Merrill Lynch's Next-Gen console prediction
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mckmas8808
Legend
Laa-Yosh said:Software is indeed missing from the analysis. Now, Sony has two main strengths here, their own franchises like the GT series, and all the best selling 3rd party games like MGS, FF and so on from the previous two generations of the Playstation. It's a safe bet that they'll be able to capitalize on the first with the PS3 as well.
However, developers and publishers of the big 3rd party franchises may have to face a tough decision in the late 2006/ early 2007 timeframe. At this time, if all goes well for Microsoft, there may be 8 to 15 million Xbox360s sold; whereas Sony may still be under 5 million, maybe even 3 million, if they would indeed start in the US and Europe in late 2006. (Note the two "if"s before you start to reply). These figures are primarily based on manufacturing potential; MS indicated that they should be able to produce 4-5 million Xboxes in 6 months, so their advantage could be anywhere from 5 to 10 million units. Thus, any game released at this time would have as much as twice the market and the sales potential on the Xbox, compared to the PS3. This is very important if you consider nextgen development budgets.
There are of course many other factors that have to be considered here by the publishers. Their costumers may be loyal to the Playstation brand and releasing a FF game on the Xbox could turn into a financial disaster. Betraying Sony in such a way could also have consequences. It's also safe to assume that PS3 will sell very well from mid 2007 and reach a very large user base by 2008.
On the other hand, if the market actually turns out to be that way, then there would be a huge potential for the first (few) big franchises released on the Xbox. We do not yet know all the X360 games in development, but it's a safe bet that most of them are from the same devs and franchises that we know from the first Xbox - so there's certainly room for well-known names. For all we know, these studios might already be watching each others' moves... and who knows how many would follow, if one decides to go for it.
And for all the politics and fan expectations, next gen development is still heavily driven by money. 10-20-50 million dollar projects won't break even with sales under a million copies, and both studios and publishers are driven by businessmen, who probably care more about the math and the balance sheet.
So, in my opinion, software will be the most important factor with this gen as well; but a larger installed base in 2006/2007 may give MS an advantage in that field as well.
I completely agree 100%.
mckmas8808
Legend
expletive said:
You know what your right. Just like UMDs were Dead on Arrival.
mckmas8808 said:
UMDs are a product which filled a need where there was no solution: a tiny disc that could fit into a portable media player. No converting, downloading, just rent it, pop it in and voila!
HD-DVD and BR will have to convince people to give up what they already have thats doing the job. Its night and day.
EDIT: And my point was not to discount BR overall but mostly that people are not going to buy a PS3 in the last 4 months of 2006 because it has BR. If it was DVD9 based would it sell any less? No, theyll sell all they can make regardless.
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Serenity Painted Death
Regular
In Sony's favor, and I realize money is money... but all their staunchest third party dev support comes from.... you guessed it, Japanese developers, many of whom have a vested interest in the RPG genre. It would take something cataclysmic for them to leave Sony for an American company with no prior (j)RPG pedigree, though they're getting better at it.
Sure, it would help MS sell in Japan if they had say, SE exclusively, but SE would sell much better with PS3, and NOTHING has been shown to indicate otherwise. Also realize, SE released over 100 games this generation in Japan... how many of those even came to N.A./Europe (10? maybe?)? Do you think MS will have anywhere near the support in Japan to support such inundation? The same goes for most other Japanese dev houses... we only see a tiny fraction, though there might be somewhat of a dilution of "blockbuster" titles between the two systems.
Sure, it would help MS sell in Japan if they had say, SE exclusively, but SE would sell much better with PS3, and NOTHING has been shown to indicate otherwise. Also realize, SE released over 100 games this generation in Japan... how many of those even came to N.A./Europe (10? maybe?)? Do you think MS will have anywhere near the support in Japan to support such inundation? The same goes for most other Japanese dev houses... we only see a tiny fraction, though there might be somewhat of a dilution of "blockbuster" titles between the two systems.
