PS3+HD price speculation: Cast your vote / Analysis

[Phil]

We've got a huge thread on the PS3 march conference, we've got another one about the HD/linux aspect and another one about the delay. With this topic (or better poll), I would like to center your thoughts on the estimated price of the PS3 in the US.

In order to make the poll more transparent, here's the definition of the PS3 package as based on the information available in the PS Business Briefing 2006 March official info topic:

[b]Estimated PS3 package sold on launch day in America includes:[/b]

1 PS3 unit, with following spec:
    - fully backwards-compatible with PSone, PS2
    - CELL with 7 SPE, 1 PPE, 256MB** XDR (90nm process***)
    - RSX GPU with 256MB** GDR3 (90nm process***)
    - Interfaces: Memorystick, SD/CF, PSone/PS2-Memorycard (?), USB2, WiFi
    - network-interface 10/100/1000
    - bluetooth for controllers
    - latest HDMI spec
1 dualshock3 wireless controller (bluetooth compatible)
1 60GB 2.5" SATA harddrive bundled with Linux
1 power adapter
1 basic cable for TV *<->PS3(component?)
1 Blu-Ray drive (assumption: 2x speed; compatible with BR-Disc, SACD etc)

* :    I don't expect an expensive HDMI cable to be included
** :   Eventhough RAM upgrade is rumoured, I'm going to assume this
       is not the case as it is not confirmed.
*** :  I am going to assume that first shipments will be based on 90nm.

Why is the HD included above in the package?
Eventhough it is not very clear if the HD will be included in the PS3 package, I'd like to assume it is for this thread and base any cost analysis on that scenario (since at this point, I think it's the most likely, especially for the launch period). Perhaps seeing the cost analysis of other members, it may paint a better picture if expecting the HD to be included is a realistic one.


IMO there are a few factors that will determine the final price for launch day. These factors are:

• demand
• competition (Xbox360) position, momentum, selling price and what they are offering
• cost (how expensive is the PS3 to produce for Sony?)
• (calculated-) risk (how high of a loss can they afford?)
• how close is the break-even-point?
• manufacturing progression: how quick can they move to 60nm?
• market expectation (how much are consumers willing to pay - how will they perceive the price?)
• yields?

I'm sure there are more factors one could name, but those are the ones that came to mind first and I'm happy to add more to the list as others participate in this thread.


Now to the speculation bit:

I am going to assume demand will be exceptionally high for PS3 come launch day. Sony has a lot of momentum with the PS2 selling at an amazing rate, it is the dominant market leader and has the support to back it up as well. More importantly, it has the name - PlayStation, that's arguably synonymous with "games". This is an important factor, one that will ensure that demand will be very strong. Considering the first buyers are for the most part hardcore-gamers and loyal platform supporters, I expect them to sell out regardless the price their selling it at: If it's $449 or as high as $600 - with what they're shipping it with, I could see them selling out at an amazing rate.

However, I think there's a large difference to what the hardcore / loyal platform supporter is willing to spend and what the casual consumer out there is.

This IMO is the key point of this analysis: Where is the best price point? It's easy to see that with the above package, Sony is trying to give out the message that the PS3 will offer much more than the competition is: A Blu-Ray capable device, a built in harddrive, the various interfaces etc. The question however remains: How much more can they offer while asking for a premium price for it? You get more, you pay more - fair enough - yet how much is the casual outthere willing to bargain for?

I've seen people (some of which I think very highly of) in these very forums expecting prices of up to $549. Would that price tag justify what you are getting? I'm sure it would - me being a geek, yeah, I'd easily pay that price tag. I'm not the average consumer though and thus I wonder, can Sony make the impact they really want at a price set that high?

