Koei on Ps3 Costs

[Sis]

Sony will price the Blu-Ray drive at the marginal cost of production in the total price of PS3, which will then be subsidised as a whole to ensure that cross price elasticity versus its competitors will not evolve into a serious issue and mass market penetration can be achieved.

...

Actually, wow, looking at it PS3 is a monumental advantage for the BDA and quite a headache for the HD-DVD side. It could be critical in enticing the first move studio from the HD-DVD side over to the BDA.

Alright, one more time: the amount of Blu-ray capable players in the market, especially due to the PS3 "trojan horse", does not amount to as big an advantage as you seem to propose. Let me quote you:

However the first HD-DVD players are only guaranteed to sell to early adopters with HD sets. PS3 is guaranteed to sell to HD consumers and those still with SD. The number of potential PS3 buyers far outweighs the number of potential HD-DVD buyers.

PS3 has a larger market potential due to the SD market--a group who isn't impacted in the slightest by a high def format.

Whatever format is successful this next generation (my money being on "none of the above") will be due to the number of sell-through discs, not players. This point is not addressed by anyone in this derailed thread so far.

.Sis

 

[randycat99]

PS3 has a larger market potential due to the SD market--a group who isn't impacted in the slightest by a high def format.

...a group that is demographically most likely to buy HD display devices in the coming years. Things won't be standing still as you imply. They'll have the player ready to go via PS3. Those who own a properly equipped HDTV will be able to enjoy it right away. Those who will be upgrading to HDTV in the near future will be ready to go with simply the HDTV purchase, instead of having to buy a new $1000 player.

 

[nelg]

I was shopping today and the store that I was in had only two non HD televisions and 18 HD televisions. Furthermore I saw a HD DVD player (Samsung) for $228 Canadian. If HD DVD players fall in price as fast as standard ones did then within six months they will be ~ $100 cheaper. That sounds like an awful big advantage for BD drives to overcome.

 

[RancidLunchmeat]

Two things...

First, I think the point on the BR and the N mini-disc format was that it doesn't matter if BR fails as a HD media format. It'll still be used as a proprietary gaming media. If all BR ever does is contain PS3 games, that's still fine. It'll suck for Sony, who spent lots of money developing the format and it'll really suck for the PS3's bottom line because it'll be the only product line that will then have to eat all the BR R&D costs (essentially making the PS3 never profitable... same thing will happen if the CELL doesn't get implemented in anything other than the PS3)

Secondly, this is just yet ANOTHER article that points to the fact that the PS3 is going to be expensive. I don't know why so many people want so badly to believe this isn't going to be the case. From people thinking the console will launch at $299 just because the PS1 and PS2 did, to people thinking it'll cost $350 or at most, $399 (the same as the X360).

We have article after article, comment after comment, from Sony Execs and Sony Reps stating that this console is going to be expensive. We have articles stating that the PS3 costs $100 more to develop than the X360 does. If the PS3 launches at $399, then Sony is losing $100 more per console than MS is, and you know Microsoft is selling the consoles at a loss themselves. How much? $50? $100? That means Sony will be losing $150 or $200 per console.

And as far as this article goes, about the price of the hardware essentially lowering the install base and giving at least one developer pause, we also know that MS has already announced planned price reductions. So not only is it likely that the PS3 will cost more than the X360 (or, if not, it will lose Sony more money than the X360 loses for MS) period, it will also almost undoubtably cost more to the end consumer because the X360 is going to continually go down in price.

I think it's extremely likely that when the PS3 is launched, even if it launches at $399 (which I doubt), the X360 is going to have it's first price reduction and probably also release Halo 3 at the same time. So even if the PS3 hits the same price point initially as the X360, by the time it's on the market, it'll still be more expensive because the X360 will be reduced to about $350.

That means not only does the X360 have a head start and a larger install base, it'll also be cheaper. That will certainly effect PS3 sales (which is why MS is doing all of this.. launching first AND having pre-planned price cuts), and that is what this developer is worried about. There will be more X360s on the market than PS3s (to begin with, duh), and the X360 will be cheaper, which means more people are likely to purchase one rather than the PS3. Which means the developer has the opportunity to sell more games on the X360 than the PS3, which means costs are higher for PS3 game development.

 

[Mordecaii]

All I have to say is that quite a bit of what you say is purely speculation Rancid.

 

[Sis]

...a group that is demographically most likely to buy HD display devices in the coming years. Things won't be standing still as you imply. They'll have the player ready to go via PS3. Those who own a properly equipped HDTV will be able to enjoy it right away. Those who will be upgrading to HDTV in the near future will be ready to go with simply the HDTV purchase, instead of having to buy a new $1000 player.

Round and round...

