KK again claims PS3 will be costly.

[Alpha_Spartan]

The psychology of pricing is very complicated. As long as it's not sky-high, they'll be fine, for a while at least.

Being more expensive than the competition is not necessarily problematic on its own. In isolation, cheaper pricing may not help. The "cheap" approach didn't help Nintendo a whole bundle this generation. Striking a balance between "reassuring expense" and "affordability" would be key, and could work well for PS3, which already has the whole "premium" image locked down.

Basically, within certain boundaries, cheaper isn't always better, and more expensive isn't always worst from the perspective of the market. It all has to be part of a larger proposal, made up of many different components.

I agree. Being more expensive than your competition does NOT spell Doom. The GC reached rediculiously cheap prices this gen, and yet it sold less hardware than the other more expensive consoles.

But there is a line where it could be TOO much. At a certian point a LARGE percentage of the population wil simply have to say "Nope. I can't afford it, that's just too much." I think $399 is about as high as they could go before they hit that line IMO, and even at $399, many will have to simply say "I'll get it, but I can't afford that much right now."

If M$ can hit that sweet spot of $299 ( or even $349 ), it will only have a positive impact on sales.

I think people overlook the oft-talked-about "sweet-spot". Outside of this sweet-spot conventional rules don't apply. We're not talking about DLP televisions vs. Plasmas where you know for a fact that the higher priced product is indeed superior. As far as consoles are concerned, the market is fickle. Outside of the $300 sweet-spot, you can throw away all the rules. Systems like 3D0 and Neo Geo which were provably more superior to the competition hardware-wise, never caught on. I remember being in the sixth grade and hear some rich kid brag about having a Neo Geo and how envious the rest of us would become. We knew that it was superior hardware because of the arcade quality games and the $700 price tag. But we were still content with our NES.

However, Kutaragi seems to be trying to push the PS3 away from the typical console image to justify the price. If the PS3 is indeed positioned as a machine in a league of it's own, a $500 price tag may be appropriate. However, does that market exist? Do people really want a Computer Entertainment System with a budget BD player, Linux and videogames? At $500, that puts Sony in a niche smaller than Nintendo's market.

 

[seismologist]

Your comment is ridiculously biased though, just wait and see which system has the best exclusives, you have to admit MS is lining up the 3rd part dev's and 3rd party exlusives like there's no tomorrow.

Which system has the best exclusive is subjective though. There's already PS3 games I know that I want to play.
Gundam, Project Force, MotorStorm, Devil May cry 4

It's unknown whether these will come out for X360 so rather than taking the chance, or settling for something close. I'll just save up the extra $100 to buy a PS3.

 

[jvd]

Well the human factor is kind of what I meant by 'new efficiencies.' I know what you mean, and no doubt it's correct, but remember in that regard that manufacturing a blu-ray drive can't be so different relative to making a DVD drive from the human side of things; just like fabbing one chip is similar to fabbing another for the person on the floor, be it a new architecture or not. I do know what you mean though; familiarity with the work at hand can make a very big difference.

Blurays lasers are much more complex and are much smaller . Thus much harder to produce . Dvd drives have been mass produced since around 97-98 . Also at no point will dvd drives switch to a higher production model. This is it 12x and 16 x are the tops . At some point manufactuers are not going to want to produce 1x , 2x or mabye 4x drives for just the ps3 . They will want to move on to whatever is the fastest or close to the fastest of the time .


As for the other hardware . The x360 parts will be produced for awhile longer than the ps3 parts thus the lines can be tweaked over that time and yields will improve over that time . Since all the parts are finished (except for final clock speeds ) the teams can already be working on the masks and other things needed for 65nm . They can start working on taping out on 65nm sooner . The gpu is in two parts so if 65nm turns out to have alot of problems like the drop to 90nm they can move half of the chip over to 65nm . Say the edram doesn't get certified for 65nm when it first comes out . Ms can still shrink the logic part to 65nm and use a 65/90nm chip and combine them , still get cost reductions . If 65nm isn't ready for prime time sony will have to wait to take the whole chip down a lvl . Not to mention how many more of these chips ms can make per wafer and how much better yields per wafer wil lbe on both halves of chip .