Some of you might be thinking that it's not relevant what the average consumer is willing to pay at launch day since it will be bought by hardcore and loyal supports anyway, regardless of the price. True. But there's another factor that IMO is very important: Market perception. If Sony launches PS3 at a price of over $500, I could see this being on the front page of various newspaper spreading the news of Sony's new console and its pricetag. Even if they sell out at this price tag thanks to their loyal supports, how quick will they be able to lower the price to make it more attractive for the casual consumers outthere? Not too soon, I'm sure. You wouldn't want to upset those loyal fans by lowering your price just after they spent an amazing amount of money on their shiny PS3.

Personally, I am expecting them to hold the price they set at launch for no less than a year. In fact, I wouldn't be surprised if they even held out longer. PS2 was sold at over 1.5 years at its original price tag (if I am not mistaken), I really doubt PS3 will be any different unless the market demands it.

Anyway, I've tried to tackle my thoughts on why the market will not be very fond of a very high price tags (in the mid to high $500s) - and that's not even assuming what the competition will be up to. Microsofts console, though lacking Blu-Ray or a next generation drive out of the box has a HD as well - even if just in the form of a premium SKU - and they are selling it today at no more than $399. In fact, I could very well imagine Microsoft would be willing to drop the price of its premium device even a bit further come Christmas 2006 - just to be able to cash in on consumers who find the PS3 price too high and the fact that probably none will be available anyway since demand will outstrip supply. If Microsoft does lower its price even if only by $50 to $349, how would that fare with the casual consumer when they see a PS3 next to it at $500 or even more? Sure, it's got a Blu-Ray drive.. but given the format war and the insecurity which format (HD-DVD or BluRay) will prevail, would they actually want to spend that much more on something that may not be certain? IMO, I would think not, thus why I believe the price won't be as high as $500+.

There are more reasons though: The race between Blu-Ray and HD-DVD
It's easy to see why Sony wants to include Blu-Ray into the PS3. It's easily the companies and BRA biggest thrump-card: With PS3 shipping as a capable Blu-Ray player, it could give them a very quick lead in the race to become the dominant next generation DVD format. If PS3 sets the price too high though, how much of an impact will it still make? Will they be able to get the units out in a high enough demand or not?

Is the PS3 really that much more expensive than PS2 was back in 1999/2000?
We all know PS2 launched at $299 in America when it went on sale. We also know, the chips that were in PS2 were very large and expensive. In fact, I think it's quite clear that they were even larger in die size than what CELL and RSX is projected to be. Then there are yield-issues and the fact that Sony have progressed quite well with their own manufacturing plants and are on a well established 90nm process. Personally, I think aside from Blu-Ray and the HD, PS3 wouldn't be much more expensive than PS2 was at the time to produce. In fact, dare I say, I would say they would end up being quite equal, if not to a slight advantage to the PS3 (if you think otherwise, please argue your thoughts and why).

Blu-Ray is the wilde-card though - but its arguably a larger factor that goes beyond than just PS3. If Blu-Ray succeeds, other divisions within Sony will benefit from it. Arguably, it's a very important aspect - one that probably is worth taking a loss for. Having said that, if you think away the HD for a second, I'm pretty sure the PS3 was targeted for a price around $299 - $349. If you add in the HD, I really don't see it raising the price by over $100, hence why I believe it won't be more expensive than $449 (for us consumers).

Another reason that would underline that price tag, is that I think 60nm should be very close to being a viable process. If they can already utilize it by next year when casuals start buying the PS3, I think they can reach their break-even-point soon enough (probably around the same time as they hit it with PS2).

Anyway, those are my thoughts on the subject. My estimate and my vote? $449.

I'd be happy to see other thoughts as well (Acert, Titanio, xbdestroya, BenSkywalker etc), perhaps with a indepth analysis or simple cast your vote!