Having a Blu-ray drive in the PS3 doesn't help the Blu-ray movie disc format if no one is buying the movies. Saying that "down the road it could probably help" is not really saying much at all. What I've been saying is that the "format war" will be decided not on market share but on movie disc sell throughs, since my belief is that the market share number will be wildly out of sync with any true representation of consumers buying a BD player in order to watch movies on BD.

All you did is try to turn this into "who's better positioned when HD goes mainstream." That's a different debate and my stance on that would still be "no one cares about the HD movie disc format".

I change my mind about the HD disc format slogan, btw. I like this one better: "What if Hollywood and the consumer electronics industry staged a format war and nobody came?"

.Sis

 

[Sis]

I was shopping today and the store that I was in had only two non HD televisions and 18 HD televisions. Furthermore I saw a HD DVD player (Samsung) for $228 Canadian. If HD DVD players fall in price as fast as standard ones did then within six months they will be ~ $100 cheaper. That sounds like an awful big advantage for BD drives to overcome.

I don't believe the Samsung player you saw is a true HD-DVD player, but a normal DVD player that can upconvert the signal to 720p and 1080i over HDMI.

.Sis

 

[RancidLunchmeat]

All I have to say is that quite a bit of what you say is purely speculation Rancid.

Of course it is, as is most of the discourse in this thread.

However, we do have some facts: There have been many statements from Sony Reps and Sony Execs that the PS3 will be expensive.

Do you agree or disagree with that?

We have seen articles that state the PS3 costs Sony $100 more to manufacture than the X360 costs MS.

Do you agree or disagree with that?

We have seen articles that state, from MS themselves, that the X360 already has pre-planned price reductions.

Do you agree or disagree with that?

If you agree on those things that I consider to be factual representations, then what we get here is yet another example of the above and a (ONE: SINGLE: Not everybody) developer's reaction to the situation outlined above.

If you disagree with those things, I'd really like to hear why and see your reasoning and your counter evidence for disagreeing. That's cool, no flame or trolling intended, if there's something I'm missing I'd love to see it. You speak of speculation, but yet comments that the PS3 will launch at $299 have absolutely no basis in fact and have no factual foundation. The best anybody can come up with is that is the price the PS1 and PS2 launched at, which is flimsy support at best.

I don't have a horse in this race. I'll end up buying both consoles, probably purchasing the X360 first because it will be released first, although now that I'm aware of the price reductions and I know that availability will be scarce when it launches, I might wait until the PS3 is released to buy an X360 and save myself $50 or so.

 

[nelg]

I don't believe the Samsung player you saw is a true HD-DVD player, but a normal DVD player that can upconvert the signal to 720p and 1080i over HDMI.

.Sis

You are right.

 

[randycat99]

Having a Blu-ray drive in the PS3 doesn't help the Blu-ray movie disc format if no one is buying the movies.

It is your assertion that "no one" will buy the movies. Additionally, it is a moot point, since it would affect HD-DVD just as well as BR.

Saying that "down the road it could probably help" is not really saying much at all.

This is your poor interpretation at work. It WILL help wherever the necessary factors are present together.

What I've been saying is that the "format war" will be decided not on market share but on movie disc sell throughs, since my belief is that the market share number will be wildly out of sync with any true representation of consumers buying a BD player in order to watch movies on BD.

This is your "belief" and wish that "only" sell throughs will be a factor. Unfortunately for you, the outcome will be dependent on an array of factors together, not just the singular one you are comfortable with. Positioning of hardware cannot be neglected. All of this is neck deep into the realm of consumer electronics, where interest in all of these things that you feel will be "out of sync" for some bizarre reason, will certainly be highly correlated and synchronized. Home theater and video-based entertainment (console gaming) are very close in family. It is only a natural and logical strategy to use both to bolster and leverage the other.

All you did is try to turn this into "who's better positioned when HD goes mainstream." That's a different debate and my stance on that would still be "no one cares about the HD movie disc format".

Suffice to say, it has a relevant impact.

I change my mind about the HD disc format slogan, btw. I like this one better: "What if Hollywood and the consumer electronics industry staged a format war and nobody came?"

.Sis

There's money to be made and people want their media and entertainment. The world isn't going to grind to a halt just because you do not feel like moving forward.

 

[MfA]

Ignoring the need to earn the higher NRE costs back Id assume the PS3 would actually be cheaper to produce than the XBOX360.

 

[Sis]

It is your assertion that "no one" will buy the movies. Additionally, it is a moot point, since it would affect HD-DVD just as well as BR.

Finally we have come together in agreement!

The world isn't going to grind to a halt just because you do not feel like moving forward.

And then we fall away again...

I want to move foward and I don't see either disc format as moving us forward; interestingly enough, I can maintain both views. But I suppose it's the best we got right now, right, so we all might as well take it.

.Sis

 

[Acert93]

Ignoring the need to earn the higher NRE costs back Id assume the PS3 would actually be cheaper to produce than the XBOX360.

