The smell of desperation is in the air...PS3 [Archive]

Woochifer

01-03-2007, 04:26 PM

Uh, isn't it a bit early to be writing the PS3's epitaph?

I mean, as recently as two weeks ago, I was reading a Reuters article about how the PS3 would remain in short supply until about June. To this day, I still haven't seen a PS3 in a retail store, then again I haven't set foot in an electronics store in over a week. If PS3s are actually getting to the floor, not too many people are expecting to see them. Once word gets out, I doubt the PS3s will stay in stock too long.

There are also reports that Best Buy was hoarding their PS3 inventory for New Year's sales. How else could they guarantee a minimum of 25 units in stock per store, with some stores reportedly having 60 units in stock?

http://www.s-times.net/12302006/00/playstation_3_massive_restock_at_best_buy

Plus, in mid-December Sony stuck to their projection of having 2 million PS3s shipped by the end of the year worldwide. If they actually succeeded in getting that many units into the distribution channels (doubtful, but still possible), that would at least temporarily satisfy some of the pent up demand, especially considering that less than 500k units were available at launch worldwide. Microsoft purportedly sold around 2 million Xbox 360s in November and December, yet I never saw a shortage of units piled up in stores.

I wouldn't read too much into this until the market settles into more of a normal balance between the supply and demand. One store in my area had a pile of Xbox 360s sitting in the middle of the store the week after Christmas last year, but I certainly didn't see that as any kind of indicator that the platform was in trouble. The question of whether Sony's in trouble won't be answered until much later. If June rolls around, and Sony has already started scaling back PS3 production because of inventory piling up in their warehouses, then I would say they're in trouble.

An underreported angle in the gaming console story is that the six-year old PS2 remained the best selling gaming console in 2006, and had a resurgence in game sales. One market analyst I read is questioning whether the next generation has really begun yet with the PS2 continuing to fare well. Another analyst is talking about how sales for the Xbox 360 have continued to lag behind expectations, and speculates that continued developer support for the PS2 have hampered growth for the Xbox 360. And yet another analyst projects that the PS2 will outsell the PS3 all the way through the end of 2008. That seems more an issue with the rate of adoption for next gen consoles in general, rather than anything specific to the PS3, especially with the PS2 projected to sell 11 million units in 2007 (more than the Xbox 360 sold in 2006).

http://www.gamasutra.com/features/20061219/wen_01.shtml
http://www.gamasutra.com/features/20061219/wen_02.shtml
http://www.playfuls.com/news_05678_PS2_Likely_to_Outsell_PS3_in_2007_and_2 008.html

Groundbeef

01-03-2007, 06:00 PM

There are also reports that Best Buy was hoarding their PS3 inventory for New Year's sales. How else could they guarantee a minimum of 25 units in stock per store, with some stores reportedly having 60 units in stock?

http://www.gamasutra.com/features/20061219/wen_01.shtml
http://www.gamasutra.com/features/20061219/wen_02.shtml
http://www.playfuls.com/news_05678_PS2_Likely_to_Outsell_PS3_in_2007_and_2 008.html

First I would like to say "Welcome" Wooch, it never takes you long to show up on these threads!

1st. Yes, BB was having a "Massive" sale on the PS3 across the country. Here in Springfield IL, they had 25 for the big sale. As of Tuesday they still had 17 on the sales floor. Even the electronics Mgr said they couldn't move them. Was in Target getting stuff and they had 3 in the case. Meijer also had 2 on display. Had them for over a week and no ones biting.

2nd. Are those Fanboy sites youve been reading on the down low? I thought you wouldn't lower yourself to that :)

As for writing the death notice for Sony? No, not at all. Its just funny that the market for PS3 doesn't seem as strong as it should be. At this point there should be NO units out for display. The WII is being practically purchased off the back of the truck before being unloaded. The PS3 sits, and sits, and sits......

It could be a death notice if they dont catch on though....

blackraven

01-03-2007, 07:31 PM

It all boils down to price. Most parents are unwilling to spend $600 for a video gaming console. I'm 48 and have discussed this with many of my friends and they all say that they would never pay that much for a gaming system for their kids. ( Thats why computer gaming has stalled because most people do not want to have to continually upgrade their computers for hundreds of dollars to keep up with the requirements of ever more demanding games. Every 2 years I have to custom build or upgrade a new computer for my son so he can play his video games on optimal settings).

That is why you see continuing sales of PS2 and great sales of the Wii.

Woochifer

01-03-2007, 10:58 PM

1st. Yes, BB was having a "Massive" sale on the PS3 across the country. Here in Springfield IL, they had 25 for the big sale. As of Tuesday they still had 17 on the sales floor. Even the electronics Mgr said they couldn't move them. Was in Target getting stuff and they had 3 in the case. Meijer also had 2 on display. Had them for over a week and no ones biting.

Springfield's also a much smaller market. Hard to judge how things are going nationally and globally based on anecdotal observations. If supply catches up with demand, that's not necessarily a sign of a floundering format. Stores have been awash in Xbox 360s for months now. Does that mean that the Xbox 360 has bombed out in the market, or that their production has reached equilibrium with demand? A lot of the early supply shortfalls with the Xbox 360 occurred because stores were playing catch up filling preorders that Microsoft could not deliver by the launch date. Did not occur with the PS3 because stores did not take preorders this time around, and Sony made no promises on how many units stores would get.

2nd. Are those Fanboy sites youve been reading on the down low? I thought you wouldn't lower yourself to that :)

Doesn't matter to me if they're gamer sites if the articles are posting actual data or analyses by professionals who actually study the market rather than equate rumors with facts.

As for writing the death notice for Sony? No, not at all. Its just funny that the market for PS3 doesn't seem as strong as it should be. At this point there should be NO units out for display. The WII is being practically purchased off the back of the truck before being unloaded. The PS3 sits, and sits, and sits......

It could be a death notice if they dont catch on though....

I've read that Nintendo underestimated the demand for the Wii, and have been playing catch up ever since, even though they had far more units available at launch than the PS3 and supposedly held back thousands of units so they could phase in the distribution and ensure a supply of units right before Christmas.

