.

 

[SPM]

#1. That requires an OS and a hard drive with enough storage space for the programs and the files they generate. How much storage space does the Wii have? And let's not forget to add in the storage space requirements you need for all of the other things normal people use PC's for, such as digital pictures and movies, and music collections.

So how is MS Office different - it requires a hard drive and as much disk space and as much RAM. Wherever you can use MS Office, you can use Open Office. for everything else there is Google Writely - all you need for that is a browser. You don't need any disk space, and you don't need much RAM.

#2. We are talking about common people. How many of them even know about this software, and if you told them there was an alternative, do you really think they would trust it? Do they use it on their current PC's which can run that software right now?

Google will integrate Writely into their email service. Whether they know it or not, they will be using Writely. With Google's backing, it and ODF will be as common as muck.

As for OpenOffice, it was found to have a 14.3% marketshare in a survey of Fortune 500 companies carried out by Forrester research about a year ago. That was only slightly less than Office 2003 which had 15% at the time, so a lot of people have heard of it, even though because it is free there is no advertising. My company uses Openoffice end to end. Before you dismiss OpenOffice, download it and use it for a while, and you will see why I say MS Office's days of dominance are numbered. If a free program is this good, who in their right mind would pay for MS Office unless they are locked in to MS file formats?

 

[RancidLunchmeat]

Misses his point tho. If Sony is thinking that way and using their pricing model that way, then presumably they have room on price (to return to the "console pricing model") should the market blow big fat raspberries at them after the initial rush of PS3 hardcore enthusiasts subsides.

I remember report after report (guess after guess?) that the PS3 was costing Sony upwards of $900 to build. Those reports were universally lambasted on here as absurd, up until Sony announced the actual price point for the PS3. Weren't there also reports from Sony's financials about how much they had predicted to lose for the PS3 launch?

I guess my point is that I was under the impression we had many indications that the price of the PS3 is not due to Sony trying to profit off of the hardware.

 

[RancidLunchmeat]

What am I missing?

The fact that we're talking about video game consoles?

 

[RancidLunchmeat]

Fact is, the premium PS3 is just not going to be as attractive as the core, it's a reverse situation to the 360. The functionality offered in the premium is completely unnecessary for gaming, and will only appeal to a small subset of users.

Actually, the problem is that the premium for any version of the PS3 over the cost of the 360 will only appeal to a small subset of users. Furthermore, in order to fully utilize that functionality, you need the $599 version.

If you aren't interested in using your console as a media center/Blu Ray player, why would you be paying a premium for the PS3 anyway? And if those features are what attract you to the PS3 and justify it's pricetag, then you need to purchase the $599 version.

At launch they will probably sell the majority of the premium's, but I'm predicting a big swing towards the core later.

But there is no 'core'. There's a unit that includes all the features necessary to use the PS3 as it is intended, and there's a unit that doesn't include those features, can never include those features, and therefore will never allow the PS3 to be used as anything other than an extremely expensive video game console.

 

[SPM]

Fact is, the premium PS3 is just not going to be as attractive as the core, it's a reverse situation to the 360. The functionality offered in the premium is completely unnecessary for gaming, and will only appeal to a small subset of users.

I guess what Sony is saying is, OK if you are buying PS3 to play games then we are going to subsidise you more since you will buy games. If you are buying PS3 to play movies (you will want HDMI for this), then we won't subsidise you as much, which is kind of fair. The bottom line is that you really don't need HDMI or a larger HD to play games, so it is only 'crippled' as far as playing movies.

 

[Gradthrawn]

The fact that we're talking about video game consoles?

What? You didn't answer my question. You stated explicitly that the 360 is not crippled in comparison to the $600 PS3, because it can add on all of the features of the $600 PS3 except for HDMI. You also stated, in the same post, that the Base PS3 is crippled compared to the $600 PS3 because it can't add on HDMI (and its already been established that you can add on the other features). You have yet to explain how this is so. And obviously we're talking about game consoles, I never mentioned any other platform.