How do you deduce that?

 

[Mordecaii]

One thing I'm curious about is exactly how much money does Sony save by doing most of the manufacturing themselves versus having to have others make their hardware (like Microsoft has to do). Also, is BD really that much more expensive to make? I'm not counting R&D costs. I know the CPU will be more expensive due to a larger size chip, and they have more ports and such than the 360, but I'm really curious how big of a difference it will be.

 

[MechanizedDeath]

PS3 is not the main/only way Sony will recoup BD research costs. Besides which, they aren't the only company spending on the research. I see no reason why it won't be like any other storage medium. And I see no reason why a simple optical drive is still considered to be a cost-leader in the hardware. The cost factor of the BD drive is complete speculation, but I think it's been blown way out of proportion. The manufacturing cost shouldn't be significantly greater than a DVD drive, save for the laser unit. But pure components alone, a BD drive shouldn't differ significantly from a DVD or CD drive, which should offer some significant savings when you factor in the modularity of components. A lot of parts will/should be shared with their other optical drive lines. PEACE.

 

[Mmmkay]

I'll bite...

However, we do have some facts: There have been many statements from Sony Reps and Sony Execs that the PS3 will be expensive.

Do you agree or disagree with that?

Disagree. Ken Kutaragi is the only Sony representative so have been quoted as saying the PS3 will be expensive. And quite frankly Ken is... Ken. This article says nothing about the PS3 being expensive.

We have seen articles that state the PS3 costs Sony $100 more to manufacture than the X360 costs MS.

Do you agree or disagree with that?

Moot. Firstly these articles have no basis in fact and are just as speculative as any other analyst assessment and are the weakest link of any price debate. There was only one analyst on record to state that the PS3 would cost $100 more and that was the hotly debated Merrill Lynch Japan report. In fact, it didnt even say that the PS3 would cost $100 more to manufacture just that it would be priced $100 higher. It was gi.biz that claimed a $100 difference in manufacturing costs. UBS made their own analysis of the Xbox360 manufacturing costs and came to $375 which would actually make the difference an even less plausible $125!

We have seen articles that state, from MS themselves, that the X360 already has pre-planned price reductions.

Do you agree or disagree with that?

Disagree-ish. Todd Holmdahl was quoted as saying "We will wind up cost-reducing the product every year". This is a simple fact of manufacturing not a pledge to pass on the cost savings on to the consumer.

 

[avaya]

PS3 has a larger market potential due to the SD market--a group who isn't impacted in the slightest by a high def format.

Whatever format is successful this next generation (my money being on "none of the above") will be due to the number of sell-through discs, not players. This point is not addressed by anyone in this derailed thread so far.

.Sis

On your first point randycat has quite succinctly put forth the reason why the SD consumer is more important. Right now worldwide HD penetration levels are almost a non-issue. PS3 and X360 will be the first time the majority of consumers will truly be exposed to the idea of HD. If they purchase a PS3 they know they will not have to buy another movie player as randycat pointed out, or more accurately their propensity to purchase a HD-DVD player is greatly diminished.

This is a huge advantage; HD-DVD not only has to compete on player price but has to make its product more enticing to the consumer than a do-it-all PS3. There is one way they will achieve this; movie exclusives. LOTR and Harry Potter (TimeWarner I believe) are some of the biggest assets they have.

However the number of players in the market is very important. Blu-Ray will have a much larger penetration than HD-DVD is able to achieve at the moment thanks to PS3 and the slew of hardware makers and crucially huge CE brands, coming to market with their standalone players. So moving onto your point about the number of sell through discs deciding this, yes I agree with that entirely.

You must recognise though that the media sales figure and number of players are not independent. They are totally inter-dependent.

HD-DVD movie studios will not sit idle if they realise they can garner greater revenues from Blu-Ray because of the sheer number of players available.

 

[Black Dragon37]

Of course it is, as is most of the discourse in this thread.

However, we do have some facts: There have been many statements from Sony Reps and Sony Execs that the PS3 will be expensive.

Do you agree or disagree with that?

And you don't think Sony's playing mind games with the customers?

We have seen articles that state the PS3 costs Sony $100 more to manufacture than the X360 costs MS.

Do you agree or disagree with that?

And that's speculation from analysts, you rarely get anything right when it comes to Sony, you don't even guide them on whether they are closer to the price.

These same analysts said that the PSP would be $400-500 at launch.

We have seen articles that state, from MS themselves, that the X360 already has pre-planned price reductions.

Do you agree or disagree with that?

Every year, they said.

We don't exactly know the launch dates of the PS3, and considering that Sony's taking Microsoft very seriously, we can't rely on their past track record.

 

[Sis]

You must recognise though that the media sales figure and number of players are not independent. They are totally inter-dependent.