Cheers

 

[hey69]

yeah ps2 sold for 299$ in the usa back years ago (incredible cheap)
ps2 launched for 540 euro here in europe (more or less the same everywhere in europe , and that includes 20% tax)


but i think the ps3 in that configuration will sell for 399-449 EURO (equivelant in UK pound for the UK and yes they are part of europe, the uk is not a continent on his own )in europe
and probably 399-449 US$ on the other side of the globe

 

[Inane_Dork]

I went with $449 because I think Sony may want to distinguish themselves from the 360 by some means. Also, they will sell out at that price and they won't have to lower it quickly to maintain sales.

 

[Shifty Geezer]

I'm not going to vote. There's no way of knowing. It depends not only on unknowns like yields but also how much of a hit Sony are willing to take, which'll be influenced by projections on how much they'll recover on content and BluRay sales. With so many variables it's pure guesswork and to have an opinion I may as well just cose my eyes and press!

 

[.Melchiah.]

yeah ps2 sold for 299$ in the usa back years ago (incredible cheap)
ps2 launched for 540 euro here in europe (more or less the same everywhere in europe , and that includes 20% tax)

In which countries did it cost 540€? In Finland PS2 cost 495€ at launch. I didn't think it was too expensive at the time, of course it's now a bit different as X2 Premium is 399€ here.

There were some stores here who took an advantage of PS2's short supply, and sold them at whopping 580€.

 

[pc999]

I voted 400$ as having consoles enought too sell I cant see someone having sucess by a long time at more than that, plus besides BD this isnt much better than the premium package of XB, that at that time will probably cost less and will have at least one game included (something like the PDZ or PGR3) plus more games, more exclussives, more market (ie frinds how already own one), more marketing and meybe already one of those HDDVD as a bundle or options (althought probably also at ~400)...Sony most be very agressive if they want to win.

Plus I want a few more things with PS3 (micro,cam...) .

Edit: text, minor additions.

 

[Phil]

I'm not going to vote. There's no way of knowing. It depends not only on unknowns like yields but also how much of a hit Sony are willing to take, which'll be influenced by projections on how much they'll recover on content and BluRay sales. With so many variables it's pure guesswork and to have an opinion I may as well just cose my eyes and press!

You are right shifty - there's really no way of knowing, since there are far too many factors that are unknown to us. Still, I think giving a good 'guestimate' can me made using a few different approaches:

- one is, as you mention, knowing the 'unknown' factors such as yields, exact costs, projections etc and making an educated guess as to what they can afford to and what not.

- the other approach - and the one I am proposing in my analysis above - is to forget about those unknown factors for a second and tackle the question from a market point of view. Where would the price have to be set from the POV of a consumer to maximize the impact / perception of your product? The 'unknowns' you are mentioning do influence the price, absolutely - but I am also assuming that Sony (or any multi billion firm launching a product) is aware that they can only succeed with a product that is wanted. Therefore, I refuse to think, they expect consumers that are used to a certain price range ($299-$399) to go out and buy their new product that fails to meet that range by a significant margin. My thoughts are; they haven't changed their target audience and if they want to hit that target audience with full force as they have done in the past, setting the price at the right spot is a move that will ensure either 'win' or 'loss'.

Even if PS3 costs more than PS2 by large margin for Sony (even if I doubt it), the stakes have risen and so I think taking a higher loss initially will be the route they will take. Only time will show though who hits the jackpot in this guestimate and who doesn't. This poll isn't to show that however - it isn't to show who is right and who is wrong - who's better and who isn't. This thread is purely to spark some constructive conversation on the different possibilities and their chances.

In the end, many of the above price options could make sense - having said that, I don't think anyone can be "right" or "wrong". It's the reasoning behind the vote that I am after.

Having said that, your input / thoughts would be very much appreciated - even if you decide not to cast your vote.

Thanks!


