Merrill Lynch's Next-Gen console prediction

[mckmas8808]

Anyway... I don't disagree that MS has a lot of leverage going forward this time around, but at the same time let's not paint for Sony an artificially bleak future!

I agree too that MS has a lot of leverage. Way more than what Sega had with the Dreamcast. Yet at the sametime some people act like Sony has loss all of its advantages just because they know little about the PS3.

 

[London Geezer]

Your totally wrong.

Sony right now cannot afford to price either system PS2 or PS3 any way they want. Sony has been bleeding money lately and you simply cannot start selling your few products that actually make profit for a loss.

Uhm my point was that they can price PS3 the way they want - more expensive than the rest - because they will sell out anyway. So they won't make such huge losses.

Which means you kinda agree with me.

If you take PS2 revenue away from the Sony financials they would be in dire straits.

Errmm and why would you take that away?

If you take Windows profits from MS, they would be broke... So what? Windows will keep selling and PS2 will keep selling, what's the point of saying "if you take XX product revenues out XX company would be broke..."???

(more than already) If the PS3 is $400+ and offers no pack in HDD or other features it is then a big deal. There comes a point that too much money is too much money for a consumer and if the X360 can compete technically and cost alot less & share some good multi-plat titles (EA, GTA, Square) what reason would a consumer have to buy a PS3 that may cost 2X as much?

Will it cost 2X as much? No, so cut it out.

They also will not be giving away for cheap PS3s because they cant. Unless one of their Blu-Ray partners helps out PS3 is going to be expensive to manufacture over the duration much in the same way Xbox 1 is.

My point is that they will be able to sell out PS3's even at a high price.

And it is totall different with the X360 and you can wipe away alot of what happened previous. Did Dreamcast have the first next-gen Madden? NO but the 360 does. That alone means a world of difference. Was Sega already hurting when Dremcast released? YES. There are many more things like this, but I dont feel like going into detail.

Exactly, don't.

 

[Master-Mold]

Keep it up big man you seem so sure of yourself. So I guess Sony closing in on 200 million consoles sold by the end of this holiday season just all of a sudden means nothing right? Sheesh guy at least that some pro Sony things into consideration.

Where am I so negative to Sony? I am buying a PS3 and an X360.

All I am saying is MS has more pricing leverage than PS3 and that does stand for something if they can show the machines are technically similar. Dont forget at one time Atari & Nintendo seemed unseatable from their throne too.

Do I think X360 will outsell PS3? NO, I already said that but that doesnt mean just because Sony has done incredibly the past two generations they can just shove out a system at any price and expect the same number of sales.

 

[Shifty Geezer]

Master Mold : If MS can do that with XB360, why didn't they with this gen? Why didn't we have $150 XB's a year after release?Maybe then MS would have sold 50 million XBs, cut Sony's throat and crippled the company financially without their Gaming Division to support them, and only lost...what $300 per console x 50 million = $15 billion. Then they'd be in the position of market leader and the share holders would be all over MS and not in any way flogging all their shares to invest in a company that's going to make them a profit on their investments instead of a company that's going to throw everything at dominating the console space regardless of how much it costs.

 

[Master-Mold]

Master Mold : If MS can do that with XB360, why didn't they with this gen? Why didn't we have $150 XB's a year after release?Maybe then MS would have sold 50 million XBs, cut Sony's throat and crippled the company financially without their Gaming Division to support them, and only lost...what $300 per console x 50 million = $15 billion. Then they'd be in the position of market leader and the share holders would be all over MS and not in any way flogging all their shares to invest in a company that's going to make them a profit on their investments instead of a company that's going to throw everything at dominating the console space regardless of how much it costs.

Oh jeez....

They couldnt do that with Xbox1 because they foolishly rushed into bad deals with their partners like Nvidia that have kept production costs/losses high. They said this time around they learned from their mistakes and are situated much better with their vendors/partners that will allow a much more agressive pricing plan if needed. In other words they arent getting raped by their partners. Remember that Nvidia/MS lawsuit?

In truth they could have done that with the first Xbox but losses would have been unaccpetable. This time they can be much more agressive.

 

[London Geezer]

Do I think X360 will outsell PS3? NO, I already said that but that doesnt mean just because Sony has done incredibly the past two generations they can just shove out a system at any price and expect the same number of sales.

The funny thing is that to a certain extent it kinda does mean that!

