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.

Apple to Sony?

[Yocto Yotta]

I'm not an insider by any means, nor a PS "fan boy," but isn't it likely that this is just very intelligent marketing by Sony? It's generally accepted that a game console launching at $900 (hell, $600), isn't going to happen in this day and age of mass market acceptance being an essential requirement of the development of any piece of electronics. This falls right in line with the Blueray machine costs . . . make it seem like astronomically expensive hardware fit for a king, and then release them at a fraction of the price, and sooner. I don't care when they release it, but I'm betting it will be this year, and at a $500 price point or lower.

Apple just did it with the Intel switch. First they've started releasing the stuff 6 months earlier than they said they would, and now their upgrading the processor clock speeds for free. Who wants to bet that wasn't in the writing already for the entire gestation of their Intel plans. If there were two companies I would compare hype-capabilities apple-to-apple (sorry), it would be Apple and Sony.

$900????

[phlegmofdiscontent]

Shit, for that amount of money, I might as well just get a new PC.

Re:Apple to Sony?

[dslbrian]

A tough decision, mabye a breakdown will help:
Pros:
+1 its a playstation
+1 got the cell processor

Cons:
-5 its from Sony
-10 blueray
-20 $900

Hmm, I think the cons are winning

Re:$900 Console?

[jericho4.0]

There's a lot special about the Cell. If used correctly (and it's debatable if/when this will happen), it could be delivering a gaming experience that puts the other two consoles to shame.

It 'aint $900 worth of special, though.

$900? Not a chance.

[YrWrstNtmr]

If that's what it will cost to build, then Sony will sell it at a significantly lower price. If that's what the retail price will be, then xbox sales will skyrocket.

The playstation is primarily a games machine. As such, it's parents buying them for their kids. Once you include a couple of initial release games, dropping $1000+ on the new console is not gonna happen. No matter how much little Johnny screams. $400-500, maybe. A grand? Not a chance.
My son is firmly entrenched in the playstation camp. PS1, PS2, PSP. Given the choice between a 360 now, or a PS3 later, he'd rather wait for the PS3. But for $1000? Tough luck, dude. Not happenin'.

(Yes, there are the fools who bought PS2 and 360 consoles for $1000+ on release day from some guy on eBay, but those are abberations.)

for starters, that column doesn't even add up...

[YesIAmAScript]

Add up the numbers in the column. It only adds to $800.

This report is way way off.

Additionally:

The only thing worse here than M-L's estimate of the price of the PS3 this year is their estimate of it in 3 years.

Let's start from this year.

$230 seems high for just the CPU. I couldn't say how much, but I can say that Sony wouldn't even bother to make their console if the CPU cost half over half of the expected selling price.

The Blu-Ray drive price is WAY too high. Philips is going to ship a Blu-Ray writer drive for $500 in May. That's $500, retail. That includes retail markup, and cost of shipping to retailer. Also, Philips pays Blu-Ray license fees to produce units and Sony doesn't. And did I mention the Philips writes and the PS3 only has to read? And I can buy a quality DVD-Writer for under $40 retail right now. A Blu-Ray reader drive is a little different, but not a lot. It cannot cost much over $100, and it'll be well below that by fall, when the PS3 production ramps up (or perhaps just begins in earnest, I dunno).

6 USB ports? It will not have that many. 4 tops (2 front, 2 back). And the connector cost seems high, I'd say $3 today for USB ports, maybe $2.

For 802.11g and ethernet, Sony is using IP from Marvell that is normally used as an 802.11 access point. So it has all 3 ethernet ports and the 802.11g (and an ethernet hub) in a single chip (or less, see below). I'd say $5 for the ethernet and 802.11g together, maybe a bit more if they really leave 3 connectors on the back.

If the $100 was for a hard drive, they're the dumbest people alive. I can get a 40GB 2.5" drive for well under $100 retail. The OEM price cannot be over $50, and they could always go to under 40GB if it saves money. I'll just assume they added wrong.

I think also M-L doesn't understand that when you make a custom chip you can put a lot of stuff on it. The link (brains) for the USB, 802.11 and ethernet are probably on the main chip in the unit, bringing the cost of them down to nearly free. The 802.11 PHY/radio will probably be a separate chip, but the USB PHY is certainly on board, maybe the gigE one too.

So M-L is well over the initial price here.

