Merrill Lynch's Next-Gen console prediction

[mckmas8808]

I second the "good post" to Avaya. People are up in arms about the report, but in the end it's a guesstimate based on known market conditions, some of which I'm sure are backed up by information many aren't priveledged to.

However, doing a cost analysis cannot predict outcome; it can only show weakness and strengths, which is what I took the report to do. Some of it's conclusions I agree with, such as Blu-ray being a weakness. Some I don't, such as a $250 dollar price point for Xbox 360 next year.

.Sis

Hold the heck on Sis. Just stop it. You keep saying stuff like...

"People are up in arms about the report, but in the end it's a guesstimate based on known market conditions, some of which I'm sure are backed up by information many aren't priveledged to.

Did you even read avaya post. Look READ IT BELOW!

The analysis is actually treating the PS3 as a standard CE product; they have actually applied the same standard pricing principles they would use to assess a new CE product to PS3.

They are assuming that Sony will not subsidise the console, hence the reason for their prediction of a $500 price.

The document states that Toshiba and Sony are making the Cell and will not be able to "out execute" IBM who will be making the XeCPU. It does not acknowledge the fact that IBM East Fish Kill will be fabbing Cells from the onset

What information do they have that will state that the PS3 will release at $500. And why are they treating it like a regular CE product? I will not calm down until you stop making the report seem fair. The sad thing is I know you are very smart and understand the video game business model. Stop acting like you don't.

 

[Shifty Geezer]

Time and again, I have seen an analyst come on CNBC and give a terrible description of what's going on with a company. I've of course seen analysts completely miss the boat on 'buy' and 'sell' ratings; in fact, I think for the most part it's safe to say analysts are good at telling you what's already happened, rather than what's going to happen.

Weathermen (women) are analysts. They talke data measured from the atmospheric conditions and determine what the result will be. They've got amazingly powerful computers to aid them. And yet they still can't be sure of getting 24 hours in advance correctly predicted! By the very nature of the areas these analysts work, they're unlikely to be getting it right. It's all too chaotic and unpredictable!

 

[mckmas8808]

Heavy losses will acrue in the first year, though, regardless. It takes time for that secondary revenue stream to build up.

.Sis

Sony is already seeing a profit for the PSP due to its secondary revenue stream. How can you explain this?

 

[Tap In]

Weathermen (women) are analysts. They talke data measured from the atmospheric conditions and determine what the result will be. They've got amazingly powerful computers to aid them. And yet they still can't be sure of getting 24 hours in advance correctly predicted! By the very nature of the areas these analysts work, they're unlikely to be getting it right. It's all too chaotic and unpredictable!

that is true.

What is also true and being overlooked in this thread is that the weather changes weekly, daily, hourly and by the minute.

as that new data is received the analysis is updated to reflect that.

Same goes here.

this analysis is based on what is known by the researcher TODAY.

Many are reading this as some kind of sweeping indictment of Sony and their competition with MS in the Next Gen. In reality it is one speculative (based in fact) report about the CURRENT state of affairs based on the information known today.

Depending on what Sony reveals and actually executes compared to their proposals, all of that may change tomorrow and so would the analysis.

Many Sony defenders here are basing their own assumptions on the outcome on no more than (in some cases far less) information or facts. Therefore claiming that this analyst is "up in the night" is being just as hypocritical by defending their own analysis.

 

[Carl B]

Hey if the analyst's came here to defend their claims, well that'd be awesome. Certainly none of us are willing to grant quarter when we disagree with each other.

I maintain that most analysts half-ass it, but Shifty you do have a point with the weather. But weathermen are better at predicting the weather than analysts are at predicting stock prices/investor movement, to be honest.

 

[mckmas8808]

Many Sony defenders here are basing their own assumptions on the outcome on no more than (in some cases far less) information or facts. Therefore claiming that this annalist is "up in the night" is being just as hypocritical by defending their own analysis.