Obviously they risk to run into the same situation they are now, with overpriced TV's and other equipment which has started to go unsold because people are waking up and seeing that the competition has better hardware for better prices (Samsung). But look how long it took...

 

[Serenity Painted Death]

There is a fundamental difference that still stands:

Some games are on one system, others are not. This is becoming somewhat less so, but it is still true. There is nothing so striking you can't get on a Samsung that you can on a Sony T.V.

 

[Tap In]

as the analyst explained, what MS has going for it this gen as compared to last gen is that its "costs" this gen are going to drop much faster than last gen and maybe sooner than PS3. (add to that deep pockets)

That is what is driving this report.

and to the poster commenting that Merrill Lynch is just posting this to get people to talk.... ... sorry, but they research and post this information to advise clients how/where to invest their money to make a return on their investments.

Hardly just a web site rumor starter.

 

[Serenity Painted Death]

Except they really know nothing about the PS3. It functions the same.

For example, do you really believe that the cell processor, the RSX, and the blu-ray drive ALL COST EXACTLY 101 dollars? They seriously reported this, but can anyone actually take it seriously?

 

[Tap In]

Except they really know nothing about the PS3. It functions the same.

For example, do you really believe that the cell processor, the RSX, and the blu-ray drive ALL COST EXACTLY 101 dollars? They seriously reported this, but can anyone actually take it seriously?

and do you have different information?

 

[mckmas8808]

as the analyst explained, what MS has going for it this gen as compared to last gen is that its "costs" this gen are going to drop much faster than last gen and maybe sooner than PS3. (add to that deep pockets)

So why not talk about the possibilities that the PS3 will have with the Blu-ray drive? Plenty of movie execs have spoken highly of the PS3. How many have any talked about the X360? The PS3 will sell due to its Blu-ray movies too. Something MS doesn't have right now. Why didn't ML go into how the PS3 will have top notch connectivity with the PSP?

It's obvious that ML didn't talk about PS3's advantages the way they talked about Ms's X360.

 

[wireframe]

Merrill Lynch's core competence is risk assessment (apart from being huge fish in very deep dark waters ... *cough*) and therefore it would seem logical that the main basis of their assessments must have some basis in relatively risk-free "facts". Costing is important, but as most know, the key to the console market is in the media sold, not the hardware to run that media. In that sense what matters most is the predictability of this and using that analysis to take advantage of the situation.

For example, Microsoft could churn out Xboxes to its heart's content, but what it wants to do is to sell games for it. That's where the money is. Now, you can make a strong point that you won't be selling any games to people without the hardware so being able to deliver this hardware is key. The question then becomes: does Microsoft "know" about this advantage and do they have a plan to pour out the titles when they have the market in reach? If they cannot capitalize on low cost/low price they would just be shooting themselves in the foot by lowering prices so they can only benefit by increased margins on the hardware. This is not a business.

You can also reverse this statement by going back to the last generation of hardware. The correct facts then would be an absolutely horrible outlook for Microsoft's cost/price on hardware. However, Microsoft did rather well, didn't they? It's a lot of red ink, but that seems to be the cost of entry.

I think they are right that Xbox 360 will do well and is well positioned in terms of costs (with the little info I have gathered on the subject). It will be very interesting to see how Xbox does in the USA and Europe. I still think they need a real whopper to get the effect to spill over to Japan. I get the sense that the Japanese may be thinking "why should we buy a foreign product when most foreigners are buying our product?" If Xbox took a dominant lead in the USA or Europe, this may then spill over as a novelty item in Japan as an imported successful and established product.

My real curiosity is in whether the Xbox 360 is a make-it-break-it product for Microsoft. What if it doesn't do much better than Xbox? What happens next round?

 

[Serenity Painted Death]

and do you have different information?

Not, but I'm not trying to pass off obviously incorrect information as reality, much less "advise clients how/where to invest their money to make a return on their investments."

 

[mckmas8808]

and do you have different information?

So we should believe them because we don't have different information? They were s.p.e.c.u.l.a.t.i.n.g.

 

[Carl B]

as the analyst explained, what MS has going for it this gen as compared to last gen is that its "costs" this gen are going to drop much faster than last gen and maybe sooner than PS3. (add to that deep pockets)

That is what is driving this report.

and to the poster commenting that Merrill Lynch is just posting this to get people to talk.... ... sorry, but they research and post this information to advise clients how/where to invest their money to make a return on their investments.