AFAIK virtually as soon as C1 (Xenos) was delivered work began on C2, which is assuredly a cost reduced C1 - ATI (and presumably IBM) has XBOX 360 milestones planned well beyond the initial deliveries. I'd say its pretty much a given that a future delivery will include the eDRAM and primary logic on a single core, but we'll have to see if this happens with C2.blakjedi said:
Well, it does scale, and argubaly to two core approach is increasing yields right now (as opposed to a single 300M+ transitor part @ 90nm).Vince said:
mckmas8808 said:
at least with umd everyone who bought a psp could use the format to its maximum potential .
With bluray how many people are going to have hdmi/dvi tvs ? How many will be able to take advantage of bluray ?
It will be a much smaller market than even umd had to work in and there is a whole generation of hdtvs that wont play bluray movies at anything more than 480p
I don't know about u but if i went into a store and I owned a ps3 and I saw a bluray movie for 25$ or a dvd movie for 15$ and both would play on 480p for the tvs i owned i would pick up the cheaper dvd movie that will play on all my tvs .
Major diffrences between umd (which is still niche) and bluray .
Aside from that we don't even know when bluray content will be avalible last i heard they haven't finalized the bluray specs . So you can be talking about an even smaller libary than umd had with an even smaller amount of people will be able to take advantage of it .
Then also add in the fact that there will be hd-dvd on the market also and the prospect of bluray being a major reason to buy the ps3 will be even smaller
mckmas8808 said:
Yet i'm still indoubt that sony is making money on the psp . The playstation divison of sony may be making money but they can still be loosing money on the psp hardware and software .
I thought it took them more than 9 months . Didn't it launch in november in japan and october in europe ? (though i'm not sure of europes release )
Btw can you post a link to where they are making money on psp
mckmas8808
Legend
jvd said:
I totally understand and respect that jvd I just wanted to point out the some people will pick the PS3 due to it's Blu-ray drive to watch HD movies. I guess I could have said it a bit better though.:smile:
mckmas8808 said:
Yes and i agree. My point was that the people that buy it in 2006, with all that will be up in the air with the formats etc, will be buying it for other reasons FIRST. Those reasons being things like, brand loyalty, Sony frnachises, they buy every new console, etc. I dont think there will be people saying 'i cant wait to pick my PS3 so i can finally play this BR copy of <insert one of the few BR titles available in 2006 here>'. Apologies if that didnt come across in my initial posts.
expletive said:If the PS3 is going into manufacturing in 2-3 months and theres some components that dont even exist theyre in trouble dont you think?
There has been reports on the cost of these consoles for awhile now and to be honest i have no idea what theyve ACTUALLY seen. However, i do know this, after the tech 'bubble burst' and ENRON, these fortune 500s, especially the financial institutions, are extremely cogniscent of everything they publish and that they can back it up with due diligence and facts. This analysis is based on facts. And the analysis is done in such a way to draw the most possible outcome, no other way. These analysts being "right" is how these large firms gain prestige, credibility, and mindshare.
So whether or not they actually end up being right about the pricing, my feeling is that they are way more likely to be correct than any of us and that the 'half the price' quote could very well be a reality.
I cant remember but there was another developer who talked about Microsofts "aggressive plans to grow their market share in 2006". Does anyone remember who said that? A $100 price drop in 12 months seems to fit into that as well.
I agree with what you're saying with the console release; time is drawing short and something better be known at some point sooner or later, at least internally. Still, Bobbler echoed my thoughts in that I just don't feel these houses have access to that info. My iPod example stands as well as an indicator.
As far as the prestige of these companies, well I agree with you but at the same time I can't help but point out my personal and impersonal experiences with analysts in the past, and the fact that so often when guessing the price points for consoles and console launches, they have been wrong. Maybe going back in Merrill's history would clarify whether more often than not they have been right or wrong.
In any event, there's not much we'll be able to settle here to prove things one way or the other. We'll probably just have to wait things out and see what happens six months-a year out.
I'll have my 'I told you so' posts ready to fly should I end up vindicated, and on the opposite end I'll willingly withstand it myself should I end up having underestimated Merrill.
On the side and on other points:
I do think that a lot of us - including myself - need to reevaluate our cockiness back in the day when we were self-assured of UMD's 'inevitible failure.' We were just plain wrong - as were many analysts. It has certainly not turned out that way, and I give Sony the benefit of the doubt now in their ability to push early adopter blu-ray content as well. Did you guys read about how Warner Monday announced UMD support? I mean - it's seriously every studio but Dreamworks now.
