James Delahunty
29 Jun 2005 23:57
According to Merrill Lynch Japan, Sony might lose over $1 billion on hardware during the Playstation 3's first year. In the latest edition of Toyo Keizai, a Japanese magazine, Merrill Lynch Japan Securities calculated the product cost of a PS3 to be around 54,000 yen ($494), as of its initial release in 2006. The main components of the machine, including the Cell chip, RSX, and BD-ROM drive will come to a price of 11,000 yen ($101) each.
However, it is highly unlikely that Sony would release the console at its production cost due to the competition it is facing with Microsoft's XBOX 360 console which will sell for $299. Merrill Lynch Japan predicts that Sony will initially sell the PS3 console for $399 in America and 44,800 yen ($410) in Japan. If those figures turn out to be accurate, that means Sony will make a loss of 130 billion yen ($1.18 billion) in the first year.
However it is normal for a company to make take hardware losses when they launch a new console as the first year is dedicated to market share more than making a profit. In 2000, Sony launched the Playstation 2 console for $299 in America and 39,800 yen ($364) in Japan and suffered a 51.1 billion yen ($458 million) loss. However in the second year the company made a profit of 82.9 billion yen ($759 million) and 112.6 billion yen ($1.03 billion) in the third year.
Merrill Lynch Japan warns however that if Microsoft decides to cut the price of the XBOX 360 console when the PS3 is launched, it could hurt Sony's plans causing a loss of 80 billion yen ($730 million) in its second year and 50 billion yen ($457 million) in its third year. "Whether consumers think a product is expensive or cheap all depends on the balance between its appeal and price," Sony Computer Entertainment president Ken Kutaragi said. "Our ideal [for the PS3] is for consumers to think to themselves, 'OK, I'll work more hours and buy it.' We want people to feel that they want it, no matter what."
He did not reveal the price of the console however, but his indications are that the company won’t mark the price down that much. "When Nintendo was selling its 16-bit machine at around 12,500 yen ($114), we sold the first PlayStation at 39,800 yen ($364)," continued Kutaragi. "The press was saying that it was expensive, but it was a huge hit. It's the same thing with the PlayStation Portable from last year. The Game Boy Advance is a same handheld gaming machine, and it costs less than 10 thousand yen ($91). On the other hand, our PSP had cost 25,000 yen ($229). But people lined up overnight to buy it, and it sold out on the day of its launch. It all depends on whether people want it. Of course, I'm confident that the PS3 is a product that people will definitely want."
Such confident words are exactly what Sony needs to counter the utmost confidence coming from the Microsoft side.
Source:
Gamespot