Ms is starting off with a lower cost all around . Thier cpu is smaller , thier gpu is in two parts both much smaller than the rsx , they are using massp roduced ram that is used in many other products . So when a drop does come ms will still be at a lower price than sony . They allways will be Just like no matter how many times ms would drop the micron process of the xbox the ps2 would be cheaper . Smaller chips will allways = cheaper chips unless you have much higher clock speeds than the bigger chip

 

[Xenus]

Your missing the biggest point jvd. Microsoft still has to negotiate prices with tmsc. Tmsc will want to make a certain amoun tof profit on the chips. Sony has their on fabs and can cut the margians as thin as they want. Thus making it not so cut and dry.

 

[Carl B]

@jvd: Ok dude, did you read my previous post on the subject?

That post you are replying to dealt with only one thing: the employees familiarity with the product. I already addressed all that long list of stuff you went on about in my previous two or three posts. 8)

I'll repost though:

they do improve over time, it's true - but how much more do you think Microsoft is going to be saving on DVD drives one year into it? On system cases? On ethernet ports? On 20 gig hard drives? Not much. What *is* going to come down in price in a big way will be the R500 and the XeCPU, and they will do so primarily because of process shrinks. If the yields improve during the course of a certain process due to maturity, do you think that those savings will be passed on to Microsoft? No, they will be passed on to TSMC's bottom line until it comes time for contract renegotiation.

Sony on the other hand will be manufacturing themselves, and I expect significant reductions in componentry prices for both the chips and the blu-ray drive as the system matures.

Component costs don't go down when x-number of months/years have been reached, they go down when new efficiencies, processes, or technologies are able to be brought to bare on the situation.

So your talk of DVD and blu-ray drives is just waaay off base; you're replying to something other than what I'm actually saying. As for the cost of the chips to produce, that's true - Microsoft's on the whole will probably generally be less expensive; but as to who gets to reap the maximum effect from process shrinks, that - in my opinion - will be Sony, as I imagine they'll see the shrinks sooner and will enjoy the entire price cut, whereas like I mentioned before, TSMC will be the primary beneficiary of improved yields between contract renegotiations.

 

[bbot]

I agree with xboxdestroya. PS3 will be cheaper to produce.

 

[Carl B]

I agree with xboxdestroya. PS3 will be cheaper to produce.

Wait a minute wait a minute, I'm not saying THAT!

I'm just saying that the duration of time Sony will have to endure high prices before they are able to begin rapidly bringing major costs under control shouldn't be too long. Blu-ray should begin to drop off very quickly in costs within the year of PS3's release, and it won't take too long for 65nm to come on line.

As long as the 360 releases with a hard-drive free version at a later date, I still think it will enjoy the edge in manufacturing costs; but it's just as time goes on, that difference between the two will become smaller and smaller. Who knows, maybe at the end of the five years PS3 will actually be the cheaper, but 360 will certainly enjoy some sort of costs advantage for a fair deal of time.

 

[jvd]

Your missing the biggest point jvd. Microsoft still has to negotiate prices with tmsc. Tmsc will want to make a certain amoun tof profit on the chips. Sony has their on fabs and can cut the margians as thin as they want. Thus making it not so cut and dry.

and sony still has to pay off a fab , pay the cost of the materials , upgrades to the fab , taxes on the fab , payment to the fabs employees . If sony cuts margians so thing that they don't make make any money off what they produce there then they will never pay back the cost of the fabs and those costs will continue to grow as upkeep and upgrades start to pile up . Sony doesn't get a free get out of jail card. Not only that but your forgeting that ms doesn't have to stay at any one fab . They can jump from fab to fab depending on who has the best fabbing processes of the time . Both umc and tmsc operate on rasor thin margins .

So your talk of DVD and blu-ray drives is just waaay off base; you're replying to something other than what I'm actually saying. As for the cost of the chips to produce, that's true - Microsoft's on the whole will probably generally be less expensive; but as to who gets to reap the maximum effect from process shrinks, that - in my opinion - will be Sony, as I imagine they'll see the shrinks sooner and will enjoy the entire price cut, whereas like I mentioned before, TSMC will be the primary beneficiary of improved yields between contract renegotiations.