As for the die shrinks of Xenos and getting the eDRAM and main core on one die, I see that as a potential challenge also. But I do recall somewhere that they were definitie in their plans to pursue it. We'll see how that turns out... Would TSMC be the singular fab house chosen in that instance, or would it move somewhere with more eDRAM experience? I wouldn't be surprised if that union were delayed on the 65nm process.
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Dave Baumann said:
I disagree and would ask for a published thesis that Multi-Chip Module costs scale in relation to technological advancement akin to Moore's guiding law, and also like to see how they've diminished over the past, say, 5 years. Perhaps a paper on MCM advancement or such. Because otherwise your comment is totally unneeded as while both ASICs will scale down in costs, their fixed cost remains.
I would also posit that it's far easier for a company with no true high-preformance embedded DRAM experience to produce an stand-alone ASIC, with what is an extention of current memory controllers; mate it with an eDRAM module, which itself is an extention of Mitsubishi's 3DRAM concept, and create an MCM than it it to create something akin to a contemporary Graphic Synthesizer.
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mckmas8808
Legend
jvd said:
I got that info from the second quarter earnings report below.
They made 73 million dollars in the second quarter alone. This was with the marketing launch of the PSP and R&D spending on the PS3. Even though the PS2 sold 2 million units more than last year and software was up in two territories it was the sales of the PSP hardware and software that helped give Sony an operating income of 73 million dollars.
Link http://biz.yahoo.com/iw/051027/099348.html
xbdestroya said:I agree with what you're saying with the console release; time is drawing short and something better be known at some point sooner or later, at least internally. Still, Bobbler echoed my thoughts in that I just don't feel these houses have access to that info. My iPod example stands as well as an indicator.
As far as the prestige of these companies, well I agree with you but at the same time I can't help but point out my personal and impersonal experiences with analysts in the past, and the fact that so often when guessing the price points for consoles and console launches, they have been wrong. Maybe going back in Merrill's history would clarify whether more often than not they have been right or wrong.
In any event, there's not much we'll be able to settle here to prove things one way or the other. We'll probably just have to wait things out and see what happens six months-a year out.
I'll have my 'I told you so' posts ready to fly should I end up vindicated, and on the opposite end I'll willingly withstand it myself should I end up having underestimated Merrill.
Thanks for wordsmithing an appropraite and cordial resolution to the discussion.
Just for the record, i never said they WOULD be right, only that what they stated in that report was based on fact. What facts exactly i dont know, the whole BOM, a subset of each BOM thats relevant, its really anyones guess. Anyone can have the facts of today yet predict the future wrong and Merrill may yet.
But just for shits and giggles, lets play along like i said theyd be RIGHT. At least it will give one of us a chance to use a nice juicy TOLD YOU SO a year from now.
mckmas8808 said:
there will be some no doubt. But i think u will see for the majority of people it wont be the primary concern. Its not a killer app in 2006 like dvd was in 2000 .
Now of course in 2008 i bet bluray (unless hd-dvd wins somehow) will become a huge factor for sony. But at the start its going to start off small. I'm sure people will even buy one or two movies on bluray even if they are limited by 480p but will stop buying as they notice no diffrence. Those that can take advantage of bluray will of course buy the games. But once again its a very small group of people realisticly .
Also depending on media that small group of people may be investing in hd-dvd .
This Lynch report fits with all we've heard even from sony themselves (that it will be expensive) . I don't really see the problem .
I knew from the moment that ms announced the two skus and sony started hinting at a high price ms was going to use pricing to its advantage .
Remember ms has two skus . Both of which they can change around or add new skus to at anytime . There are many senarios that could actually happen . What the xbox 360 will cost us in a year isn't what it will cost ms , for good or bad that is true .