Sony supposedly "solved" their production woes before December and the units produced after ramping up to full production are only now starting to get into retail channels. Like I said, if people read the same newspaper articles that I did, then they fully don't expect to see PS3s until June. Hard to gauge how the market will react if the PS3s become readily available this much sooner than expected.

If the market reacts the same way as it did to the DeLorean automobile in the early-80s, then Sony will have a disaster on its hands. In the case of the DeLorean, ther publicists put the word out that the entire first year production was sold out before the cars even arrived in showrooms, hoping it would stoke demand. Instead, prospective car buyers wound up ignoring the DeLorean and staying away from the showrooms, figuring that they'd have to wait a year to get their hands on one. On the other hand, if there's enough pent up demand, the PS3 will move once word gets out that stores have them in stock. If anything, Sony has been trying to put the word out that they're now in full production on the PS3 and will supposedly have 6 million units shipped by the end of March.

The Wii looks like an early hit, and it's already outselling the Xbox 360 worldwide, and came close to the Xbox 360's U.S. sales figures for the Christmas season despite supply shortages. People I know who've played it love it, but those analysts I linked to earlier seem more skeptical about whether Nintendo can maintain momentum over the long haul.

kexodusc

01-04-2007, 05:02 AM

Seriously, Beefy, are you sure you're not on the MS payroll? :P

It's way too early to write off PS3 just now. I can't see any negative in any of this to tell you the truth. Sony may have miscalculated the markets willingness to fork over $500 + for a console in 2006, but that can be easily remedied at any time.
From Sony's point of view, there's no point rushing the production schedule and entering a price war now. As Wooch pointed out, PS2 consoles are still selling well. The market is quite content for the moment. Sony is making money off their PS2's. Lowering the PS3's price will just canibalize some of those sales and likely result in less revenue/profit overall. Besides, it's not like XBox 360 is all the rage either. I'm guessing when there's a good library of big hit PS3 games, we'll see the price drop and a war begin.

I seem to recall most PS owners waiting a good year, maybe 2 years before finally jumping on the PS2 bandwagon (or in my case getting an XBox).

Sony and Microsoft got blindsided by Nintendo this time around - instead of the goofy Game Cube and it's cute games, the Wii actually offered something totally unique, fun, and extremely cheap (relatively speaking). When you consider that a good chunk of popular games are available on all consoles, Wii is actually a pretty good choice for a lot of casual gamers. And that's the key here - the casual gamers are the largest chunk of the market, and their not going to pay $400 for an XBox 360or $500 for a PS 3. We're quite happy waiting for another year because we were also late to the PS2/XBbox party and want to get our money's worth there. Wii might not be stealing all the sales, but it's definitely causing people to stop, rething their decision, and play the wait-and-see game before buying a new console.

I kind of suspect that both Sony and MS are re-tooling their new consoles to answer Wii anyway. Consumers aren't going to fall for the next generation console so easily, diminishing returns and all - these guys are going to have to think outside the box to get sales early on. Nintendo did that. It's not even revolutionary, (power glove anyone?) but it's certainly welcome.

Funny thing is, I can see us having this same discussion at this time next year.

Groundbeef

01-04-2007, 06:58 AM

Groundbeef

01-04-2007, 07:17 AM

Springfield's also a much smaller market. Hard to judge how things are going nationally and globally based on anecdotal observations. If supply catches up with demand, that's not necessarily a sign of a floundering format. Stores have been awash in Xbox 360s for months now. Does that mean that the Xbox 360 has bombed out in the market, or that their production has reached equilibrium with demand? A lot of the early supply shortfalls with the Xbox 360 occurred because stores were playing catch up filling preorders that Microsoft could not deliver by the launch date. Did not occur with the PS3 because stores did not take preorders this time around, and Sony made no promises on how many units stores would get.

Although Springfield Il, may not be a Chicago, we do have over 100,000 people. I would not consider it "small". As for when the PS3 came out there were well over 100+ knuckleheads lined up around the BB store. Now, 1 month later, they cant even sell a resereved alotment. Doesn't take a rocket scientist to infer that perhaps demand has cooled a bit. And although my report may be anecdotal, it is by no means isolated.

As far as the 360 supply issue, vs the PS3 issue, you are trying to cloud the arguement. I would not expect the 360 to be sold out. If MS doesn't have enough stock to meet demand then there would be a problem. The PS3 is still very early into the launch phase. If demand were white hot it would be selling out as the Wii is. But its not. Do a couple calls today and report if any retailers have any units. I would be interested to know if you can get a PS3 in your area.

As far as preorders go, the major retailers NEVER take preorders. BB, CC and the like don't do pre-orders. Never have, never will. However, EB games, Game Crazy, and others DID take preorders for the PS3 and they got screwed when Sony short shipped orders up to 40%. And yet those same retailers are now sitting on inventory that is not moving.

Doesn't matter to me if they're gamer sites if the articles are posting actual data or analyses by professionals who actually study the market rather than equate rumors with facts. .

Depends upon whose doing the reporting I suppose.

I've read that Nintendo underestimated the demand for the Wii, and have been playing catch up ever since, even though they had far more units available at launch than the PS3 and supposedly held back thousands of units so they could phase in the distribution and ensure a supply of units right before Christmas. .

Everyone was caught by suprise by this one. If anything the Wii has hurt the PS3 worse than the 360. It is double the price of the Wii, and doesn't demonstrate capabilties over that of the 360. In my opinion, people either get the Wii, or buy a 360 for next gen gaming because Sony has not demonstrated the need to pay a $200 premium.

Sony supposedly "solved" their production woes before December and the units produced after ramping up to full production are only now starting to get into retail channels. Like I said, if people read the same newspaper articles that I did, then they fully don't expect to see PS3s until June. Hard to gauge how the market will react if the PS3s become readily available this much sooner than expected. .

Or, demand is simply not going to ramp up to expectations. The reality of the console is that it plays games that either don't look better than the 360, or are not fun to play. All that for $200 extra.