I am talking about a system as a whole . Because one part by itself doesn't matter .

ON usb ports ? Who knows they have 3 or 4 and sony has 6 . At the very least it will mean cheaper pcbs and less parts and parts that can fail .

On hardrives . Well this is a new model. They don't have to stick with just a 20 gig hardrive . If 20 gig drives hit bottom and wont drop anymore than they already are after the next year they can use a 40 gig drive that may now be at the same time . Unlike putting in say a faster dvd drive or a faster bluray drive the marketing gains of a bigger drive will be evident and will attracked many customers . No one is going to care if a year later ps3 goes from a 1x or a 2x drive or a 4x drive as devs will still have to program for a 1x drive .

The other big factor no one talks about is the pcb . THe more complex a pcb is the more layers are needed . Things like busses drop slower m uch slower in price than any other part of the system. That is why we don't see 256bit busses on 100$ video cards being introduced into them. We only see cards at the high end fall to the low end before they are phased out. Ram drops much faster than a bus dispite it being 3 years since the first 256bit bus card came out . Because pcb boards are expensive . You throw on as many ports and busses on the ps3 as they are going to have and the pcb is going to be expensive .

but as to who gets to reap the maximum effect from process shrinks, that - in my opinion - will be Sony, as I imagine they'll see the shrinks sooner and will enjoy the entire price cut, whereas like I mentioned before, TSMC will be the primary beneficiary of improved yields between contract renegotiations

What are you basing this on ?

Have you factored in that sony has to a) pay back the fab costs , b ) pay the fab upkeep (taxes , maintance on the building and other things ) and then upgrading the fabs to accept these new processes coming around .

Ms on the other hand can move fabs when they want to. if umd suddenly gets 65nm working well before tsmc they can go and produce chips there . and secondly they only have to pay a small fee for production of the chip. Which has been repeatly said by many others on these forums much more knowledgable than us that they operate on rassor thin margins .

 

[Carl B]

What are you basing this on ?

Have you factored in that sony has to a) pay back the fab costs , b ) pay the fab upkeep (taxes , maintance on the building and other things ) and then upgrading the fabs to accept these new processes coming around .

Ms on the other hand can move fabs when they want to. if umd suddenly gets 65nm working well before tsmc they can go and produce chips there . and secondly they only have to pay a small fee for production of the chip. Which has been repeatly said by many others on these forums much more knowledgable than us that they operate on rassor thin margins .

Well I actually do consider myself pretty knowledgeable on this particular subject, if I do say so myself.

Yes they're on razor margins, no doubt - and in fact the Taiwanese for the most part have a lower costs structure than the Japanese fabs; thus the reason they've become the center of outsourced fabbing.

What I based my assertions on - the Sony 'gaining the maximum effect' - is simply the truth that they will be interested soley in their own costs and there will be no mark-up above that.

But Jvd you make a totally valid point that even after TSMC's mark-ups, MS' price might be quite competetive - theoretically even better - than Sony's prices, mm^2 for mm^2. Still though, Sony already has the 65nm lines on the way that will be producing these chips, and they are all state-of-the-art. The joint fab with Toshiba, the Nagasaki fab, and the upgraded line at East Fishkill will all be some of the most advanced fab lines in the world. I don't know what TSMC's line upgrade schedule is so I can't speak to it. Very true though that they could move production to Chartered or anyone else though if they felt the need.

PS - You had a good point with the PCB costs; I don't think the things Sony is throwing on there should push up the layers beyond whatever Microsoft would need, but there is always that chance, no doubt. Either way, it will cost more than the 360's board.

 

[jvd]

Yes and tsmc , umd will also have state of the art fabs . Not to mention ibm , intel and others . Ms can take thier chips to any of them and get them produced .

Its not just tsmc's line schedual . They can move to any chip producer when they need too . IF tmsc misses thier mark they can move to umd and use 65nm . If not they can go to ibm and use thier process .

If anything goes wrong at sony's fabs if there are any delays in 65nm , 45nms sony is stuck with them. They will have to wait .

 

[hongcho]

Just some thoughts on BD...

Sony (or $ony, BenQ? ) is definitely taking risks on PS3 with BD.