Now, let's look at the future prices.

$100 for an OEM Blu-Ray reader in 3 years? Unpossible. Blu-Ray would have to be the biggest flop in the world for this to happen. My guess is you'll be able to buy a Blu-Ray writer drive for less than $60 in 3 years at retail. Look at how DVD writer prices collapsed. Readers will probably be under $40 retail. OEM prices for either will be even lower. And again, Sony doesn't have to pay license fees, so that lowers their prices even further.

$60 for the main chip in 3 years seem high too. It'll be on 65nm or lower then, yields will be way up, chip size down, and they might even combine chips (like the GS and EE were combined into a single chip on PS2 in under 3 years). I couldn't say how high though. Maybe it'll be $50, but include the functions of some of the other chips in it.

$30 for 512MB of RAM 3 years from now. Seriously? That's way off. GDDR3 will not be special anymore, and Sony won't be paying much premium for XDR, since they'll have enough volume to make a market in it. Right now you can get 32M of mobile SDRAM for $4 in big quantities, 64M of mobile SDRAM for $5. And I'm to think 512MB of commodity RAM will be $30 in 3 years? Nope.

Again, they don't know the PS3 uses a single set of IP for Ethernet and WiFi, $7 between the two 3 years from now is way too high. I'd say $2 for the PHYs, links will certainly be on with another chip.

$5 for Bluetooth in 3 years? It won't drop at all? Smooth move.

These companies stink at estimating parts costs. Just remember, these are stock brokers, not engineers, not parts buyers. They just don't have any clue at all.

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

[utlemming]

Additionally the cell will be used by IBM for things like blade servers and medical devices. So while the initial launch may be rather painful for Sony and cost Sony a lot of money, economies of scale do apply, and the cost will fall. With the use in medical devices for example, I would suspect that Sony and IBM will use that as a major source of revienue to help pay back development costs.

Re:Obligatory RTFA.

[NoMoreNicksLeft]

This is counter-intuitive, so you don't lose points. But they lose more if he does buy it. Why? Because in the initial frenzy for the machine, there won't be enough. If someone buys one like he suggested, that's a machine no one else can buy. He's keeping it off the market, in effect. Depending on how demand goes for games, Sony may not be able to justify making any more of them.

Where as if he lets a hardcore gamer buy it, sales might be so brisk of games, that Sony decides they will eventually make a profit, keeps going.

So during the debut of the thing, it's entirely possible that him buying the machine could hurt them worse than not buying it (since he has no control to keep everyone from buying his unit). What you say only becomes true if he can convince others not to buy it either, an unlikely proposition.

Re:Apple to Sony?

[NutscrapeSucks]

Well, the reason Sony is sticking a BluRay drive into the PS3 is to bring up mass production as quickly as possible and force economies of scale. Of course, that also means the PS3 is delayed until BluRay has all the kinks worked out.

Blu-ray suicide

[PrvtBurrito]

If this really retails for more than $500, Sony stands to lose more than the game market. HD-DVD is getting ready to debut, with a Toshiba player having an opening street price of around $400 (or less). Blu-ray is opening with a price target of $1000, probably a little less. If the PS3 does not succeed, Blu-ray is, in my opinion, likely lost. An expensive PS3, will limit adoption of Blu-ray and of the PS3. Sony will be ready to take a huge loss on its initial release, and take a huge gamble. But with a cost of $900, there may be no hope.

Re:Apple to Sony?

[ceoyoyo]

I find it kind of refreshing when a company delivers more, earlier than they promise. As opposed to the standard line of delivering less, later than promised.

Sony hasn't done that... they've promised nothing regarding cost and only vague release dates. If they've paid off this "market research" firm then they get no credit for more, earlier because I don't consider fake studies ethical.

Re:Obligatory RTFA.

[NoMoreNicksLeft]

Bear with me, I am no economist... but:

Let's use small numbers to make things clearer. You are Soby, maker of this crappy little video game machine. It will be a big hit, but it costs $100 to make. Only, no one is willing to pay more than $50. No big deal. If you can get it to be a big enough hit, you can ramp up production, and sometime next year you can be making the things for $50, or maybe even less. The thing is, will it be a big enough hit?

If you go forward now, you might make up a little of the $50 difference through games licensing. But even that isn't expected to pay it up completely (don't get me wrong, once you get the cost down, games licenses will make up the bulk of the profit).