Read this for some insight. Not sure if is up to your standards of objectivity, but a good read anyway:
http://geekidiot.com/9/5-reasons-why-the-ps3-isnt-selling/

The Wii looks like an early hit, and it's already outselling the Xbox 360 worldwide, and came close to the Xbox 360's U.S. sales figures for the Christmas season despite supply shortages. People I know who've played it love it, but those analysts I linked to earlier seem more skeptical about whether Nintendo can maintain momentum over the long haul.

I see the Wii as a complement to EITHER the PS3 or the 360. There are some shortcomings, such as lack of DVD playback, no HD etc. The price is perfect for complimentry gaming.

GMichael

01-04-2007, 08:18 AM

Doesn't this link show a pic of even more Xboxes on display than PS3's?
http://www.kotaku.com/gaming/ps3/ple...ers-225271.php

To me that says that neither is doing all that well at this point.

emorphien

01-04-2007, 08:37 AM

Doesn't this link show a pic of even more Xboxes on display than PS3's?
http://www.kotaku.com/gaming/ps3/ple...ers-225271.php

To me that says that neither is doing all that well at this point.
They're not comparable situations. The XBox 360 has been out for a year and early adopters and fans have been taken care of. The PS3 just came out and hasn't sold as many as the XB360 in the same amount of time because at first enough weren't available (or so it seemed) but now they just aren't selling all of them. For consoles, you should expect to see a bunch on the shelves after a year, but not after a month and a half.

kexodusc

01-04-2007, 08:58 AM

Pray tell all knowing sage...just how can Sony remedy the GUSHING red ink flowing from their bottom line? They have invested Billions (thats with a 36 font B) on the PS3. They lose more money per sale than they recoup in 2 PS2 console sales. Think about that. Sony has to sell 3 PS2 units to make up for the profit LOST in one PS3 sale.
So what? If you think Sony doesn't have the balls to take a loss you're mistaken. That company has a history of failing products and technologies that it keeps on the market until the absolute bitter end - Beta, MiniDisc, SACD arguably,etc. They'll won't blink first. They never do. And if they didn't make $1 off this venture, the company will still exist in all it's big evil glory.

They'll sell PS3's at a rate and price that maximizes long-term profit (or minimizes loss). We're in the early adopter phase of the product life cycle here - way too early to get excited.

They can not entertain a price cut at this time to make up the difference. Besides, currently MS is making about $75. per Xbox 360 sold. So any price cut Sony makes, MS can simply go lower. Its a lose-lose for Sony..
They're not eager to enter a price war now, that's for sure, but neither is Microsoft. Over time the cost of production for both will drop, and the gap between them will reduce.
It's a matter of production cost, timing, and sales volume. Microsoft knew this very well when they made the original XBox. They lost a ton on it for a long time. But the successful market penetration was worth it to them. Nobody views the gaming console wars as a 1, 2 or even 5 year investment. Cost are recovered over time. Not just through consoles, but all the games and bells and whistles that work with them.

Consoles are epensive to build now. As the technology becomes older with each passing month and production means streamlined they'll get cheaper to build. Every batch gets cheaper. Such has been the model for every console dating back to the Coleco Vision. These guys stand to make more money off the games and licensing than the ever do for the consoles anyway. That's how this business works. Generally, initial pricing is set to maximize revenue. That's how initial prices are determined for most new technologies - and that's a bit different than maximizing sales or maximizing profits. If Sony wanted to guarantee sales strong, they'd have been the price leader. They just want to create enough of splash in the market to generate publicity, and maximize the revenue for the first batch of early buyers. They may have missed the mark by some degree, but its way to early to be preaching their demise.

Second, I dont' think anyone really cares about Sony's financial success on the PS3 - consumers will buy it or they won't based on how good the gaming experiences are relative to another console, not on how good a prospectus on Sony's gaming business looks.

They'll probably lose market share this generation that's normal in any industry as more competitors enter and competition gets heated. Today's leader is tomorrow's goat - ask Sega or even Nintendo. Maybe the'll fall to #2 or #3 this generation. Then bounce back to #1. Maybe yet another corp like ATI/AMD or someone will enter the market. Things are always changing.

Now, they certainly have a winner in the PS2. Dont confuse that point. 100+ million units sold is great. I think though that the PS3 is quite an albatross around the necks of the Corp.
The corporation must recoup the investment in the technology that makes the PS3. It would be foolish to think that Sony can rely on the PS2 to cover the loss. It cant. Nobody suggested PS2 will cover the losses of each individual console. But they're probably offsetting a portion of losses in the initial stages. Sony will soak the most money out of the combined basket of goods before lowering the price of PS3 substantially, if a price drop meant less money in their pockets. When the price drop decision maximizes profit at some point in the future, they'll do it. Is anyone doubting that the PS3 will come down in price at some point in the future? I don't think so. In fact, I think most of the market is just waiting for it. Waiting for Xbox 360 to drop, too. We've seen it happen too many times before.

Personally, I'm sorta rooting for XBox, I like what I've seen better and I hope it helps make HD-DVD the video standard sooner. But I'm sure PS3 hasn't "run out of gas" and that this isnt' the final chapter.

Anyone wanna guess what % of XBox/PS2 owners actually upgrade to a new console? I'm wondering if these guys moved to fast.

GMichael

01-04-2007, 09:15 AM

They're not comparable situations. The XBox 360 has been out for a year and early adopters and fans have been taken care of. The PS3 just came out and hasn't sold as many as the XB360 in the same amount of time because at first enough weren't available (or so it seemed) but now they just aren't selling all of them. For consoles, you should expect to see a bunch on the shelves after a year, but not after a month and a half.

Maybe bad timing. Having them available after Christmas instead of in October or November didn't help them much. The market is not the same now.

L.J.

01-04-2007, 09:48 AM

I must say, these PS3 vs 360 threads are very interesting (in a strange sort of way). As Kex mentioned, these same conversations are gonna be going on a year from now.

Groundbeef

01-04-2007, 12:28 PM

So what? If you think Sony doesn't have the balls to take a loss you're mistaken. That company has a history of failing products and technologies that it keeps on the market until the absolute bitter end - Beta, MiniDisc, SACD arguably,etc. They'll won't blink first. They never do. And if they didn't make $1 off this venture, the company will still exist in all it's big evil glory.

