HD DVD and Blu-ray drives cost over US$400 to build

[Platon]

I am no expert at this, but from what I have read, Blu-ray should not intrinsically be any more expensive than DVD. The reason it is more expensive now is due to the initial investment/re-tooling required for manufacture (which has already been invested for DVD), the shortage in supply, and the lack of cut throat competition between manufacturers unlike DVD.

Yes, but here they are talking about the BR readers, not the discs...

 

[expletive]

I don't wish to see an overly pricey PS3 anymore than the next guy, but if Sony decides to start out fairly exhorbitant and still sells out at launch, I can only congratulate them on a launch well played (especially compared to their nearest competitor). Their industry clout and userbase fanfare has never been greater, so who is to honestly say they are unwise to call in on some well and fairly earned chips, from a business standpoint?

I still believe claims of premium priced BR components remain gratuitously overrated.

Oh i agree but i think the argument has always been the race to $149. These companies (except Nintendo) will alwys be losing money early on but how long before they can realistically sell the thing for $149, or even $99? The question is if Sony wants to lose money on the hardware throughout its life. If they feel their business model supports it then thats fine, i'll reap the benefit of that buy getting $600 worth of kit for $299. However, if they cant or dont want to lose money on the hardware for every long, the competition should be able to have a significant cost advantage..

I kow there will be replies on the fact that theyre willing to do this because they make money on the software and BR movie sales. Just to put it in context...

Due to market competition, figure that Sony will sell at a loss for a good part of its lifespan, lets say on average they lose 100 per unit over the next 5 years (figuring more at the beginning but less at the end, averaging $100)? With that, if they sell 80 million units, thats 8,000,000,000 lost over its lifespan. EIGHT BILLION. Can Sony really afford to lose that much over the next 5 years? Thats 1.6 billion in losses per year. Forget the games and the demos, this it the biggest piece of info we should be interested in because of its long term ramifications on the market.

This becomes irrelevant if market competition does not drive them to match the prices of their competition, but to compete in the console space i would think they have to no?

 

[Carl B]

Due to market competition, figure that Sony will sell at a loss for a good part of its lifespan, lets say on average they lose 100 per unit over the next 5 years (figuring more at the beginning but less at the end, averaging $100)? With that, if they sell 80 million units, thats 8,000,000,000 lost over its lifespan. EIGHT BILLION. Can Sony really afford to lose that much over the next 5 years? Thats 1.6 billion in losses per year. Forget the games and the demos, this it the biggest piece of info we should be interested in because of its long term ramifications on the market.

Well, I think that the PS3 hardware itself will probably be sold at a profit after ~two years or so though. I figure initial losses will be steep-ish, but as 65nm comes on and BD costs start to plummet - and I mean the costswill start to plummet at some point - PS3 will take it's place among previous profitable Sony consoles.

 

[scooby_dooby]

I think it seriously comes down to what Randycat said in post #5 of this thread.

Just because our own analysis of someone else's analysis then comes in line with another prior analysis, it doesn't mean any and/or all of us aren't mistaken.

Anyway I do think that ultimately Blu-ray in PS3 won't be as high as $300; all we can hope is that one day we get a real read on the figures, if for our curiosity alone.

No it doesn't mean anything, but it is a sign that the estimates were more inline with reality than we gave ML credit for. After all, you said it yourself, these guys specialize in pricing hardware, the fact that they came out with roughly the exact same cost is interesting at the very least.

 

[Carl B]

No it doesn't mean anything, but it is a sign that the estimates were more inline with reality than we gave ML credit for. After all, you said it yourself, these guys specialize in pricing hardware, the fact that they came out with roughly the exact same cost is interesting at the very least.

Well, I grant you that - it is interesting. The prices only line up though were Sony to be sourcing their parts today in the here and now. So M-L still has plenty of chances to overshoot on their BOM/BD estimate.

 

[expletive]

Well, I think that the PS3 hardware itself will probably be sold at a profit after ~two years or so though. I figure initial losses will be steep-ish, but as 65nm comes on and BD costs start to plummet - and I mean the costswill start to plummet at some point - PS3 will take it's place among previous profitable Sony consoles.