I do disagree, for a couple different reasons:

1) The trojan horse is only useful if the market that is buying the horse is also buying the media. If this is not the case, market share is deceptive, since some portion of the group that buys a PS3 will not ever buy a movie on BD.

Also, we should recognize that those who buy a PS3 buy it will have X number of entertainment dollars. If the consumer is spending that money on games, will they also spend it on BD discs for that machine? Conversely, if they're spending it on movies, will they spend it on games--both scenarios affect the other market heavily (more movies may mean less games sold which means less games made which means less PS3s sold which means smaller market...) We'll be able to see this sooner by watching the UMD movie space on the PSP, as more games are released. If sales are adversely affected, it's a good indicator whether the consumer opted to shift their spending from UMD movies to UMD games.

In terms of positioning, it would seem that the PS3 gives Blu-ray the advantage, since it allows gamers to buy the PS3 and sample HD movies as they want to. This is a valid point, as I told Randycat, but it's part of a different discussion. But it goes to my second point:

2) I'm not sure that either format is really that compelling. 720p has 3 times the resolution of a 480p movie, but that hasn't stopped some movies, such as Winged Migrations, from appearing as if I were staring through a window, even though it's being played on a standard DVD player. Tripling the resolution on that will do what for me? Make it appear 3 times more like I was staring through a window?

The poster "one" would like us to believe that the difference between HD discs and standard DVDs is the same as the difference between PS2 to the PS3 and the Xbox to the Xbox 360. Even assuming that it's only a tripling in power, the point is somewhat moot. Gaming graphics still benefit visually from a doubling, tripling, and quadrupling of power. Movies obviously benefit, just not as much (or at least, it isn't as obvious).

3) If the above 2 points are valid (and I believe they are, to some degree, and you and I may just disagree on how much affect it'll have on the market), but if the 2 points are valid, the all we're left with is early adopters. These folks will pay out the money for the stand alone player and they'll buy a disproportionate of discs per player (the attach rate).


Now remember, I'm only in this debate because I argued that having a Blu-ray player in the PS3 does not gaurantee it's success. Others jump in with many reasons why Blu-ray will defeat HD-DVD, as if that were the debate. We can re-hash the features and advantages of Blu-ray versus HD-DVD, comparisons with Betamax and VHS, recount the effect that PS2 had on DVD, etc etc, but the bottom line for me is that there may not be a victor in this battle., especially if it takes 4-5 years for one to become mainstream. The HD format has a much steeper hill to climb in this regard, versus the DVD player. DVDs had obvious and recognizable features over VHS and the benefits were viewable on 100% of the market. The HD disc formats have only "better visuals" going for it, and not only are they limited to the HD tv market, but limited to those HD sets with HDMI inputs.

.Sis

 

[avaya]

I’m wary that the discussion in this thread has gone off topic and am reluctant to continue that trend, so I’ll make this my final post in this particular thread.

You make some great points again.

On the issue of “fake†market share, this is indeed a something that tends to muddy the waters in these analyses. The target for both groups is to get their players into as many homes as possible so they may achieve a critical mass. If I may use an analogy; in this sense HD-DVD is like a harpoon – targeted at those with HDMI HD sets. PS3 is like a net, it picks up everything and everyone. If we take expected volumes into account; the number of PS3’s hooked up to HDMI HD sets is very likely to exceed the targeted sales of HD-DVD players, this is before we factor in the SD converts. This hinges on PS3 being a success of course.

Moving on, the PSP vs. PS3 game/movie comparison is missing some context, IMO. A PSP is likely to be enjoyed by one sole user who will purchase all the software and hardware they wish for it. PS3 will be targeted at the same consumer but if it takes its place in the living room it can assume a role as an entertainment device for the household; both console and movie player.

Therefore when considering the expenditure on software; a PSP is likely to be dependent on the disposable income of an individual, while the PS3 is likely to be dependent on the disposable income of the household. The disposable income of the household is greater than that of the individual therefore the budget constraint should not significantly impede the households’ purchase of a game or a movie.

Your second point about the rationale of buying into the HD era. I agree with this since most people will not notice it till you show them the difference. However you only begin to realise the substantial difference in quality, even to an untrained eye, when you watch films in SD or 480p on a larger screen, something above 32â€. It really is up to the media companies and hardware makers to build up this point and start a hype train.

The issue of HDMI, HD penetration is so low right now that I don’t think this will really play a part in dictating the success of either format, future sales are the critical issue. It’s mainly early adopters with HD sets at the moment and as an early adopter you maybe taken for granted by the people who set the standards.

It may well take 4-5 years before we maybe able to declare a victor, if any at all, as you said. It depends on how successfully both groups and the media can generate interest. Lastly the price of HD sets – they are becoming cheaper by the day; the day when all TV’s sold are HD with HDMI is probably the true beginning of the HD era.