They'll sell PS3's at a rate and price that maximizes long-term profit (or minimizes loss). We're in the early adopter phase of the product life cycle here - way too early to get excited..

Heres a bit of a breakdown of the cost structure of the PS3 and the Xbox 360
http://arstechnica.com/news.ars/post/20061116-8239.html

Currently there is no profit to maximize. And the lack of consoles sold directly translates into a lack of incoming licensing fees paid to Sony. No consoles, no games, no income.

They just want to create enough of splash in the market to generate publicity, and maximize the revenue for the first batch of early buyers. They may have missed the mark by some degree, but its way to early to be preaching their demise.

Second, I dont' think anyone really cares about Sony's financial success on the PS3 - consumers will buy it or they won't based on how good the gaming experiences are relative to another console, not on how good a prospectus on Sony's gaming business looks..

No one cares about the finanical success of Sony on the PS3? What are you thinking? The future of Sony is the PS3. Their movies are in the crapper, Blu-Ray is barely a blip on the radar, and the PS3 WAS to be the knight in shining armour. Investors are VERY concerned about the finacial hit Sony is taking right now. Check out these 2 clips. The first isnt quite as #'s oriented. Lest anyone think that perhaps its not as credible check out the article published on "the street.com". Its the second article.

http://arstechnica.com/news.ars/post/20061019-8033.html

http://www.thestreet.com/_tscrss/markets/activetraderupdate/10330004.html

Perhaps that will color your perspective a bit on "no-one cares"

Nobody suggested PS2 will cover the losses of each individual console. But they're probably offsetting a portion of losses in the initial stages. Sony will soak the most money out of the combined basket of goods before lowering the price of PS3 substantially, if a price drop meant less money in their pockets. When the price drop decision maximizes profit at some point in the future, they'll do it. Is anyone doubting that the PS3 will come down in price at some point in the future? I don't think so. In fact, I think most of the market is just waiting for it. Waiting for Xbox 360 to drop, too. We've seen it happen too many times before..

The point was raised by Wooch. The PS2 is a solid seller, but it will not keep the company afloat. Thats the only point I was making.

Personally, I'm sorta rooting for XBox, I like what I've seen better and I hope it helps make HD-DVD the video standard sooner. But I'm sure PS3 hasn't "run out of gas" and that this isnt' the final chapter.

Anyone wanna guess what % of XBox/PS2 owners actually upgrade to a new console? I'm wondering if these guys moved to fast.

It took the original Xbox 5 years to sell 24 million consoles. The 360 has sold 10 million in one year. I would hazard a guess to say that PLENTY of original PS2/XBOX console owners have traded up.

Woochifer

01-04-2007, 02:53 PM

Although Springfield Il, may not be a Chicago, we do have over 100,000 people. I would not consider it "small". As for when the PS3 came out there were well over 100+ knuckleheads lined up around the BB store. Now, 1 month later, they cant even sell a resereved alotment. Doesn't take a rocket scientist to infer that perhaps demand has cooled a bit. And although my report may be anecdotal, it is by no means isolated.

I'm no rocket scientist, but I have done plenty of retail market studies. 100k is a VERY small market -- barely enough to support a big box electronics retailer like Best Buy, and probably not enough to generate the sales per square foot that they average across the rest of the country.

Might not take a rocket scientist, but an economist will tell you that you also need to look at the supply component before making any assessment about a market condition. And if Sony was truthful about their shipment projections, a lot of supply got into the distribution channel in a relatively short time considering how few units they actually got out by the end of November. And anyone who tracks the seasonality of retail sales will tell you that the period between New Year's and the beginning of March is typically when consumers tighten up the most on discretionary spending. Call it bad timing for the supply to start catching up with demand, but it won't make much of a difference in the long run considering that the PS3 was designed to have a shelf life considerably longer than the 2006 holiday shopping season.

As far as the 360 supply issue, vs the PS3 issue, you are trying to cloud the arguement. I would not expect the 360 to be sold out. If MS doesn't have enough stock to meet demand then there would be a problem. The PS3 is still very early into the launch phase. If demand were white hot it would be selling out as the Wii is. But its not. Do a couple calls today and report if any retailers have any units. I would be interested to know if you can get a PS3 in your area.

As far as preorders go, the major retailers NEVER take preorders. BB, CC and the like don't do pre-orders. Never have, never will. However, EB games, Game Crazy, and others DID take preorders for the PS3 and they got screwed when Sony short shipped orders up to 40%. And yet those same retailers are now sitting on inventory that is not moving.

You need to consider the supply component with the Wii. By accounts I've read, Nintendo had a far bigger supply available at launch, but they also started with a lower production capacity by which to restock stores, which is their problem right now.

Like I said before, hard to tell what people will do if they've been expecting the PS3 to be short-supplied through June. I've yet to see a PS3 in stores, but again, I've not been looking for them nor expecting to see them. I'm not clouding the argument by comparing the Xbox 360 supply with the PS3, since you were the one that was comparing the short supplies on the Xbox 360 to the PS3 to begin with.

As far as preorders go, Best Buy DID take preorders on the Xbox 360 (as a Reward Zone member, I was offered an Xbox 360 preorder), and they DO take preorders on a whole bunch of items like DVDs, video games, and software. Is Best Buy not a major retailer?

Everyone was caught by suprise by this one. If anything the Wii has hurt the PS3 worse than the 360. It is double the price of the Wii, and doesn't demonstrate capabilties over that of the 360. In my opinion, people either get the Wii, or buy a 360 for next gen gaming because Sony has not demonstrated the need to pay a $200 premium.

Well, not everyone. In earlier threads, Lensman pointed out Nintendo as a potential dark horse winner in the next gen console war, as did others, myself included.

Or, demand is simply not going to ramp up to expectations. The reality of the console is that it plays games that either don't look better than the 360, or are not fun to play. All that for $200 extra.