Hardly just a web site rumor starter.

Tap In I'm not sure if you're referencing my first post in this thread or not when I called it 'good vibe press' with that 'web site rumor' comment; but certainly I wasn't implying it was a coordinated effort or PR or anything. Obviously they are doing this for their financial customers. It's just a flawed analysis on their part is all. My comment stemmed solely from the fact that this might generate spillover positive press for MS, which it probably will.

Statements such as 'sell 360 for half of PS3's price' simply have no context, and are dubious at best considering that this was the same house that released the claim that PS3 would be $500 or greater in price.

Anyway I just can't go with Merrill's analysis - I agree some of their conclusions are rooted in truth, but frankly I just don't think these guys are following things nearly as closely as a lot of us here are, else they never would have released that initial $101 per Cell, RSX and blu-ray nonsense a couple of months ago.

 

[Serenity Painted Death]

I think Xbox is actually in more danger of disappearing than the PS3, should it not do well this go around. Not that I think it won't... but MS as a company will not just continue to tolerate losses in the billions for the sake of doing so. In contrast, the Playstation division is one of the only bright spots to be found in Sony's stable. It is the lifeblood of their company. Xbox is just a parasite on MS at the moment.

 

[Tap In]

So why not talk about the possibilities that the PS3 will have with the Blu-ray drive? Plenty of movie execs have spoken highly of the PS3. How many have any talked about the X360? The PS3 will sell due to its Blu-ray movies too. Something MS doesn't have right now. Why didn't ML go into how the PS3 will have top notch connectivity with the PSP?

It's obvious that ML didn't talk about PS3's advantages the way they talked about Ms's X360.

because in THIS particular analysis his research led him to recommend MS as a viable investment based on the reasons given (at THIS time).

That analysis could change monthly over the next 3 years.

It is not meant to be a direct comparison, just a simple conclusion that an investor can comprehend today.

 

[AzBat]

They never said MS will win. They simply stated the obvious that MS has the luxury to price their console as affordably as needed and Sony cant.

Of course that is a huge advantage to MS. I dont think MS will sell more 360s than PS3s but they have much better vendor terms this time around and have resources to play with. Anyone who thinks that having a potentially loaded Premium X360 for $179 in late 2006 vs. a $400 PS3 isnt bad a place for Sony to be in they need medical help.

You might want to check that again. Anybody thinking the Xbox 360 will be less than $200 in ONE YEAR is definitely on some major hallucinogenic. No matter what Sony does I seriously doubt we will see Microsoft reduce the cost of Xbox 360 more than $100 in one year's time. I could see them dropping to $250 for the core and $350 for the premium with no bundled game. I could also see them keeping the prices the same and include a bundled game. You can bet there will be a perceived increase in value from the 2005 launch prices to 2006 holiday prices, but it won't be anywhere near the values you're hoping for.

As for Merrill Lynch's prediction I think they are sound and feasible for the most part. To me it suggests they might be hinting at PS3 costing $500. Half of $500 would be $250 and that could be a realistic number for Xbox 360 in one year's time. However, I'm not so sure $500 is a realistic price for the PS3's US launch. I suspect Sony might launch in Japan earlier at that kind of premium price, but it will probably max at $400 for the US.

Merrill Lynch(and other market research companies like them) are usually pretty good at estimating the BOM for products like this. They have access to numbers directly from the suppliers. If Microsoft's BOM is cheaper than Sony's then I don't think you can discount their estimates. Personally I wouldn't be surprised if Microsoft's BOM was cheaper. I'm sure we'll start seeing more estimates similar to Merrill Lynch's as we approach Sony's launch announcement.

Tommy McClain

 

[Serenity Painted Death]

I'm curious, because I really don't know, but was Meryll one of the firms estimating a 500 dollar price tag for the PSP? Ditto PS2.

These firms have a long and storied history of horribly overestimating the price of Sony game machines.

 

[Tap In]

Not, but I'm not trying to pass off obviously incorrect information as reality, much less "advise clients how/where to invest their money to make a return on their investments."

actually, they are doing more than guessing, they are researching this info with phone calls and contacts, trying to gather facts.

Are they always right? of course not; they don't have access to privileged info such as deals that sony may have struck in back rooms that discount the costs.

I do recall however, that when the "$101" analysis was released are very own SONIC, stated that it was quite possible that those costs were in line. (Not enough coffee yet this am to look up the link)