Merril Lynch's PS3 Analysis - Possible Launch Delay - Cost to Manufacture = $900

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A very interesting analysis, which includes a itemized cost breakdown of PS3 parts.
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Highlights:


  • launch of PS3 could be delayed by between 6 and 12 months, with the result being an autumn launch in Japan and a late 2006 or early 2007 launch in the U.S
  • Our updated analysis indicates that the initial bill of materials for PS3 could approach $900, falling to $320 three years from launch.
  • If Sony were to delay the PS III launch in North America and Europe into early CY07, our industry forecast could fall from a 1% to a 3-4% decline in CY06 and from 17% growth to high single digit growth in CY07,
 
The PS3 launch will be bad if it launches for more than $300 or $350.. $900.. wooooooow.

How many of you would buy it if it were $900?
 
[quote name='Vampire Hunter D']Im not paying more than 450.[/QUOTE]

Agreed. Metal Gear Solid 4 has me salivating, but it's still just one game.
 
Damn, if that even turns out to be $800 or $700 they can't possibly sell that sucker for more than $500 so they'll take at least a $200 hit on each console. How does that compare to PS2 and PSX or Xbox and Xbox 360? I know they took a hit on each sale of those too, but how much?
 
Analysts are full of shit, have always been full of shit, and will always be full of shit. Didn't one a few weeks ago say the PS3 would be roughly 485?

Assuming ML is on target here, Sony would be in for a world of hurt. Must be Kutaragi's "WE WANT YOU TO WORK LONGER FOR OUR BABY" comments coming alive.

If I were a bigger Sony fan (given their arrogance lately, I have little empathy), I'd be more worried about the possible DRM crap. That would be more damaging than a high price.

To comment on the speculations, if you honestly thought the PS3 was coming out this year, I feel bad for you, because I don't see it happening. And if it comes out to 900, they might as well just hand Microsoft half of the US marketshare. It might fly in Japan and to the hardcore fans all over the world, but after that, you'd be staring down a huge barrel of reality.

And given that I think the graphics will be like the current generation (i.e., close all across the board), I don't think Bluray is going to convince anyone to drop the bucks on the system. That's definitely not enough for me. If the only draw is more space, yet movie companies can fit enough content on DVDs, why would I need to upgrade at all?

If Sony actually released a system at, say, 500, lost 400 per system, they'd be in huge trouble. And if they release it at 900 and lose nothing, they'd still be in huge trouble.

In fact, once the hardcore fan market goes dry, what happens then, Sony? You going to tout it as a Bluray player?...You think anyone but some geeks know wtf that means?

This next gen becomes more interesting by the day.
 
STRELL is right, 99.9% of the time analysts are wrong. $450 Psp anyone?

Sony's in a weird situation right now though because of the ungodly sales of the PS2 system. This past December in the USA alone they sold over 1 million Ps2's at $150 each.

"This next gen becomes more interesting by the day." - Strell
 
[quote name='Strell']To comment on the speculations, if you honestly thought the PS3 was coming out this year, I feel bad for you, because I don't see it happening. And if it comes out to 900, they might as well just hand Microsoft half of the US marketshare. It might fly in Japan and to the hardcore fans all over the world, but after that, you'd be staring down a huge barrel of reality.[/QUOTE]

I still have people coming into my store (CC) and insisting that the PS3 is coming out in March.:roll: 11/06, at this point, would require an act of God.
 
[quote name='Scorch']The PS3 launch will be bad if it launches for more than $300 or $350.. $900.. wooooooow.

How many of you would buy it if it were $900?[/QUOTE]
The $900 is the cost to Sony to manufacture it. They will sell it for a loss, no matter what their cost is.
 
[quote name='CheapyD']The $900 is the cost to Sony to manufacture it. They will sell it for a loss, no matter what their cost is.[/QUOTE]

True, I don't think any system has ever launched and not been sold at a loss.
 
I say Sony's goal should be to lose $4B while getting the PS3 into people's homes.
In the past, such actions have been hailed as being a success in the market.

But seriously. I think $500 would be acceptable to the average consumer. This is based on:
a) $400 for the 360
b) People gleely paying MUCH more than $500 for a 360.

A big question is whether or not Sony will care enough about load times to put in a fast enough Blu-Ray drive to be competitive with todays fast DVD transfer rates.

1-2x vs 4x+ is going to probably make a huge difference in their cost.