Read this for some insight. Not sure if is up to your standards of objectivity, but a good read anyway:
http://geekidiot.com/9/5-reasons-why-the-ps3-isnt-selling/

Well, also consider that the base PS3 has the same basic feature set as the $400 Xbox 360 plus Blu-ray capability for $100 more. But, until more Blu-ray titles and PS3 games come out, the actual value of the extra processing power under the hood won't be known.

The article raises some good points, particularly about the PS2 and Blu-ray. If the main selling point on both the Xbox 360 and the PS3 is HD resolution, consider that less than 1/4 of households currently have HDTVs. Hardly enough to entice the casual gamers with regular TVs into upgrading their consoles.

As of now, neither of these consoles can be considered the heir apparent to the PS2 if the PS2 console continues to outsell both of them, game developers continue to support the platform, and exclusives for that platform like the Guitar Hero series continue to create a buzz. It's still way too early in the game to project where the PS3 is headed.

I see the Wii as a complement to EITHER the PS3 or the 360. There are some shortcomings, such as lack of DVD playback, no HD etc. The price is perfect for complimentry gaming.

Actually, I think the Wii will likely be complementary to the PS2 in the short-term. The Wii seems to have a broad appeal to the casual gamers that make up the majority of the market, and the $250 price point is a market segment that both Sony and Microsoft abandoned with their next gen consoles (IMO, Microsoft made a mistake in discontinuing the original Xbox and completely ceding that end of the market over to Sony and Nintendo). But, I think the market analysts are right in questioning the long-term potential for the Wii, which will be at a disadvantage as the market continues to move towards HD and the console prices for both the Xbox 360 and PS3 inevitably go down.

kexodusc

01-04-2007, 03:17 PM

Currently there is no profit to maximize. And the lack of consoles sold directly translates into a lack of incoming licensing fees paid to Sony. No consoles, no games, no income.
Profit maximization( or loss minimization - they're the same thing) - My point here is Sony will from this point forward do what is economically most beneficial, even in a losing cause. This is certain. They'll continue with the product line doing whatever it takes to make the most money or lose the least if being in the black is impossible. That's all I'm saying. The deed is done, PS3 is gonna be made. Millions will buy. Sony might have to remarket and accept they'll take a hit, but I'm not willing to write of PS3's chances of being a viable competitor just yet.
Look at the computer processor market. AMD was a dog for years, then took the market by storm while Intel lost billions. Intel didn't quit, and now fortunes are reversing again.

No one cares about the finanical success of Sony on the PS3? What are you thinking?
Read the context of my message again - When a consumer chooses a console, the financial health of Sony has nothing to do with the decision making process. Especially the average consumer. Nobody cares - they only care about the product itself, not the viability of the parent company. Sony's stockholders might care, but I doubt they make up the majority of consumers.

The future of Sony is the PS3. Their movies are in the crapper, Blu-Ray is barely a blip on the radar, and the PS3 WAS to be the knight in shining armour. Investors are VERY concerned about the finacial hit Sony is taking right now. Check out these 2 clips. The first isnt quite as #'s oriented. Lest anyone think that perhaps its not as credible check out the article published on "the street.com". Its the second article.
Sony isn't going belly up regardless of which direction PS3 goes. I might not buy Sony stock in the near future, but it will continue on. The future is PS3? Didn't realize Sony filed Chapter 11. And when did it completely leverage itself all on PS3.

Perhaps that will color your perspective a bit on "no-one cares"
Please, let's try and keep this civil, no need for condescending tone here.

Surely you're not telling me a 10 year old kid tells their mom and dad to buy a gaming console based on the recent stock performance of the company? Truth is undeniable, "no-one cares" about the profitability of the company when they make their gaming console selection. I cannot make this point any clearer.

Nintendo's financial statements were terrible for years, they seem to be enjoying some success. They didn't give up and get out of the gaming business. You underestimate these corporations ability to absorb billions in losses and carry on...That's all I'm trying to say here.
Calling Sony out of gas at this stage of the game is premature. Maybe it'll end up that. They're not off to the start they wanted. Neither was Xbox 360.

It took the original Xbox 5 years to sell 24 million consoles. The 360 has sold 10 million in one year. I would hazard a guess to say that PLENTY of original PS2/XBOX console owners have traded up. Sure, but are 100 million plus PS2 owners going to upgrade to Xbox or PS3? All of them? Maybe, but it's gonna take awhile. I kind of wonder if people are just content to skip a generation and hang on to the Xbox/PS2 until the next round comes out.

Woochifer

01-04-2007, 03:45 PM

It's way too early to write off PS3 just now. I can't see any negative in any of this to tell you the truth. Sony may have miscalculated the markets willingness to fork over $500 + for a console in 2006, but that can be easily remedied at any time.
From Sony's point of view, there's no point rushing the production schedule and entering a price war now. As Wooch pointed out, PS2 consoles are still selling well. The market is quite content for the moment. Sony is making money off their PS2's. Lowering the PS3's price will just canibalize some of those sales and likely result in less revenue/profit overall. Besides, it's not like XBox 360 is all the rage either. I'm guessing when there's a good library of big hit PS3 games, we'll see the price drop and a war begin.

I seem to recall most PS owners waiting a good year, maybe 2 years before finally jumping on the PS2 bandwagon (or in my case getting an XBox).

I went about a year and a half before getting a PS2, and can easily see myself waiting at least that long on the PS3.

And looking at the sales charts for the PS2, the console sales did not peak until December 2002, which was more than 2 1/2 years after it got introduced in Japan in March 2000, and about six months after the first major price reduction. And if you tally up the PS2's U.S. sales between its introduction in October 2000 and the end of December 2000, it was barely over 1 million units even though the console had already been on sale for 6 months in Japan and Sony presumably had time to work out any production shortages.

http://www.neogaf.com/forum/showthread.php?t=105508

One of the more interesting things that I read from a market analyst pointed out that the Xbox 360 sales as of October were running behind both the PS2 AND the original Xbox at the same point in their respective product cycles. Supports your assertion that the Xbox 360 hasn't been setting the market ablaze.