Surrre we are. Why not state the normal sony business model when it's PLAYSTATION console? People know how Sony and other companies price their consoles. We all know that Sony is looking to sell close to if not more than 100 million consoles with the PS3. Doesn't that change what Sony can do as far as the pricing is concerned.

I also understand that this is why UMDs are priced so high. Sales for UMDs are not promised, therefore the price must be higher to balance that out. Now if UMDs were a sure think (i.e. slam dunk like the PS3) they would be priced at $9.99 like most people want them to be. It's overall knowledge by which you would think ML would have.

Not hard to understand.

 

[Tap In]

Surrre we are. Why not state the normal sony business model when it's PLAYSTATION console? People know how Sony and other companies price their consoles. We all know that Sony is looking to sell close to if not more than 100 million consoles with the PS3. Doesn't that change what Sony can do as far as the pricing is concerned.

I also understand that this is why UMDs are priced so high. Sales for UMDs are not promised, therefore the price must be higher to balance that out. Now if UMDs were a sure think (i.e. slam dunk like the PS3) they would be priced at $9.99 like most people want them to be. It's overall knowledge by which you would think ML would have.

Not hard to understand.

Until more information is revealed by Sony and its partners, basing the future (with new technology and associated costs) on their past is not an accurate stance IMO.

It is the only one you have to stand on at the moment however.

 

[scooby_dooby]

"It’s possible that we finish 2006 with the HDD-enabled version of Xbox 360 at $249 and the PS3 at $499.".

Maybe by HDD-Enabled they mean ready for the HDD, but not included? Aren't all X360's 'HDD Enabled"?

A $250 premium next X-mas is too ridiculous, I don't see how thay could be predicting that. $250 core is possible. Although, I think MS would be better served to do a $50 price drop, and bundle a a game like Forza 2 or Halo 3, or a couple from 05 like Kameo+PGR3 bundle.

 

[Mmmkay]

Maybe by HDD-Enabled they mean ready for the HDD, but not included? Aren't all X360's 'HDD Enabled"?

By that logic, that means they are implying there will be a 'HDD-disabled' version.

 

[scooby_dooby]

Any system that is "able" to accept a HDD is enabled.

HDD-Bundled, or HDD-Included, would be concrete phrases.

 

[AzBat]

Maybe by HDD-Enabled they mean ready for the HDD, but not included? Aren't all X360's 'HDD Enabled"?

Most likely. They did use the term "HDD-equipped version" in their report:

The various add-ons that both consoles will offer should
not vary significantly between platforms. The only major
element that Xbox 360 includes that PS3 does not is a
detachable hard drive. In the 20GB configuration that we
believe will be shipped, the price is likely to be $25. That
leaves Microsoft room to lower the price for the HDD-
equipped version of Xbox 360, which will initially be
offered at $400.

Tommy McClain

 

[seismologist]

Wrong.

"• Sony has in PS3 a console with plenty of impressive proprietary technology, but also a high manufacturing cost."

Thats a pretty good advantage-disadvantge mention.

In that case all Sony has to do is cut the performance in half, replace Blu Ray with a DVD drive and they will come out ahead. See why It's not a very thoughtful analysis?

 

[Mmmkay]

Any system that is "able" to accept a HDD is enabled.

HDD-Bundled, or HDD-Included, would be concrete phrases.

If you are inferring that Merrill's language of 'HDD-enabled' means they are simply talking of an xbox 360 capable of using a HDD, because of the way it is phrased that would mean the alternative is to say 'HDD-disabled' or a unit which cannot support a HDD. Since all units will support the HDD, that would make it a redundant statement. i.e. There is no purpose in saying HDD-enabled in the sentence.

In my definiton of their language, HDD-enabled refers to an Xbox360 with a HDD unit included, as opposed to one which does not have a HDD unit included. HDD-enabled serves a purpose in this version to indicate which of the two models they are describing.

 

[Sis]

Hold the heck on Sis. Just stop it. You keep saying stuff like...



Did you even read avaya post. Look READ IT BELOW!



What information do they have that will state that the PS3 will release at $500. And why are they treating it like a regular CE product? I will not calm down until you stop making the report seem fair. The sad thing is I know you are very smart and understand the video game business model. Stop acting like you don't.