[quote name='neocisco']True, I don't think any system has ever launched and not been sold at a loss.[/QUOTE]

Outside of Nintendo systems, this is generally the case. But to be sold at the degree of loss that this analyst is predicting is unprecedented. The PS2 sold at a loss at first. But not nearly like this
 
IMO the PS3 is already on shakey ground. Remember I'm not biased toward any console. However with the problems with PS2, and the fact that everytime I check for news on the ps3. All I'm getting is the fact that they are dropping a feature or the price will be huge. I'm will wait till E3 before I pass judgement.
 
[quote name='Megalith']$500 for a solid piece of hardware is acceptable.

But $500 for a new piece of Sony hardware...hell no.[/QUOTE]

I will never understand people who hate a system. Unless that is the system killed your mother. :cry:
 
*looks at the article*

Assuming It's like other analyst predictions: Yeah... rigggght.

Assuming It has truth to it: Well Sony is in deep shit down the long run. Hardcore Sony fans will eat up the first batch even at $900 (or $700ish assuming they will take alittle of the loss, MS is only eating up $146 for a loss and look how big of a company they are) but a $900 system is only going to sell for so long. They would have to release at a ultra high cost to begin with, then drop the price over the course of a year? I see features from the PS3 being cut, blue ray maybe? Sounds laughable at first, but if Sony wants a lower price they would have to make some sort of cut. Meh, I think if this is the case we are just going to the see PS3 pushed back another year.
 
I seriously doubt that is accurate. Didn't ML say before that the PS3 would cost $494 to make and retail for $400? Anyway, analysts have usually been wrong in the past, especially about consoles.

what's funny is their numbers actually add up to $800, when the total says $900 for some reason.
 
[quote name='Monsta Mack']*looks at the article*

Assuming It's like other analyst predictions: Yeah... rigggght.

Assuming It has truth to it: Well Sony is in deep shit down the long run. Hardcore Sony fans will eat up the first batch even at $900 (or $700ish assuming they will take alittle of the loss, MS is only eating up $146 for a loss and look how big of a company they are) but a $900 system is only going to sell for so long. They would have to release at a ultra high cost to begin with, then drop the price over the course of a year? I see features from the PS3 being cut, blue ray maybe? Sounds laughable at first, but if Sony wants a lower price they would have to make some sort of cut. Meh, I think if this is the case we are just going to the see PS3 pushed back another year.[/QUOTE]
The most expensive components are the blu ray drive and the Cell processors, the price of those units will come down substatially if/when they go into widespread production. If Blu ray fails as the next gen film disc Sony going to be in trouble in the long run with the PS3.
 
usually console manufacturers sell at a loss with the idea of making the money up on software or accessory sales. from what i've read on the all knowing interweb, new software is going to be pretty light for a while for this console due to its blu ray drive (which is questionable to be used at launch imo) and all that goes into to developing for this new tech. so the question is how would sony recoup any costs via complimentary software and movie formats being so new in the market and not widely adopted as of yet.

i mean there is only so far that killzone and other games can offset such substantial losses. now if everything goes sony's way, then walmart will carry blu ray movies, everybody will have a ps3 player to watch hd movies and game devs will flock to code on the ps3.

the other thing is that after 3 years, the cost to manufacture will go to $320. does that mean that the retail price may never dip below $300?
 
What about third-party support? Positioning the console in such an elite price range would scare off a lot of developers, I would think. Having such a cost-prohibitive console could cause Sony to lose a lot of multiplatform titles (the "GameCube effect," although with a completely different cause).

It's funny because I assumed the next-gen would consist of the two similar "powerhouse" systems and the oddball Revolution. There would basically be two game markets, the Revolution and "the other guys," with some degree of overlap. But a $900 pricetag on the PS3 would basically create a third, "premium" market. The three consoles would truly be going for three different audiences, which is not what I expected at all!
 
[quote name='BustaUppa']What about third-party support? Positioning the console in such an elite price range would scare off a lot of developers, I would think. Having such a cost-prohibitive console could cause Sony to lose a lot of multiplatform titles (the "GameCube effect," although with a completely different cause).

It's funny because I assumed the next-gen would consist of the two similar "powerhouse" systems and the oddball Revolution. There would basically be two game markets, the Revolution and "the other guys," with some degree of overlap. But a $900 pricetag on the PS3 would basically create a third, "premium" market. The three consoles would truly be going for three different audiences, which is not what I expected at all![/QUOTE]
If this were true, then my statement in the "Sony is not competing with MS" thread would be pretty damn accurate (to paraphrase: Rev = half the cost of 360, PS3 = twice the cost of 360)
 
[quote name='evanft']Ehhhhh...I never put much stock in these analyst predictions.[/QUOTE]

Ditto. Oh and by the way it will be out this year. Just wait.
 