Deutsche Bank analyst Jeetil Patel looks at the 360 business in a different light, instead focusing on the hardware which seems to be underperforming. "260K hardware units were sold in Sep-06, which is an improvement from Aug-06 (200K). However the Xbox 360's installed base is still smaller than the original Xbox's equivalent after the same number of months of sell-through. Xbox 360 sales are even more lackluster if you consider that the original was an unproven product that was trying to sell-in against the hugely popular PS2," commented Patel. "Finally we highlight that the gap between Xbox 360 and PS2 hardware sales at equivalent time periods in their lives continues to widen. In 2001, the PS2 was consistently selling-through >300K units a month, whereas the Xbox 360 has not broken 300K since its launch in November."

http://biz.gamedaily.com/industry/feature/?id=14095

Sony and Microsoft got blindsided by Nintendo this time around - instead of the goofy Game Cube and it's cute games, the Wii actually offered something totally unique, fun, and extremely cheap (relatively speaking). When you consider that a good chunk of popular games are available on all consoles, Wii is actually a pretty good choice for a lot of casual gamers. And that's the key here - the casual gamers are the largest chunk of the market, and their not going to pay $400 for an XBox 360or $500 for a PS 3. We're quite happy waiting for another year because we were also late to the PS2/XBbox party and want to get our money's worth there. Wii might not be stealing all the sales, but it's definitely causing people to stop, rething their decision, and play the wait-and-see game before buying a new console.

You got that right, although I think the Blu-ray angle might yet play out as the PS3 supplies start to ramp up and home theater enthusiasts (who are less apt to camping out overnight or bidding 5x over list on eBay for components) start to consider the PS3 as a relatively inexpensive $500 Blu-ray player. I know that until I get around to upgrading my video chain to HD, the PS3's not even on my radar screen. But, once that happens, then I'll definitely take a long look at the PS3 as a Blu-ray player. And if I get around to finding some interesting PS3 games to play, all the better.

Funny thing is, I can see us having this same discussion at this time next year.

Yup, just as we were last year before the PS3 even came out!

Groundbeef

01-04-2007, 05:13 PM

Might not take a rocket scientist, but an economist will tell you that you also need to look at the supply component before making any assessment about a market condition. And if Sony was truthful about their shipment projections, a lot of supply got into the distribution channel in a relatively short time considering how few units they actually got out by the end of November. And anyone who tracks the seasonality of retail sales will tell you that the period between New Year's and the beginning of March is typically when consumers tighten up the most on discretionary spending. Call it bad timing for the supply to start catching up with demand, but it won't make much of a difference in the long run considering that the PS3 was designed to have a shelf life considerably longer than the 2006 holiday shopping season..

A major reason that the PS3 is in the supply chain so quickly is that they were forced to use air freight to get many units in for the holidays. That is why the supply chain had as many units as it did. As it was it was still 40% less than expected. The problem as you stated is that there is a lul in the market. In my opinion this will reinforce the negative perception that SOME consumers have of the system. As in "Hey this was supposed to be a really hot system. Why is my local BB have 17 of them on the floor for the last week? Must not be that hot." On the flip side, the Wii cant be kept in stock. It simply reinforces the idea that maybe the PS3 isn't such a great system. This doesn't translate into the 360 because it is an established system and the supply chain has been established.

Like I said before, hard to tell what people will do if they've been expecting the PS3 to be short-supplied through June. I've yet to see a PS3 in stores, but again, I've not been looking for them nor expecting to see them. I'm not clouding the argument by comparing the Xbox 360 supply with the PS3, since you were the one that was comparing the short supplies on the Xbox 360 to the PS3 to begin with..? Not following here. You suggested that perhaps the 360 isn't selling well because there are units in the store. I am saying that is not an equal equation because I for one, dont expect to see any PS3's in the store. The 360 is established. You should be able to go in and buy one at will.

As far as preorders go, Best Buy DID take preorders on the Xbox 360 (as a Reward Zone member, I was offered an Xbox 360 preorder), and they DO take preorders on a whole bunch of items like DVDs, video games, and software. Is Best Buy not a major retailer?. I should have elaborated. Yes, BB DOES take pre-orders on games, movies and software. It has been my experience, and from asking the Manager about pre-ordering systems. He told me that BB does NOT do pre-orders on consoles. Perhaps its a regional thing.

Well, not everyone. In earlier threads, Lensman pointed out Nintendo as a potential dark horse winner in the next gen console war, as did others, myself included. . I think I agreed on that as well.

Well, also consider that the base PS3 has the same basic feature set as the $400 Xbox 360 plus Blu-ray capability for $100 more. But, until more Blu-ray titles and PS3 games come out, the actual value of the extra processing power under the hood won't be known..
I hope you realize that Sony also made the PS3 without IR support for the remote controller. So if you have a fancy all in one, pitch it, or better yet duct tape the PS3 bluetooth remote under it so you can control the movies.....hahaha (that was catty sorry :(

As of now, neither of these consoles can be considered the heir apparent to the PS2 if the PS2 console continues to outsell both of them, game developers continue to support the platform, and exclusives for that platform like the Guitar Hero series continue to create a buzz. It's still way too early in the game to project where the PS3 is headed..

You need to read some more fanboy sites. Your a bit behind on your data. Sony has lost MANY exclusives to MS in the last few months. Guitar Hero will be coming out first Q 2007, Rockstar Games is shipping GTA 4 the same day for PS3, 360, a HUGE departure from the past when MS got the game several months after the PS2 got it. Take Two is getting away from Sony Exlusives. Tekken 5 a very popluar series is coming to the 360, and UbiSoft (assisins creed) another prior Sony Exclusive developer is now developing games for the 360. Virtua Fighter 5, another prior Sony Exclusive...gone, now to be developed for the 360/PS3.

While in no way will these losses kill Sony, they can't help either. GTA was a system seller, and now it comes out the same time for example.

Actually, I think the Wii will likely be complementary to the PS2 in the short-term. The Wii seems to have a broad appeal to the casual gamers that make up the majority of the market, and the $250 price point is a market segment that both Sony and Microsoft abandoned with their next gen consoles (IMO, Microsoft made a mistake in discontinuing the original Xbox and completely ceding that end of the market over to Sony and Nintendo). But, I think the market analysts are right in questioning the long-term potential for the Wii, which will be at a disadvantage as the market continues to move towards HD and the console prices for both the Xbox 360 and PS3 inevitably go down.