Avaya has stated the obvious: a game console is not a typical CE. But are you then suggesting the analysts do nothing? That they say, "Whelp, folks, Sony will ownzered everyone cause of the games!"?

In the end, doing a cost analysis is completely reasonable. The problem is that it does not encroach on the emotional aspect of video gaming and therefore misses probalby the largest factor in the battle. This is what I took avaya to mean when he said "The analysis is actually treating the PS3 as a standard CE product" and it was this statement directly that I mean "good post".

Tell me again, though, mckmas, what is it that you disagree with in the article? You need to counter their claims and not just a single one. They say Sony will price the PS3 at cost in order to avoid losses, you say, "No way! Loss leader! PSP!" but you don't respond then to their basis for that claim, which is that they believe the CEO of the company has given guidance stating that they will not take heavy losses into 2007.

I don't know why Stringer gave this kind of guidance, given the launch of a new system could cost a lot of money. But if he did say it, and the PS3 COGS is around $500, then you need to explain why you believe it will release less than that and still somehow be profitable.

Otherwise, your argument boils down to "nuh-uh!".

.Sis

 

[ImaginaryIndustryInsider]

"The report predicts that Microsoft will break even in year one of the 360's release and that profits will come in year two."

...No wonder MS dumped Xbox.

 

[nelg]

1. The development cost for the CELL will be pay for itself with the help of Toshiba and IBM using it and helping sell it to other consumers. The CELL is bigger than just going into the PS3. Something that has been said here on B3D that obviously ML doesn't understand.

How large of a market do you see for cell outside of the PS3?
IMHO the investment in the x86 ISA is so great that its inertia will keep Cell and others confined to niche markets.

 

[crystalcube]

In that case all Sony has to do is cut the performance in half, replace Blu Ray with a DVD drive and they will come out ahead. See why It's not a very thoughtful analysis?

An analytical prediction has also be based on realistic possiblities. Cutting performance by half and replacing Blu-ray by dvd are not something that can happen going by current scenarios.

 

[Sis]

In that case all Sony has to do is cut the performance in half, replace Blu Ray with a DVD drive and they will come out ahead. See why It's not a very thoughtful analysis?

These would strengthen their current weaknesses and change the analysis that ML has done. It does not mean they will come out ahead.

The article is reasonable in stating that the Cell chip was expensive to develop and will probably be expensive to produce. This is not the same as saying "Sony is doomed".

The article is reasonable in stating that Howard Stringer has given guidance saying Sony will not take heavy losses into 2007 (or something to this effect) thus we should expect a huge discount on the PS3. This is not the same as saying "Sony is doomed".

The article is reasonable is stating that the Blu-ray drive is challenging add-on, both in terms of costs and timing. This is not the same as saying "Sony is doomed".

The article is reasonable in stating that MS may have a significant price advantage, given their cash position and their year to year profits, and the apparently cheaper to manufacture Xbox 360. This is not the same as saying "MS for the win!" (Also, I disagree with this one; I don't believe MS can really afford to throw another billion or two into Xbox.)

.Sis

 

[Sis]

If you are inferring that Merrill's language of 'HDD-enabled' means they are simply talking of an xbox 360 capable of using a HDD, because of the way it is phrased that would mean the alternative is to say 'HDD-disabled' or a unit which cannot support a HDD. Since all units will support the HDD, that would make it a redundant statement. i.e. There is no purpose in saying HDD-enabled in the sentence.

In my definiton of their language, HDD-enabled refers to an Xbox360 with a HDD unit included, as opposed to one which does not have a HDD unit included. HDD-enabled serves a purpose in this version to indicate which of the two models they are describing.

To be fair, assuming "HDD-enabled" means the core system and will be priced at $250 at end of 2006 is much more reasonable, even if the wording is poor. The report mentions both HDD-enabled and HDD-equipped, but does not use the term interchangeably.

.Sis

 

[pakpassion]

anyone seen this from merryll