1) The (initial, at least) cost of BD drive/media manufacturing.

As many have already pointed out, this is something that I am sure Sony will try to absorb as much as possible. However, it isn't zero, and it will be interesting to see what Sony decides to do come Spring 2006 given the competition and their financial situation.

2) BD-ROM (for movies) specification is not finished.

Although the media specification is almost, if not completely, finished, the content rights management portion (or DRM) of the spec is not complete. From what I can read, AACS is probably become the standard for BD (it is already for HD-DVD). The problem is that the AACS specification is not complete.

Without a robust content rights management mechanism (given the recent events), it will be unlikely that the content rights holders (i.e., movie studios) will release their titles on a particular format. Given the current DVD sales (although the growth seems to be slowing down), they are in no hurry for HD title releases (given the current market size of HDTV owners).

So, this means that, as already mentioned, the BD movie playback may not be an initial part of the PS3 release (because it would be suicidal for Sony either to delay the release or to remove BD). It may get enabled for the North American release, but even at that time, there are other issues.

3) Half of the movie studios are not with BD.

Currently, the movie studios are almost evenly split between BD and HD-DVD camps. So, your favoriate HD movie may not be playable on PS3.

We've heard that the retailers are voicing their opinions for a single HD format, but at this point, there does not seem to be any hope of the HD format unification.

So, it will be interesting what Sony decides to do on the pricing because as far as I am concerned BD is a huge risk for early 2006 (probably not for late 2006 or 2007).

Hong.

 

[Carl B]

Yes and tsmc , umd will also have state of the art fabs . Not to mention ibm , intel and others . Ms can take thier chips to any of them and get them produced .

Its not just tsmc's line schedual . They can move to any chip producer when they need too . IF tmsc misses thier mark they can move to umd and use 65nm . If not they can go to ibm and use thier process .

If anything goes wrong at sony's fabs if there are any delays in 65nm , 45nms sony is stuck with them. They will have to wait .

I know, it's very true - there are trade-offs. BUT, they took the gamble for a reason, and that reason is that when you yourself can provide the supply demand for the very chips you will be manufacturing, structuring vertically can make sense. This is the jump-off point for what Sony hopes will be a larger home-grown chip fabbing effort, afterall. That's a different thread topic however...

I'm not saying there's not a lot of merit to the way Microsoft is handling it this time - it's what I would have done, for sure - but for a well capitalized company like Sony who felt there was an opportunity to wean themselves off dependency on others for chip needs, it makes sense to do.

 

[Arty]

3) Half of the movie studios are not with BD.

Currently, the movie studios are almost evenly split between BD and HD-DVD camps. So, your favoriate HD movie may not be playable on PS3.

We've heard that the retailers are voicing their opinions for a single HD format, but at this point, there does not seem to be any hope of the HD format unification.

So, it will be interesting what Sony decides to do on the pricing because as far as I am concerned BD is a huge risk for early 2006 (probably not for late 2006 or 2007).

Hong.

Correct.

HD-DVD 43%
Blu-Ray 39%
Undecided 18%

http://news.com.com/DVD+standoff+plagues+Hollywood/2100-1041_3-5782680.html

 

[Bobbler]

Yes and tsmc , umd will also have state of the art fabs . Not to mention ibm , intel and others . Ms can take thier chips to any of them and get them produced .

Its not just tsmc's line schedual . They can move to any chip producer when they need too . IF tmsc misses thier mark they can move to umd and use 65nm . If not they can go to ibm and use thier process .

If anything goes wrong at sony's fabs if there are any delays in 65nm , 45nms sony is stuck with them. They will have to wait .

By that same token... what would stop Sony from doing the same thing? They probably have good relationships with several companies for fabbing. Just because they have a new fancy fab now (which wasn't made solely for Cell/RSX) doesn't mean they are limited to using it only -- if that was the case for companies we wouldn't see half the out-sourcing we do in the electronics market.

Switching fabs isn't exactly something you do on a dime, getting a fab up and running on a certain chip isn't something that is done over a weekend (is it?) so it isn't like fab switches will be happening much, if at all.

This whole arguement is moot... there are benefits from doing it both ways (Sony's way vs MS' way), obviously -- neither of which we can claim to know the whole story on.