Actually I disagree. For MS to move forward I think that it was a good move to support the new system 100%. The installed base isn't as large as the PS2, and studios are still free to develop games for the original Xbox.

Groundbeef

01-04-2007, 05:27 PM

Read the context of my message again - When a consumer chooses a console, the financial health of Sony has nothing to do with the decision making process. Especially the average consumer. Nobody cares - they only care about the product itself, not the viability of the parent company. Sony's stockholders might care, but I doubt they make up the majority of consumers..

I will conceed that perhaps the average joe doesn't wander into the ol' BB and care about the financial health of the company. However, there are plenty of people that are seriously considering the financial health of Sony.

Sony isn't going belly up regardless of which direction PS3 goes. I might not buy Sony stock in the near future, but it will continue on. The future is PS3? Didn't realize Sony filed Chapter 11. And when did it completely leverage itself all on PS3..

As you say, lets keep this civil. Here is some meat to chew on about the PS3 and Sony's future as an electronics giant: The first one is bit of a read at 4 pages, but if you got the time it is an excellent article! Pretty evenhanded as well. Certainly not a slash and burn piece.

http://www.wired.com/wired/archive/14.09/sony.html

http://news.cnet.co.uk/gamesgear/0,39029682,49285320,00.htm

Please, let's try and keep this civil, no need for condescending tone here.

Surely you're not telling me a 10 year old kid tells their mom and dad to buy a gaming console based on the recent stock performance of the company? Truth is undeniable, "no-one cares" about the profitability of the company when they make their gaming console selection. I cannot make this point any clearer. .

Sorry if I wasn't being civil. These chats are hard to come across as "dry" vs "smart-ass". I've been slapped by the admin once and prefer not to be again. So, please accept apologies.

And surely you are not going to suggest that 10 year olds run major corporations either. I agree with your point about consumers, but you can't disagree that there is plenty of concern in the financial world about Sony and its finances.

kexodusc

01-04-2007, 06:36 PM

And surely you are not going to suggest that 10 year olds run major corporations either.
Not suggesting that at all.

I agree with your point about consumers, but you can't disagree that there is plenty of concern in the financial world about Sony and its finances.

100% in agreement with you on this point, and have been from the start if you follow the thread. Sony's got a lot of problems right now, fighting too many wars at once if you ask me. But analyzing Sony, and analyzing PS3's potential in the console market are a bit different. PS3 has time to recover market share, be a big, meaningful player, and if nothing else, keep Sony in position for profiting on future generations of consoles. All it takes is one "Halo" to come along and suddenly PS3's are in demand.

I think a lot of Xbox 360 buyers are planning on getting a PS3, too.

Plenty of concern with Sony, but they're not going anywhere. Companies can loose billions for years and keep going - look at Ford.

Oh, and no hard feelings either, Beef...I was just razzing you about being on the payroll (couldn't ya tell with the :P smiley?) - I like the updates on the console wars you bring here, even if the perspective seems slightly tilted. Keep waiting for the one that says "...to cut price by 50%"

Woochifer

01-04-2007, 07:13 PM

A major reason that the PS3 is in the supply chain so quickly is that they were forced to use air freight to get many units in for the holidays. That is why the supply chain had as many units as it did. As it was it was still 40% less than expected. The problem as you stated is that there is a lul in the market. In my opinion this will reinforce the negative perception that SOME consumers have of the system. As in "Hey this was supposed to be a really hot system. Why is my local BB have 17 of them on the floor for the last week? Must not be that hot." On the flip side, the Wii cant be kept in stock. It simply reinforces the idea that maybe the PS3 isn't such a great system. This doesn't translate into the 360 because it is an established system and the supply chain has been established.

And what does this perception ultimately amount to in the end? Probably not much in the long run, since Sony was not purposely trying to constrict the supply or create a perception of scarcity in the market to boost demand. IMO, this is probably not history repeating itself as with the DeLorean fiasco, but that kind of perception could work to suppress sales in the short-term. Nintendo can't keep the Wii in stock because they did not have as much production capacity available (don't know the situation now, but my understanding is that they used a lot of lead time to get their unit numbers up prior to launch). There's more PS3 in the market simply because Sony has been in full volume production since early-December, and they always had plenty of manufacturing capacity on tap. It was only that blue diode component shortage that kept them from running at full capacity early on.

You need to read some more fanboy sites. Your a bit behind on your data. Sony has lost MANY exclusives to MS in the last few months. Guitar Hero will be coming out first Q 2007, Rockstar Games is shipping GTA 4 the same day for PS3, 360, a HUGE departure from the past when MS got the game several months after the PS2 got it. Take Two is getting away from Sony Exlusives. Tekken 5 a very popluar series is coming to the 360, and UbiSoft (assisins creed) another prior Sony Exclusive developer is now developing games for the 360. Virtua Fighter 5, another prior Sony Exclusive...gone, now to be developed for the 360/PS3.

While in no way will these losses kill Sony, they can't help either. GTA was a system seller, and now it comes out the same time for example.

Behind on the data? I'm simply reviewing what happened in 2006 where the big surprise turned out to be the staying power of the PS2. PS2 losing exclusivity shouldn't be a surprise since it's a six-year old platform. But, if anyone expects the Xbox 360 or any other system to emerge as the heir apparent to the PS2, the wannabe successor had better start by outselling the PS2 and steering developers away from supporting the platform altogether. Hasn't happened yet.

Actually I disagree. For MS to move forward I think that it was a good move to support the new system 100%. The installed base isn't as large as the PS2, and studios are still free to develop games for the original Xbox.

Not as big as the PS2, but still over 20 million users. That's a lot of consumers who have basically been abandoned by Microsoft. And with the limited backwards compatibility of the Xbox 360, it's a lot of users who might not follow the upgrade path that Microsoft has mapped out for them.