So you see, they don't have to make up the difference. They have to hold out until that difference no longer exists, and it has to continue selling past that point long enough to actually make a profit. That profit will be what makes up for the initial cost/retail price difference (and hopefully then some).

Will it work? Fuck if I know, that's a hell of a price to make up for. The good news is the Cell processor, it's possible they'll make enough in royalties for that thing to make the whole thing worthwhile no matter what.

Re:Good for Nintendo

[moosesocks]

I think Nintendo's already won this round before they're even out the door.

Combine the 360's supply problems with the Price/delays of the PS3, as long as nintendo plays its cards right, the revolution will be a winner fairly easily.

Most of the hype the revolution's been recieving has been a result of the sheer mediocrity of the other offerings at this point. Additionally, it's the only console that's made any sort of substantial innovation other than "marginally better graphics" this time around.

As long as they can keep the details of the launch private until they're absolutely certain they're ready, and then launch it with a modest amount of publicity (and adequate supply), they've already won. Microsoft wasted millions generating hype around the 360's launch, and then botched it completely. The PS3 lacks focus, and is going to either be expensive, or have its specs cut right before launch. The expectations were initally low for the revolution after the commercial failure of the gamecube (which it wasn't -- it was just percieved that way by many), and Nintendo's got a cool new controller design that's doing a pretty good job of creating hype on its own. All in all, I'd say that by innovating and maintaining a profile of modesty, they've saved millions on advertising, and have managed to generate even more hype. I'd say it's a pretty good parallel to the initial success of the iPod.

Re:Obligatory RTFA.

[PixelSlut]

Keep in mind that the online platform is a huge part of both PS3 and Xbox360. We know that this won't be a free service, this is something players have to pay for on a monthly basis, just like your existing MMOs. Most likely you pay $60 a game, then another $15 or $20 a month to give you access to all the online game services or whatever. Not everyone will be willing to pay that at first, but as the game library builds and as more people see how cool it is at their friends' house or whatever, the subscriptions will increase. Plus, manufacturing costs will not always remain $900 a unit. They'll go down, just like they always do with PC hardware. I think Sony can easily take a $400-500 hit per unit long enough to get the costs down and get the online business booming.

Re:Obligatory RTFA.

[Babbster]

Sure, they have other revenue streams but when put together they all have to have a margin, and a consumer market, that can at least recoup the costs of research, development, production, marketing...

In other words, let's say that they lose $400 per PS3 sold (that would be stunning to me, but I'll go with it) intending to make up the difference through game sales. Now the game sales (talking first-party here) have to not only recoup their own costs but they have to cover the losses from the console itself. It's even worse for Blu-Ray licensing since their per-unit licensing fees have to be large enough for Sony to make up for their research and development on Blu-Ray (it would be an instant profit out of the gate) and small enough so that the format is attractive to manufacturers and content providers.

In short, if this analysis is accurate (and I have my doubts until Sony makes a reporting of their actual costs after producing and distributing the consoles) then Sony is up a creek without a paddle. They've already been laying off employees and experiencing profit problems in other divisions. If the Playstation division joins in, we could see a company-destroying debacle. Again, though, whether or not this analysis is truly accurate would be the big "if."

Re:Out Of Order Overrated

[Anonymous Coward]

That is incorrect. Compilers can reduce branching by emitting predicate instructions. OoOE is not useful for branch-prediction, anyway. It's useful for increasing instruction-level parallelism by removing stalls caused by certain types of data-dependency. The PPE in the Cell, more like the T1 but also like the POWER5 relies on CMT to deal with potential stalls by scheduling a second thread to be run when the current thread would stall. What the SPE doesn't have beyond OoOE is branch prediction (the PPE does have a branch predictor), which is where compiler hinting and the use of predicate instructions are important. This is also where the large register file of the SPE is useful for loop unrolling. If a branch should be taken and isn't, then this just stalls the pipeline (the SPE doesn't have a cache, it reads from the local store which isn't flushed on a stall, considering it's 256KB of data/instruction storage). The VMX unit on the PPE is useful for performing double-precision floating-point math (each SPE does double-precision float an order of magnitude slower than packe single-precision), and will also probably be a workhorse for programs that aren't specially designed to run within the SPEs. It also provides binary-compatability with the current PowerPC, where the SPEs do not.