 

[jvd]

I know, it's very true - there are trade-offs. BUT, they took the gamble for a reason, and that reason is that when you yourself can provide the supply demand for the very chips you will be manufacturing, structuring vertically can make sense. This is the jump-off point for what Sony hopes will be a larger home-grown chip fabbing effort, afterall. That's a different thread topic however...

Perhaps in the future this is true .

But there are allways absolutes and the absolutes are the x360 processer transtior amounts will allways be less than the ps3's . Thus all milestones will come sooner esp when factored into the lead in productionn. It will be ms that can do a all on one chip before sony and even if it comes at the same micron processer the ms chips will be smaller and easier to produce at higher yields .

I'm not saying there's not a lot of merit to the way Microsoft is handling it this time - it's what I would have done, for sure - but for a well capitalized company like Sony who felt there was an opportunity to wean themselves off dependency on others for chip needs, it makes sense to do.

Right but this doesn't change the price of the console and may actually make it more expensive

By that same token... what would stop Sony from doing the same thing

They already are to some degree. I believe idm will be making some of the first cell chips and samsung is making the ram. However in the future sony is not going to want 300-600m fabs (forgot the price ) to sit idle or not doing what they were meant to do .

Switching fabs isn't exactly something you do on a dime, getting a fab up and running on a certain chip isn't something that is done over a weekend (is it?) so it isn't like fab switches will be happening much, if at all.

No not a weekend . But we are talking 4-6 years for production of these products or longer . So even if its a couple of months to change from a fab to another they will still be able to go from a fab that wont be doing 65nms in volume for 8 months to with in 3-4 months a fab that is making 65nm products in volume . That will be 4 months sooner on a much smaller process , meaning lower prices , smaller chips and of course they will have an extra 4 months to start tweaking and improving yields .

This whole arguement is moot... there are benefits from doing it both ways (Sony's way vs MS' way), obviously -- neither of which we can claim to know the whole story on.

And that is the point . There are enough positve factors on both sides for them to have come to the choices they made. However to claim sony will be able to see bigger drops in costs simple because they are sony is wrong. We already know they have bigger chips and thus they will allways have higher costs on the same process as the ati parts

 

[Carl B]

And that is the point . There are enough positve factors on both sides for them to have come to the choices they made. However to claim sony will be able to see bigger drops in costs simple because they are sony is wrong. We already know they have bigger chips and thus they will allways have higher costs on the same process as the ati parts

Well but jvd, I really do believe the drops in price Sony sees will be bigger. But no, not because they are Sony. As for the '360 always costing less,' that is not what I disputed at all; I agree fully. It is still possible for Sony to have the larger percentage decrease in cost and for the 360 to remain the less expensive of the two to produce, I don't know how the two things were lumped together during the course of this discussion.

 

[Bobbler]

Well but jvd, I really do believe the drops in price Sony sees will be bigger. But no, not because they are Sony. As for the '360 always costing less,' that is not what I disuputed at all; I agree fully. It is still possible for Sony to have the larger percentage decrease in cost and for the 360 to remain the less expensive of the two to produce, I don't know how the two things were lumped together during the course of this discussion.

I agree with that, it makes sense. For example: the cost of a BR drive will probably get close to DVD drive price over the next few years (at least much closer), yet DVD drive won't really be going down in price much (since its already etremely low). Some parts of Sony's are expensive now but won't be in a few years, most of MS' parts seem to be pretty cheap now -- they have the benefit of starting out low to begin with. At the end Sony and MS' costs will probably be pretty close to each other, where they may not be now (all we have to go off is speculation at this point). I'd be surprised if both consoles weren't profitable within a year or two (maybe even sooner -- remember the price predictions on the PS2? similar story -- we had people claiming it would cost 500 to produce, etc, etc).

There is a lot to the story that we don't know, but it seems both are doing things in their best interest -- MS is probably trying to cut costs drastically while still giving as much bang for the buck they can, because after Xbox1 I'm sure the suits at MS want some ROI. Sony is doing a different strategy by leveraging their Playstation name to further other parts of their company (which at this point is probably a good choice for Sony since they need to get the parts of them that are bleeding back into a maintable state).