If the xbox 360 sells very well during the year I don't see them lowering the price over the holiday. I think we can both agree that in 2006 sony will be virtualy sold out of ps3s (unless they launch over a 500$ pricep oint) however for ms that is a good thing. If they can lower the price of the unit (which i see no reason why they can't ) and sell at the same prices they will help stem losses untill a time they need to drop the price. Like say in 2007 spring time which is a soft time of the year for all markets .
They can do
1) 200$ core , 300$ premium
2) 200 core , 300 premium , 400 gamer pack with 2 launch games and a 40 gig hardrive.
Or a number of other senarios .
The whole point is to get to the 200$ and under price range. That is where you really start making sales and not for nothing but a casual person isn't going to care to much about the hardrive which at that point will most likely be cheaper with bigger models taking the 100$ mark . I would bet u can find some cheap 20 gigs used if a 40 gig model comes out .
For ms they need to keep a price gap between them and sony so sony either has to drop price or stay at the higher price point .
I really don't see where the sony system costs more than the ms system when the sony system has many more additional costs .
Sony off the top of my head has
bigger cpu
two banks of ram
wifi liscense fee
bluetooth liscense fee
bluray
Sd slot
more expensive pcb
two hdmi out ports
Anything else i'm missing ?
I read the statement and I can see how Merrill lynch can come to this conclusion. Companies like Merrill Lynch are all about the bottom line and they made a prediction based on the bill of goods as well as the company's financial status.
Take all that we have heard recently.
1. The PS3 will cost more to develop for. (not necessarily proven, but developers seem to think it)
2. The XBox will be out at least 6 months before the PS3 (install base prior to PS3 launch)
3. The cost to build a PS3 seems to initially be higher. (This will affect selling price which is a huge determining factor in a console's success)
4. Financial status of Microsoft's is much stronger than Sony's. (developers may feel more secure working with the XBox than with the PS3 for this reason. I dunno about you guys, but I prefer to do business with financially secure business partners. Not that Sony isn't, they just aren't Microsoft)
5. XBox Live is fantastic and will be third generation for XBox. Sony is starting from scratch.
I personally feel the PS3 will be the superior machine when all is said and done (and not in a Sega Saturn kind of way ). That doesn't mean that it will be the most successful though. IMO, the reasons I listed above will be why the XBox will prove to be more successful of the two.
I really hope Sony can execute well and release an amazing product. I don't want to see a one-horse race.
Then again, wtf do I know.
Take all that we have heard recently.
1. The PS3 will cost more to develop for. (not necessarily proven, but developers seem to think it)
2. The XBox will be out at least 6 months before the PS3 (install base prior to PS3 launch)
3. The cost to build a PS3 seems to initially be higher. (This will affect selling price which is a huge determining factor in a console's success)
4. Financial status of Microsoft's is much stronger than Sony's. (developers may feel more secure working with the XBox than with the PS3 for this reason. I dunno about you guys, but I prefer to do business with financially secure business partners. Not that Sony isn't, they just aren't Microsoft)
5. XBox Live is fantastic and will be third generation for XBox. Sony is starting from scratch.
I personally feel the PS3 will be the superior machine when all is said and done (and not in a Sega Saturn kind of way
). That doesn't mean that it will be the most successful though. IMO, the reasons I listed above will be why the XBox will prove to be more successful of the two. I really hope Sony can execute well and release an amazing product. I don't want to see a one-horse race.
Then again, wtf do I know.
expletive said:Thanks for wordsmithing an appropraite and cordial resolution to the discussion.
Just for the record, i never said they WOULD be right, only that what they stated in that report was based on fact. What facts exactly i dont know, the whole BOM, a subset of each BOM thats relevant, its really anyones guess. Anyone can have the facts of today yet predict the future wrong and Merrill may yet.
But just for shits and giggles, lets play along like i said theyd be RIGHT. At least it will give one of us a chance to use a nice juicy TOLD YOU SO a year from now.
LOL, exactly. And I wasn't meaning necesarrily I'd lord it over you, or you'd lord it over me - I've felt our discussion to have been extremely civil and neutral in tone, and I've actually enjoyed this thread very much due to the recent posts.
Rather I was just saying to the more fiery members who've chimed in, I'll willingly submit to the abuse should I be proven wrong, as I know I've been a ardent critic of Merrill's numbers throughout this thread.