PS: Anyone that contributes to this thread in a constructive way, I'm sure, will receive a cookie! *hint*

 

[ninzel]

I'm not going to speculate on exactly what the cost will be, but I will guess it's going to be on th high end.Up to $600 if not more .
When I look at the PS3 I see a really long term product for Sony. This could be the console that Sony finally realizes the 8-10 year product cycle before replacement as opposed to the PS2 which will be about 6, so I don't beleive Sony is looking to compete directly with MS for short term market share.They're in this for the long run so I beleive for the next 1.5-2 years Sony is going to sell this as a high end product at little loss, to consumers who might normally buy a Viao or Alienware, not the kind of consumer looking for an E-machine. Sony will continue to sell and support their PS2 as their mass market device for the next 2 years.
If they price it too low they loose too much money, and they risk huring the sales of PS2(not to mention hurting sales of other BD-ROM players) and it's perception as a high end device, not just a games machine or a toy for kids to play with.

 

[Titanio]

I voted for $549. Relative to MS's offering that seems more than plausible, IMO. I'm amazed so many have voted for $449 or even $399! $449 without the HDD seems plausible enough. I think you'd be doing very well indeed to walk away with the PS3 and a 60GB HDD for $500.

 

[Shifty Geezer]

...is to forget about those unknown factors for a second and tackle the question from a market point of view. Where would the price have to be set from the POV of a consumer to maximize the impact / perception of your product?

this is true. Lely the only aspect that can be considered knowable. If Sony are making a million PS3s a month, they need ot be sure they'll sell. They can't price drop from $500 to $300 too quickly I don't think, so they'll want the price as near to $300 as they can get away with. However, a fly in this theory's ointment is that PS3 isn't just competing with XB360, but also HDDVD and BRD players. If there's 50 million HDTV owners who'd happily pay $500 for a BRD player, who cares that gamers only want to pay $300?!

I think Sony are aiming low, but are being pushed higher by economics. That'll place PS3's costs somewhere between, say, $300 and $600.

 

[superguy]

Man it's just not going to sell at $500. It's just not.

I think they'll have trouble even selling out over Christmas at that price.

I have a hard time imagining myself paying that..and I'm a game nut.

 

[HappyBread]

299.99 GBP

399.99 USD

48,000 - 50,000 JPY


+ 1 vote for $399

 

[Fast]

$399. They want to match Microsoft.

 

[lefizz]

I cannot see how i could possibly sell in the u.k. for much more than £349.
If it does when you cna buy a basic (i.e rubbish) 360 for £209 then it simply has to fail.

Also the 360 may get a £50 price cut in the interim, I would also very very interested to see what MS are doing hardware wise this year. I think there is every chance they are already at the trying to move the CPU to a smaller process, and to also do a die shrink and single die to the gpu/gpu local memory package.
I think MS will do evrything this year to dramticlly lower cost so they can pass then onto the consumer. To me it appears that Sony has got too bogged down try to pimp out its new Movie format and has lost sight of what people actually want from a games machine, Low price, high power, fun games, great gfx. Simply as that if MS can do it for a significantly lower price which i recon they can in this cycle they can hoover up the casual gamers and thats where the real money it at.

 

[liolio]

i voted 449$, if i have been able i should have said AT LEAST 449 $

The BOM of ps3 seems highter than xbox360 so I don't expect 399$, and Sony do pretty setting in mind that PS3 is more advance device.
Anyway I agree with titanio even at 500$ it will sell, hardcore gamers and early adopters will buy whatever, for mass market it's not an issue, with 1 million/month it will take more than a year to Sony to feed gamers who are willing to pay anything (english issue) for the PS3.

 

[liolio]

I voted 400$ as having consoles enought too sell I cant see someone having sucess by a long time at more than that, plus besides BD this isnt much better than the premium package of XB, that at that time will probably cost less and will have at least one game included (something like the PDZ or PGR3) plus more games, more exclussives, more market (ie frinds how already own one), more marketing and meybe already one of those HDDVD as a bundle or options (althought probably also at ~400)...Sony most be very agressive if they want to win.

Plus I want a few more things with PS3 (micro,cam...) .