Prediction:
PS3: $500 for the basic system, no bundles, etc. (lose $ but betting on gaining market share)

Games: $59.99 - $69.99 at launch (the real cha-ching).
 
[quote name='tickdude']Prediction:
PS3: $500 for the basic system, no bundles, etc. (lose $ but betting on gaining market share)

Games: $59.99 - $69.99 at launch (the real cha-ching).[/QUOTE]

I agree with $500 for a single unified package, though I dont know what will consist of.

But $70 for games? The jump to $60 is something that is currently being swallowed and probably has been swallowed for the most part, but to take it up another $10 right away. I dont know about that. I dont know if we are ready for that.
 
[quote name='Dr Mario Kart']I agree with $500 for a single unified package, though I dont know what will consist of.

But $70 for games? The jump to $60 is something that is currently being swallowed and probably has been swallowed for the most part, but to take it up another $10 right away. I dont know about that. I dont know if we are ready for that.[/QUOTE]
The power of Blu-Ray.
 
$70 for a game is nuts. Crazy Crazy nuts. Theres no way thats gonna fly man.

A fairly good game that that comes with a pendant, a deck of cards, a watch and a fancy hard covered manual is only currently paid for by what we'll call 'enthusiasts'.

The BR is backwards compatible with regular DVD right. So in theory, if the game doesnt have more than 9 gigs of bells and whistles, you could just go with a double sided dvd?
 
[quote name='Dr Mario Kart']$70 for a game is nuts. Crazy Crazy nuts. Theres no way thats gonna fly man.

A fairly good game that that comes with a pendant, a deck of cards, a watch and a fancy hard covered manual is only currently paid for by what we'll call 'enthusiasts'.

The BR is backwards compatible with regular DVD right. So in theory, if the game doesnt have more than 9 gigs of bells and whistles, you could just go with a double sided dvd?[/QUOTE]

My Mom bought "Adventures of Bayou Billy" for $75 back in the day. There's a sucker born every minute. The could sell Madden for $100 and people would still buy it in droves.
 
This is pointless just like the PSP everyone thought it would cost over 400 and the price was a lot less. I will buy the PS3 and I will not spend more than 500. I'm pretty sure that is going to be the price.
 
[quote name='Dr Mario Kart']$70 for a game is nuts. Crazy Crazy nuts. Theres no way thats gonna fly man.

A fairly good game that that comes with a pendant, a deck of cards, a watch and a fancy hard covered manual is only currently paid for by what we'll call 'enthusiasts'.

The BR is backwards compatible with regular DVD right. So in theory, if the game doesnt have more than 9 gigs of bells and whistles, you could just go with a double sided dvd?[/QUOTE]
People said (and I still do say) that $60 for a game was nuts not long ago. After a year of 360 games being released at $60, $70 won't seem as big a jump as it does now.

And I'm sure Sony is going to be pimping out Blu-Ray to its 3rd-party developers as much as they can.
 
The psp MAY have cost $400 to manufacture at the start. I'm not familiar with the literature on the subject. All of the speculation involved HOW MUCH of a loss they intend to sell it at.

We know that even if it cost Sony $800 to manufacture a PS3, they sure know better than try to charge anywhere near that.

It seems everyones best guess is around the $500 area. If its lower, that doesnt change the validity of this thread surmising the initial manufacturing costs.

The system however, is supposed to be a 1 time cost (yea, I know about the ps2). I think a more significant factor in the long run is what games go for.

$70 as a non-4th quarter rush, casual sale? It'll happen, but there has to be a magical point on the spectrum SOMEWHERE, where the price is going to significantly affect both consumer choice as well as maybe developer standings.

And I submit to you, that $70 is arbitrarily, too god damn high. Even people outside us hardcore cheapasses know how quickly games drop. The pressure to wait will be much more ensuing that it is now if that is indeed the case.
 
I don't know about you guys, but I can definitely wait for the next generation.

I am going to pick up a Revolution because it is going to be inexpensive and unique from the games I'm enjoying now.

Same reason for a DS (once the new design is here).

High end graphics and sound are not going to get me to spend that much money.

Who wouldn't get a revolution for 200 and a DS for 130 over a PS3 for 400? Or an XBox 360 for 350?
 
[quote name='Scrubking']The cost will actually be $800. Merill Lynch can't do math. ;)
LINK[/QUOTE]
Yeah, I don't know if they can't add or if they're factoring in estimated production costs (unless Sony can somehow throw together all those components into a functioning console at zero cost); but I think if they were doing that, they would say so.