And your other comment about the DMAing to main memory being slow is wrong. Each SPE can DMA from main memory at incredibly high rates, it's simply limited by latency.

Re:Thank You

[Anonymous Coward]

The Cell is still way overhyped. Its performance is only "really good" for a really limited set of problems where its vector units can be used. Despite the steps made to mitigate the effects of dropping OoOE and the like, it's still going to perform pretty mediocrely on anything not optimized for it. The PPE for example won't perform nearly as well as a G5 does now. Developing for the SPEs is a pain in the ass, too. The Cell would be more useful in a set-top box than a computer. It's sort of like a slightly more generalized GPU built onto a stripped-down PPC.

Re:Financial v computer analysts

[dslbrian]

You might be right if these boys were specialist IT analysts, but they aren't they are financial analysts making a series of pretty big assumptions that don't match reality.

This is perhaps partly true, however I skimmed the PDF and one bit that did stick out which I thought was pretty insightful was this:

The die, at 235 square millimeters initially, is large, and Sony plans to manufacture it on a leading-edge 90nm process. Add to that the fact that the die is mostly logic, not memory arrays that can easily be repaired, and you've got a part that looks like it will be difficult and expensive to manufacture.

From a silicon prespective the die has what 7 processing units on it? If IBM had put say 8 units on the die, disabling one if it had a defect then they might be able to mitigate the yield impact (much like memory manufacturers), however I don't think they do that. So in that regard I think the analyst is right, with 235sqmm of dense 90nm logic I think IBM will have a headache getting the yield under control (and they will undoubtedly pass those costs on to Sony).

Wow.

[Perseid]

Wow. Who wrote this thing? Ballmer? Anyway, two points:

How does Merryl Lynch know how much components cost Sony? They can know how much a Cell processor would cost you and me, but don't you think IBM would be cutting them some sort of deal? Has this deal been announced to the public so as to allow a specific cost per unit? Maybe. Sounds odd to me, though.

And secondly, I refuse to take seriously any video game article that call this next round the fifth generation of consoles. I guess Meryll Lynch thinks video games started when the NES did.

Re:The $900 price estimate is awfully pessimistic

[MBCook]

Don't forget, that Samsung has to make money on those players, where Sony can do the loss-leader thing with the PS3. That said, the Samsung unit needs to have processors to decode and play the video and do whatever else. It needs the output connectors, the HDMI encoder, etc. The PS3 already HAS all those things. The PS3 just needs the bare drive to read the data, all the other stuff in the Samsung player (the sound circuitry, the power supply, the video circuitry, etc) is already accounted for in the rest of the PS3 price.

Plus, everyone knows that the first people to buy something like that Samsung player is paying a large premium. I would be amazed if that player cost them over $500 to manufacture.

And of course, Sony will benefit from economies of scale on the PS3 faster than that Samsung player will.

The PS3 will be sold at a loss. But I bet it will be less than $200 per unit (I'm guessing at a $400 price point myself).

Re:Obligatory RTFA.

[RemovableBait]

...then another $15 or $20 a month to give you access to all the online game services or whatever.

Considering the Xbox Live service costs $49 for 13 months (12 paid, 1 free), do you really think that Sony could get away with charging (what amounts to) $180 to $240 a year for their service? Especially when you factor in that by the time PS3 launches, the 360 will have a much larger catalog of online capable games, not to mention a more opponents. And the Xbox Live service has had a lot of time to mature, with Marketplace and Arcade and all of the stats tracking... It would be a seriously tall order for Sony to churn out an Xbox Live beating service on their first real attempt.

And I was seriously considering buying one of these things, until they starting fucking the little guy with rootkits and DRM. The deserve the PS3 to flop IMO, even if it is a shame for gamers.

Re:Good for Nintendo

[Sergeant Beavis]

I would have to agree. This is an incredible opportunity for Nintendo if they can get to market before Christmas, and all indications are that they will. I do think Microsoft has enough time to get their supply issues out of the way and perhaps become the domainant game platform in the US. However, Nintendo is primed to take a much larger share of the US market than the GameCube got them and totally own the Japanese market.

I've got a 360 and I do like it. I am also planning to buy the Revolution. I was considering the PS3 but even I have my limits. If the PS3 prices at anywhere near $800 in the US, it will be a failure, plain and simple.

Its up to you Mario, can you get the job done?