PlayStation 3 Delayed, Over $800?

AWhiteFlame writes "Cnet is reporting that a research report issued by Merrill Lynch suggests that the Sony PlayStation 3's American release may be postponed until 2007. From the article: 'The analyst firm proposed the idea that high costs and Sony's decision to use an 'ambitious new processor architecture--the Cell' is making it look like the company might not be able to meet its goal of getting the PS3 out in the U.S. this year.' Sony did not immediately respond to a request for comment." The official report (pdf) would also seem to indicate that the console will be somewhere in the neighborhood of $900 when it launches.

Before we all go nuts...

[Snamh Da Ean]

...pointing out that this is clever marketing from Sony, or this is just some whacky stuff from Wall Street, remember that the analysts who wrote this report make their livings and substantial salaries from analysing their target companies. They know these companies inside out, because if they didn't they would be out of a job before they knew. When you consider their balls are really in a vice grip because if they get their predictions their wrong, their companies stand to lose a lot of money, then you give a bit more credence to reports of this nature.

Having read the pdf file, the analysis seems quite reasonable, and well considered, and utltimately quite persuasive. Whether it persuades you is a different matter, but before you dismiss the report out of hand, remember that the authors spend a lot of time trying to understand and predict what Sony is going to do, and therefore are better qualified than most third parties to reach conlcusions about slippages and prices.

Price

[truthsearch]

the console will be somewhere in the neighborhood of $900 when it launches.

Somewhere in the neighborhood of $900 to build when it launches.

I doubt that price; Sony invested in IBMs Cell fab

[Nova Express]

Remember: Sony, unlike Microsoft, is a hardware company, and it still owns its own chip fabs. In fact, its a direct investor in the IBM East Fishkill Fab where the Playstation processor will be made. [techweb.com] That would suggest that Sony will be getting their Cell processors at pretty cost to cost.

Attention Zonk: Summary is misleading

[Anonymous Coward]

The $900 figure is the estimated BOM at launch, not
the retail price.

The BOM is figuring $350 for the BluRay drive,
and $230 for the Cell processor.

Re:This sounds...

[Joffy]

I know someone that works for Merril Lynch, and a few years ago I started to become a big Sony fanboy because in my expierences the quality was worth a few extra bucks. I asked them if I should buy some Sony stock and I got a big fat NO. This was before the rootkit, PS3 worries, and that interview with the white guy Sony brought in to *fix*(ie layoffs) the company.

Re:Apple to Sony?

[ThisIsForReal]

No, it's not an exaggerated look at the cost of blu-ray. When DVD players first became available in the consumer market around 1995, the players all cost over $1k. Sure, the drive is $30 now, but not back in the day. I remember in 1997 when the first DVD-R drive was made, it was marketed to the military and retailed for $16k. $350 for blu-ray is the truth, not a marketing ploy.

Re:$900 Console?

[maynard]

The more I read about Cell the less enthusiastic I am about the design. It's just eight SIMD vector units tuned best for calculating single precision floats. The local memory store seems more a hindrance than an advantage, especially at only 256KB a pop. The EIB interconnect bus is quite fast, but moving data in and out of each SPE from main RAM requires a DMA transfer for each operation. s-l-o-w. And finally you have the PPE, a basic PPC with the out of order execution unit hacked away yet keeping the traditional VMX (Altivec) unit. Why didn't they toss the VMX unit and try to keep OOE? For that matter, why did they need eight SPEs? Die space is already way too big at 90nm!

Gotta say: Microsoft is already in the game and taking marketshare. Sony better act quickly, or they're gonna lose this round.

Urban legend

[Akaihiryuu]

I wish people would quit repeating this myth. Only 3 consoles have ever been sold at a loss: the Sega Saturn, the Dreamcast, and the Xbox (well, probably 4 now, I assume they're taking a loss on the 360 also). Losing money on console hardware is NOT the norm, and it's something only Sega and Microsoft have done. And look at what happened to Sega when they did that. Here's an article that has a decent rundown on the subject. It was last updated in 2003, but nothing has really changed since then. http://www.actsofgord.com/Proclamations/chapter02. html [actsofgord.com]

Re:Amazing

[maynard]

Yes. Really. Because using a smaller lithographic process allows the manufacturer to reduce the total die size in area per chip. This reduces the risk of silicon crystal defects per chip. Other advantages, such as running at a lower voltage and reduced heat dissipation are secondary.

Re:Obligatory RTFA.

[Total_Wimp]

The article states that $900 is the cost to Sony. It won't cost that retail, they always take a hit. The original Xbox cost more to make, than it sold for. It's called a loss leader, look it up.