Edit: text, minor additions.

i disagree Sony have no need to split in half to win this round, they want to keep their significative advance in market share, PS brand is awesomely strong.
In this regard NIntendo want to keep its niche market, and MS have a long term plan to overcome Sony supremacy (but not his round, for them a more balanced market, is a win has Sony should loss some 1st party support for next next gen lol)

 

[Kryton]

Okay, I'll take a stab at a BOM and go from there: Cell + RSX = $200, BR+HD = $120, packaging, advertising etc. = $30.

So, $50 profit per console would give a nice $399 figure.

Cell, though radical, isn't any huge investment compared to EE/GS and with RSX being, essentially, a commodity part the cost there is low. Included in the cost is the motherboard etc and controller costs that generally come witht he console. BluRay might cost a bit more just because it's new but Sony make it. The HD is quite cheap and easy to get in quantities from 3rd parties however, if they do an MS (and get stuck selling 20gb drives which are no longer standard), that may rise.

As Shifty says, Sony have a nice hand to play. They can combat MS on every front by saying 'hey why buy a HD or HD-DVD when you can buy Sony and have it all in the box' making the 360 look cheap and lacking functionality leaving MS with the option of saying "it's expandable" (here I anticipate the cost of a 360 Premium + HD-DVD will be greater than the basic PS3). BluRay players won't be like DVD players by the end of the year with the cost of most standalones high to target the professional market just as it was with the PS2 release - a lot of people bought one at $299 for a DVD player and the added feature of playing games NOT games then the added feature of playing DVDs. And, with all of this, they still have the 'HD starts here' game to play - Xbox doesn't have HDMI or a next gen format or etc...

$399 is my guess.

 

[hey69]

In which countries did it cost 540€? In Finland PS2 cost 495€ at launch. I didn't think it was too expensive at the time, of course it's now a bit different as X2 Premium is 399€ here.

There were some stores here who took an advantage of PS2's short supply, and sold them at whopping 580€.

Belgium and luxemburg for sure. 21750BEF back before the euro.
we have 21% tax over here, maybe that would be a litle different with other currencies (Germany has 17% i believe and some other countries like netherlands 19%)

 

[liolio]

Okay, I'll take a stab at a BOM and go from there: Cell + RSX = $200, BR+HD = $120, packaging, advertising etc. = $30.

So, $50 profit per console would give a nice $399 figure.

Cell, though radical, isn't any huge investment compared to EE/GS and with RSX being, essentially, a commodity part the cost there is low. Included in the cost is the motherboard etc and controller costs that generally come witht he console. BluRay might cost a bit more just because it's new but Sony make it. The HD is quite cheap and easy to get in quantities from 3rd parties however, if they do an MS (and get stuck selling 20gb drives which are no longer standard), that may rise.

As Shifty says, Sony have a nice hand to play. They can combat MS on every front by saying 'hey why buy a HD or HD-DVD when you can buy Sony and have it all in the box' making the 360 look cheap and lacking functionality leaving MS with the option of saying "it's expandable" (here I anticipate the cost of a 360 Premium + HD-DVD will be greater than the basic PS3). BluRay players won't be like DVD players by the end of the year with the cost of most standalones high to target the professional market just as it was with the PS2 release - a lot of people bought one at $299 for a DVD player and the added feature of playing games NOT games then the added feature of playing DVDs. And, with all of this, they still have the 'HD starts here' game to play - Xbox doesn't have HDMI or a next gen format or etc...

$399 is my guess.

Nope, I almost sure MS and Sony take a loss on each console in early lifetime

 

[Titanio]

Okay, I'll take a stab at a BOM and go from there: Cell + RSX = $200, BR+HD = $120, packaging, advertising etc. = $30.

So, $50 profit per console would give a nice $399 figure.

I think your figures are WAY too low. Blu-ray on its own could be $120 or more, Cell + RSX I'd say are closer to $250. A box is more than CPU/GPU/disc drive, also, though they are the main cost contributors.

I'm just guessing also, but I think your numbers are low balling a bit too much.