Its more of a case of the disparity between the BOM of the 360/Revolution and that of the PS3. If the BOM is lower for the former(s), they will be able to sell it cheaper, Sony can then match that price and lose money or sell it for more (i.e. their BOM for the PS3). The BOM of the PS3 is not in a vacuum, it has to be taken in context with the competition. Curiously, what was the BOM advantage for MS in 3 years time according to ML?

 

[Carl B]

Its more of a case of the disparity between the BOM of the 360/Revolution and that of the PS3. If the BOM is lower for the former(s), they will be able to sell it cheaper, Sony can then match that price and lose money or sell it for more (i.e. their BOM for the PS3). The BOM of the PS3 is not in a vacuum, it has to be taken in context with the competition. Curiously, what was the BOM advantage for MS in 3 years time according to ML?

Sure I see what you're saying, and it's no doubt true. I'm just saying that DVD drive prices are about as low as they'll ever get in absolute terms; BD prices - relative - are going to fall like a rock. Such that five years out from now, BD inclusion probably won't be too much more than DVD inclusion. Granted that makes some positive assumptions as to BD's acceptence in the marketplace over those five years, but even were it to fail utterly, the prices would still drop markedly for it from where they are now.

So I'm just saying, although the PS3 has a higher BOM overall, it's BOM should fall at a faster rate relative to the other consoles using already mature technology.

PS - Yeah I forget what M-L's three year estimates on the matter were as well.

 

[mrdarko]

No it doesn't mean anything, but it is a sign that the estimates were more inline with reality than we gave ML credit for. After all, you said it yourself, these guys specialize in pricing hardware, the fact that they came out with roughly the exact same cost is interesting at the very least.

I'm confused.

In-stat=$400 for intel cpu,broadcom chip,512MB DDR,mobo,OPU,256MB flash disk,ect,ect....

ML=$350? for an OPU?

What else is in the ps3 that is in a standalone player?

 

[expletive]

Sure I see what you're saying, and it's no doubt true. I'm just saying that DVD drive prices are about as low as they'll ever get inabsolute terms; BD prices are going to, relatively, fall like a rock. Such that five years out from now, BD inclusion probably won't be too much more than DVD inclusion. Granted that makes some positive assumptions as to BD's acceptence in the marketplace over those five years, but even were it to fail utterly, the prices would still drop markedly for it from where they are now.

So I'm just saying, although the PS3 has a higher BOM overall, it's BOM should fall at a faster rate relative to the other consoles using already mature technology.

Absolutely. One thing to consider is that the BR drive is the only thing that will 'depreciate' at a faster rate in the PS3. The CPU and GPU in the other consoles will also benefit from more mature processes and better yields. Couple of things are becoming clear now as 2 critical factors: The difference in the relative BOMs in 3 years is very important (which is probably always the case and why ML chose to use that timeframe for its analysis), and that a lot of the PS3's success hinges on the mass-acceptance of BR.

 

[Carl B]

Absolutely. One thing to consider is that the BR drive is the only thing that will 'depreciate' at a faster rate in the PS3. The CPU and GPU in the other consoles will also benefit from more mature processes and better yields. Couple of things are becoming clear now as 2 critical factors: The difference in the relative BOMs in 3 years is very important (which is probably always the case and why ML chose to use that timeframe for its analysis), and that a lot of the PS3's success hinges on the mass-acceptance of BR.

Well, I think Cell and RSX will drop in price slightly faster relative to XeCPU and Xenos as well honestly - though yeah for ease of discussion we should just take it as a straight halving of costs with each node generation and call it even. The HDMI component costs will drop, the bluetooth chip, just the little things... It won't add up to much, but really there are several components in the PS3 that will qualify as being from 'less mature' areas of the industry, and thus prone to faster price drops relative.