Then someone, probably many someones, are smoking crack.

Explain to me how Sony is going to make up $400 per console on average if it costs them $900 and they sell for $500? A loss leader is not some magical thing where you sell a $900 item for half price and make a profit. The way it works is that you somehow manage to make more than the cost of the item through some other kind of sales. My question to you is: give me some kind of business model where Sony is going to make $400 bucks per console off some other kind of sales? Put another way, that's about 7 games. If the games cost nothing to make and Sony took home 100% of the profit, they'd have to sell 7 games for each console to break even.

Sony is participating in a mature business where it is the market leader. Market leaders don't give away very much in order to gain market share, because they already have market share. They're in the business to make a profit. They may, in fact make more of a profit off blades than razors, but they won't give away a razor that costs them more than they can make in blades.

That said, TFA is counting costs from a place that is not based in reality. As the IP owner and manufacturer of the Blue-Ray drive, it will not cost Sony anywhere clos to $350 to manufacture a drive and put itinto a Playstation. Their R&D and manufacturing facilities costs can not be put into a per-unit cost in the same way as if they were buying the drives from Toshiba. You can make any kind of argument you want here about 3-year right-offs and the like, but the fact is that those dollars are in reallity going into a whole industy and not just the PS3. Claiming the Blue-Ray drive as a $350 manufacturing cost of the PS3 is like claiming it costs $350 per unit to manufacture Windows Vista. You may be able to cook the numbers that way, but that kind of per-unit cost just isn't relevant to this particular kind of manufacturing.

MOD PARENT UP +5

[Lehk228]

it's all true

Re:I doubt that price; Sony invested in IBMs Cell

[ceoyoyo]

MRI and CT scanners, next generation ECG and EEG monitors, radiology workstations for the first two.

There are all kinds of things Cell could be used in. Note that a radiology workstation currently is usually a PC, often running Linux with some badly designed software on it that usually costs upwards of $100,000. LOTS of margin.

Out Of Order Overrated

[tepples]

And finally you have the PPE, a basic PPC with the out of order execution unit hacked away yet keeping the traditional VMX (Altivec) unit. Why didn't they toss the VMX unit and try to keep OOE?

Because out-of-order execution will ultimately result in instructions being reordered the same way each time. If an optimizer can predict this reordering, such as through a hardware simulation, then it can save this order and generate object files that are already in an optimal order. As I understand it, out-of-order is primarily intended to squeeze out a bit more performance when running programs that were compiled for a different microarchitecture (e.g. 486 1-pipe vs. Pentium 1 UV vs. Pentium 2/3/M 4-1-1 rule vs. the mess that is Pentium 4).

Re:I doubt that price; Sony invested in IBMs Cell

[MaverickUW]

Actually, previous articles have said that Sony has proclaimed that the lifecycle for the PS3 will be 10 years, not 5. Think about it, if ML is right and it doesn't come out till 2007 in the US, we're looking at between 6-7 years for the PS2, so why not 9-10 for the PS3. Granted, with how fast Microsoft is moving, Xbox 4 should beat PS4 to the market.

Re:Obligatory RTFA.

[freeweed]

It's hardcore because systems are lucky to sell games at a 10:1 ratio.

You seriously think most people have 30+ games for their game consoles?

You assume people buy games throughout the life of a console (most don't after the first year or 2), that they buy games on a regular basis (most people buy a game or 2 a year TOPS after the first year), and that "a game every other month" is normal purchasing.

"Hardcore" refers to those gamers who buy excessive games in comparison to the general public. Like more than 3 times the avergae number of games. That's how it's hardcore.

Mod Parent Down!

[shadow demon]

The part after "aditionally" is blatantly cut/pasted from the Engadget discussion on the same topic found at http://www.engadget.com/2006/02/18/playstation-3-c osts-900-sez-merrill-lynch-mob/#c1063780 [engadget.com]. Unless this person happens to be the poster of the comment on Engadget (and he didn't bother to direct people to it), it should be modded down even though he makes a great point.

Re:Apple to Sony?

[christopher240240]

I could have sworn the correct spelling was "Analrapist"(R).

I am

[YesIAmAScript]

And I didn't direct people to engadget because it's not courteous to slashdot to say "the discussion is better elsewhere" and send people away...

Re:Meh

[RzUpAnmsCwrds]

I don't really like either console. The 360 seems to rely heavily on you having a passport account and paying Microsoft a monthly fee for the privilige of owning the box.

I'd be willing to bet that most 360s aren't even connected to a network. The 360 works fine without Live - stop spreading FUD.