[quote name='WebScud']http://www.ps3center.net/1/article/132.html[/QUOTE]
They also can't afford to rush an $800 piece of hardware to market if its not ready...
 
This will be interesting to see. As much as I'm will to pay my max for $500, anything more than that could be used for more important things.
 
[quote name='botticus']Yeah, I don't know if they can't add or if they're factoring in estimated production costs (unless Sony can somehow throw together all those components into a functioning console at zero cost); but I think if they were doing that, they would say so.[/QUOTE]

But the report does say exactly what you've deduced. Table 1's heading reas as follow: "PlayStation 3 Bill of material analysis." And the estimated $900 is the cost to manufacture it into, as you put it, 'a funtioning console.'

I can honestly say that I am the least bit surprise. Kaz Hirai himself said so, 'Playstation 3 will be expensive.' I took his word at face value.
 
People keep posting $900 bucks...thats the cost for production, not the sticker price.... the reason this article is so important is the cost vs. ratio lost per system....its way to high and it seems very accurate...I think Sony is going down a dark path and its not looking good...look at $500-$600 for the system and the games will have to cost more due to the Blu-Ray format alone maybe $70....this thing is turning into Neo-Geo.

I think it will be the system that people invite the friends over to prove they have it....this thing needs to get pushed back to summer 2007 just to cover cost loss per system issues....also youll need a 1080P HDTV to run the highest setting on this system (good luck, hopefully those 1080P Tv's will cost under $5000 by 2007...LOL)

You also have a year and half loss in time behind XBOX 360 as far as production goes....games that will already be on Xbox 360 like Splinter Cell Double Agent and COD.....youll be able to add a HD drive for $100 bucks onto Xbox 360 by year end 2006....making it $400 bucks if you chose to add that on.....in PS3 case you have to buy the whole shabang so its not just gaming

Also you will NEVER see them supporting MEDIA CENTER so that in itself takes the value down... what the hell is the point of your PSP working like a portable device to your PS3 if you dont have stuff on it...granted tech people know how to put their stuff on portable devices...but the general public??? MS is partnered with Direct TV so that takes out that deal....maybe TIVO??...LOL.... not selling me here

The only 2 ways Sony even has a chance is to have a KILLER APP for launch (a Halo like title...not some remake of a game...something brand new...I bet they have GTA as their main draw) and postpone launch until 2007 to help the technology costs catch up and make production costs go down due to that availibility of that technology. Oh yeah and dont forget Sony's crappy ONLINE that they have....well they have 1yr & a half to work on that too! not one thing is good about this system....hmmm maybe we can go watch the Supposed "IN GAME" footage of MGS4 (that will also be on 360) no thanks
 
http://news.ft.com/cms/s/41430f3e-a2fa-11da-ba72-0000779e2340.html

Here's the takeaway of this link:

"CLSA’s Mr Dimas estimates that it will cost Sony at least $523 to make each PS3 console."


Is this a more reliable than the ML data? Don't know for sure, but when Merill can't even add up the total properly; they said $900 when the #s they provided add up to $800. Check here and add it up yourself http://www.engadget.com/2006/02/18/playstation-3-costs-900-sez-merrill-lynch-mob/ , well that makes them a bit less credible in my eyes.

If the $523 is reliable, then pricing the PS3 at $400 makes sense.

If Sony could only decide on a release date...
 
I dont think so....the cost at this time is looking pretty dead on...and to get technical factor in that 1080P tv...then what..babhabha, also your qouting ENGADGET??? a PS3 site...comon....the title alone should give away engadgets bullshite alone....LYNCH MOB? comon
 
[quote name='manthing']http://news.ft.com/cms/s/41430f3e-a2fa-11da-ba72-0000779e2340.html

Here's the takeaway of this link:

"CLSA’s Mr Dimas estimates that it will cost Sony at least $523 to make each PS3 console."


Is this a more reliable than the ML data? Don't know for sure, but when Merill can't even add up the total properly; they said $900 when the #s they provided add up to $800. Check here and add it up yourself http://www.engadget.com/2006/02/18/playstation-3-costs-900-sez-merrill-lynch-mob/ , well that makes them a bit less credible in my eyes.

If the $523 is reliable, then pricing the PS3 at $400 makes sense.
[/QUOTE]
[quote name='Article above']
But if yields on the cell processor – the super-computer-on-a-chip Sony is developing with Toshiba and IBM – prove to be low or the Blu-ray multimedia drive turns out to be more expensive than expected to produce, the cost of the PS3 “could easily go to $600 or $700”, Mr Dimas says.
[/QUOTE]
Pretty good odds this is what ML is taking into account.
 
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