I think that five years from now this stuff in PS3 is going to seem very mundane in a sense, and be quite cheap to include. It certainly should act as a positive differentiator relative to it's generational contemporaries at that point, and make it a viable console for sale as PSThree for five more years or whatever.

Now I wouldn't be surprised though if Microsoft released a re-designed 360 in that timeframe as well though, including HDMI, WiFi built-in, etc etc... the little things.

 

[expletive]

Well, I think Cell and RSX will drop in price slightly faster relative to XeCPU and Xenos as well honestly - though yeah for ease of discussion we should just take it as a straight halving of costs with each node generation and call it even.

Thanks for saving me the trouble of asking you to back that up with some facts.

I think that five years from now this stuff in PS3 is going to seem very mundane in a sense, and be quite cheap to include.

Possibly, but in 5 years from now the market share of this generation's consoles will have already been decided.

It certainly should act as a positive differentiator relative to it's generational contemporaries at that point, and make it a viable console for sale as PSThree for five more years or whatever.

Only if BR 'wins'. Otherwise youre talking about HDMI being the only difference, and we still dont have a final word on that for the 360 or the revolution. And as you said, there could easily be a revision on the 360 or rev to include HDMI. Todd Holdahl has said at LEAST that much...

 

[Carl B]

Thanks for saving me the trouble of asking you to back that up with some facts.

Well I will anyway though for the sake of a side-discussion.

I'm viewing the continuing commitment to Cell by STI and the sheer volume advantage it will/should enjoy (assuming actual CE utilization) as something that will probably be of benefit to the chips overall cost-structure going forward. RSX is also - seemingly - pretty simple compared to these other chips we're talking about. I see the packaging situation with Xenos and the dual-sourcing of dies as being a possible drag on it's rate of cost reduction relative to RSX. Of course moving to a single die at some point would represent a significant one-time move in long-term costs for the chip; we'll see if and when they manage that though.

Keep in mind I wasn't saying absolute costs of the chips above, just rate of decrease in terms of their sourcing prices.

Possibly, but in 5 years from now the market share of this generation's consoles will have already been decided.

Yes very true.

Only if BR 'wins'. Otherwise youre talking about HDMI being the only difference, and we still dont have a final word on that for the 360 or the revolution. And as you said, there could easily be a revision on the 360 or rev to include HDMI. Todd Holdahl has said at LEAST that much...

Well, bluetooth as well and built-in WiFi, along with GbE; these on top of HDMI. Granted MS could include any and all of them later, I'm just pointing out that they are in PS3 vs not being in 360 at the moment, and their prices should all fall to one extent or another over the next couple of year.

Yeah though if BR 'loses,' that's going to be something of a drag on one of the key aspects of the system's desirability *and* cost reduction structure.

 

[ban25]

Edit: Already addressed

 

[expletive]

Well, bluetooth as well and built-in WiFi, along with GbE; these on top of HDMI. Granted MS could include any and all of them later, I'm just pointing out that they are in PS3 vs not being in 360 at the moment, and their prices should all fall to one extent or another over the next couple of year.

I'd need to be convinced that BT will be anything but a communication protocol for the PS3 and that we'll even appraoch saturating 100Mb ethernet first...

Wifi is already available but only the people who want it need to pay for it (and boy do they), which is apparently 50% at the moment, minus those who are wired ethernet.

But your point is well taken, its a combination of cost vs. perceved value.

Yeah though if BR 'loses,' that's going to be something of a drag on one of the key aspects of the system's desirability *and* cost reduction structure.

Speaking of 'drags', we havent even breeched the subject of a standard HD...

 

[Carl B]

Speaking of 'drags', we havent even breeched the subject of a standard HD...

Well... yeah, I left that out on purpose just because I don't know what to make of it yet. I mean, firstly is it really 'standard?' Like non-bundled standard? And if so does Sony view it as something they'll forever price into the system, as a cost they're willing to eat in order to recoup on the expectation of downloads... or both?

Also I wonder if they feel that at some later date solid state storage will be cheap enough to replace the HDD and scale forward with the regular semi' industry price drops.