Both companies pay people big money to make sure the choices they make are for the best in the end, it seems to me both companies have been in existance for a long time for a reason -- if either company was concerned about immediate profits neither would be in the console business (MS would have never made Xbox 1, and Playstation 3 probably wouldn't be as 'feature rich', same with PS2/PS1). It seems to me some people are a bit too concerned about immediate profits on here (the whole Sony having a bad quarter thread -- most companies know in advanced that some quarters just aren't going to be profitable, but as long as they are over time then there is no problem).

 

[RancidLunchmeat]

Interesting topic, revisited once again as it is.

I'm still shocked that certain people continue to swear that the PS3 won't be more expensive than the X360 despite the fact that this is now the 3rd or 4th statement from either KK or somebody else at Sony that the PS3 will in fact be expensive.

And as I said in other discussions, it appears that the PS3 isn't just going to be expensive, it's going to be overly expensive and the casual gamer won't notice the benefit of these added expenses. Sony has to recover the R&D costs of both Cell and Blu-ray as well as pay for the XDR licensing. So far, we don't have any indication that any of these things are actually going to improve game performance... just like the 7 bluetooth controlers, the multiple storage device formats, the 3 gigabit ethernet ports, etc..

If the PS3 costs $100 more than the X360, that's the price of the console plus two games. What is the average Joe Gamer going to buy?

On the other hand, I do think that some in this thread have a rather unfounded view of the PS3's launch lineup. Sure, those titles won't be "optimized" for the PS3 because most likely they won't be exclusives. But don't forget that all these developers who are making games that will appear 6 months to 1 year earlier on the X360 will also be available as ports to the PS3 for their launch.

Finally.. To scooby (?) about the X360 launch/bundle/PS3 Launch.. Why do you think that's a fantasy? I don't think there's any doubt that the X360 will have Halo 3 or some other AAA title available and ready to compete with the PS3's launch. (I think they're planning for Halo 3). I also think that there's no reason to suspect that MS won't give us a Halo 1/2 X360 bundle at launch. Let alone at the PS3 launch. These things are all easily done, and make very good sense.

 

[flick556]

If Sony provides unrestricted access to the hardware and software something Microsoft will never do that alone justifies the cost. Loading linux and using ps3 as a PC and a Console has allot of value above and beyond that of a normal console.

I also believe sony's investments have returns outside of ps3. They have an incentive to get blueray into the household, and they have other uses for their fabs than ps3 alone. Going forward knowing Sony’s history it's obvious these investments are critical to their other products and long term goals. That is why I don’t think they expect ps3 to entirely recoup the huge R&D investments that have contributed to its creation. I believe the opposite to be true of Xbox in order for them to achieve success they need xbox360 revenue to pay for the entire development process. This can have a pretty dramatic effect on per unit cost.

I will buy both consoles but for younger audiences cost can have a strong effect. Adults can make sacrifices or go into dept

 

[RancidLunchmeat]

Of course they don't expect the PS3 alone to recoup the R&D costs of cell and blu-ray.

But they definately do plan on "hiding" a portion of the R&D costs of cell and Blu-Ray in the PS3.

If Blue-Ray fails to catch on and HD-DVD (which somehow now seems to have the edge in the media segment), becomes the standard, then Sony has no choice but to absorb ALL the R&D costs of Blu-Ray into their PS3 development. Same thing with CELL, but I believe that Cell has a far brighter future in other devices than Blu-Ray does.

The reality is that of course, the PS3 is going to cost Sony more money to develop and manufacture than the X360 will cost MS. That also leaves MS in a position to do price reductions at a far earlier time than the PS3 is able to do.

Depending on the launch price of the X360, I wouldn't be surprised to see the X360 actually have a price reduction at the LAUNCH of the PS3. If the PS3 comes out a year later, and maybe $50 more than the launch price of the X360.. the X360 may very well be able to not only meet the PS3 head on with a AAA title release but ALSO a $50 price reduction that will totally KILL the PS3.

Simply put: at the PS3 launch it simply cannot be more than $50 over the price of the X360. Whether the X360 can reduce it's tag by $50 or just maintain its launch price because the PS3 is so expensive is really what is left to be seen.