The HDD confounds me in some ways; it's inclusion is clearly there so Sony can open a front on the online download service battle at the same time that it has BD inclusion to fight for it in the optical race. But what Sony's long-term cost-reduction plans are for it seem beyond our grasp at the moment. KK's gotta have something planned though - because indeed, drag it will be later on. I maintain that it might be as simple as a 'mandatory' HDD-bundle at launch (like PSP) rather than actually a system-mandatory HDD for operation.

 

[expletive]

Well... yeah, I left that out on purpose just because I don't know what to make of it yet. I mean, firstly is it really 'standard?' Like non-bundled standard? And if so does Sony view it as something they'll forever price into the system, as a cost they're willing to eat in order to recoup on the expectation of downloads... or both?

Also I wonder if they feel that at some later date solid state storage will be cheap enough to replace the HDD and scale forward with the regular semi' industry price drops.

The HDD confounds me in some ways; it's inclusion is clearly there so Sony can open a front on the online download service battle at the same time that it has BD inclusion to fight for it in the optical race. But what Sony's long-term cost-reduction plans are for it seem beyond our grasp at the moment. KK's gotta have something planned though - because indeed, drag it will be later on. I maintain that it might be as simple as a 'mandatory' HDD-bundle at launch (like PSP) rather than actually a system-mandatory HDD for operation.

Everything Sony has said in this regard gives them plenty of wiggle room going forward. I assume theres key factors that they are hoping become more apparent as they near production of the console.

Clearly they *want* the HD in there for a couple of reasons:

1. The online content they want to sell.

2. An *enhanced gameing experience* which i'm cynically translating into 'non gimped gaming experience due to a slow optical drive'. (I dont fully understand this but everyone seems to be in agreement that a 2x BR drive is somehow slower than a 12x DVD drive for game data)

But like you said, are they going to shoehorn everyone into this model by forcing everyone to pay for a HD? Are they willing to put themselves $50 further away from hitting $149?

I think sold state mass-storage is on the horizon (i believe Panasonic has 30 and 60g units in the works) but im not sure if its a more cost efective than the traditional 'platter' drives.

 

[fearsomepirate]

How much of that fee is for licensing? Wont' Sony avoid a lot of that, since they're the key mover behind Blu-Ray?

 

[Natoma]

Of course it's not, but not necessarily because standalones cost X to produce. How much did you expect PS3 to retail at - $300?

I had no expectations actually. I've just seen a lot of responses that the $500-$600 price point couldn't possibly be true. That's all.

 

[Natoma]

Well, what I'm saying is that Cell and RSX are in there anyway; you know, to play games and stuff. So I'd say the answer is definitively 'no,' including the specialized hardware would not save them money. Now, how much that hardware costs - ie what part of In-Stats $400 it represents - I have no idea. I'm sure some people here from the A/V crowd may have an idea though, and basically Cell and RSX would reduce the costs by that x amount.

Sorry for not being clear. What I'm asking is if Cell and RSX had logic built in to handle the decoding for Bluray, or if there isn't any dedicated logic and they're just using the brute force computational power of both to handle the audio and video decoding.

If brute force, ok. If not, and they built in dedicated logic, I wonder if the price would've been cheaper. See where I'm coming from now?

I know you don't frequent the console side of the forum much Natoma so I don't blame you for not knowing, but no, PS3 mass production should start in August or something. I forget exactly when, but it's the topic of another thread from a week or two back.

Ok that doesn't make sense. Why start production so close to launch? Given the problems with the xbox 360 launch, i.e. the shortages, why wouldn't they start, say, now?

 

[Natoma]

This might be true if the "art" of market research was even remotely an exact science. Since it isn't, it could be anywhere from 10% off to 100% off, and no one can really step forward and say they know which it will be w/o it being utter BS. That is the nature of best guessing. You might be better off using statistics to nail down "probability of being right", rather than % closeness to the correct answer, at this point. The whole scene is pretty far removed from any notion of "concrete", ultimately.

What then are the criteria for determining the cost to produce something if not aggregating the costs of the components?