Lowering the console price to match the PS2's $129, Microsoft could have kept a presence in the entry level market, and put some more pressure on Sony. Instead, they basically gave a second wind to the PS2, and potentially accelerated the loss of developer support for the original Xbox. So far, the Xbox 360 has been a very mixed bag, and far from a runaway success story. The software sales have gone better than expected, but the hardware sales have yet to even equal what the original Xbox sold at this juncture. I just question why Microsoft would abandon a platform that had still had plenty of life left in it. I don't think that the Xbox would have cannibalized sales for the Xbox 360, but it certainly could have competed with the PS2 and kept it from outselling the Xbox 360.

Groundbeef

01-04-2007, 07:28 PM

Behind on the data? I'm simply reviewing what happened in 2006 where the big surprise turned out to be the staying power of the PS2. PS2 losing exclusivity shouldn't be a surprise since it's a six-year old platform. But, if anyone expects the Xbox 360 or any other system to emerge as the heir apparent to the PS2, the wannabe successor had better start by outselling the PS2 and steering developers away from supporting the platform altogether. Hasn't happened yet. .

No, but by gaining far more acceptance from developers the 360 is making several inroads that it didn't have w/ original Xbox. Word is that MS is doing backflips to get developers to make games for it. Wheras Sony is resting a bit on its laurels. This is going to hurt them in the future. Without exclusives, where is the need for the extra $200. If you can get the same game w/same graphics why pay the extra dough?

As HD penetrates the market further I see the demand for next gen increasing exponentially. That is where MS is looking. If Sony is content to lose developers so be it.

Not as big as the PS2, but still over 20 million users. That's a lot of consumers who have basically been abandoned by Microsoft. And with the limited backwards compatibility of the Xbox 360, it's a lot of users who might not follow the upgrade path that Microsoft has mapped out for them.

Lowering the console price to match the PS2's $129, Microsoft could have kept a presence in the entry level market, and put some more pressure on Sony. Instead, they basically gave a second wind to the PS2, and potentially accelerated the loss of developer support for the original Xbox. So far, the Xbox 360 has been a very mixed bag, and far from a runaway success story. The software sales have gone better than expected, but the hardware sales have yet to even equal what the original Xbox sold at this juncture. I just question why Microsoft would abandon a platform that had still had plenty of life left in it. I don't think that the Xbox would have cannibalized sales for the Xbox 360, but it certainly could have competed with the PS2 and kept it from outselling the Xbox 360.

Although MS has not made any more XBOX consoles I would hesitate to say they have been left out in the cold. Games are still being developed for it. AT&T wasn't run out on a rail after they stopped making the rotary dial phone right? I mean comon, MS is wanting consumers to buy the 360 so be it.

Anyway gotta get to bed. 2:30am comes mighty early, and I gotta be to work on time. Cheers!

Woochifer

01-05-2007, 02:01 PM

No, but by gaining far more acceptance from developers the 360 is making several inroads that it didn't have w/ original Xbox. Word is that MS is doing backflips to get developers to make games for it. Wheras Sony is resting a bit on its laurels. This is going to hurt them in the future. Without exclusives, where is the need for the extra $200. If you can get the same game w/same graphics why pay the extra dough?

As HD penetrates the market further I see the demand for next gen increasing exponentially. That is where MS is looking. If Sony is content to lose developers so be it.

Sony was going to lose exclusives regardless of what Microsoft is doing simply because the Xbox 360 made it to market first, and now has an installed user base in place. That's why just about every market analyst I've read has been projecting that the market share for the different console platforms will be much more evenly split this time around.

Major games for the PS3 that will supposedly better exploit the system's more powerful processors are still in development. I actually think that in the end the better graphical capability on the PS3 will start showing up with latter games. But, whether consumers are willing to pay the extra $100 for more powerful hardware and whether that translates into market share is a totally different question. After all, the original Xbox had a clear technical advantage over the PS2, but that did not translate into better sales. At this point, I'm not even sure if the HD resolution is all that big a selling point just yet. If anything, the PS3's backwards compatibility with the PS2 might be a stronger selling point at the moment.

Although MS has not made any more XBOX consoles I would hesitate to say they have been left out in the cold. Games are still being developed for it. AT&T wasn't run out on a rail after they stopped making the rotary dial phone right? I mean comon, MS is wanting consumers to buy the 360 so be it.

Games are still being developed, but I don't think that developers are too keen on continuing to support a platform with zero growth prospects on the hardware side. Microsoft has purportedly stopped all game development for the original Xbox, and stopping hardware production means no further growth in the installed user base. They're basically trying to force consumers to upgrade by taking their choices away (pretty much the same thing that they do on the PC side), and they've obviously taken the presumption that their Xbox users will follow through and upgrade to the 360. But, they also leave the door wide open for those users to migrate over to a different platform, since the Xbox 360 doesn't have strong backwards compatibility as one of its selling points.

Say what you will about Sony, but as Kex pointed out they will doggedly support their formats to the bitter end, so long as there are still consumers out there that will buy them. They only stopped making the original Playstation console last March, and obviously they plan to continue making and supporting the PS2 for at least the foreseeable future. The PS2 installed user base is still growing, and the backwards compatibility built into the PS3 means that developers can continue to support the platform until the market naturally transitions into the next gen consoles. If Sony had stopped production on the original Playstation and only offered limited backwards compatibility with the PS2, I think game development on the original Playstation would have ended much sooner and the PS2 would not have caught on with casual gamers as quickly as it did.

BTW, AT&T kept offering rotary phones all the way until the old Bell system was broken up, and to this day, you can still make an outgoing call using a rotary phone.

Geoffcin

01-05-2007, 02:26 PM

Major games for the PS3 that will supposedly better exploit the system's more powerful processors are still in development. I actually think that in the end the better graphical capability on the PS3 will start showing up with latter games. But, whether consumers are willing to pay the extra $100 for more powerful hardware and whether that translates into market share is a totally different question. After all, the original Xbox had a clear technical advantage over the PS2, but that did not translate into better sales. At this point, I'm not even sure if the HD resolution is all that big a selling point just yet. If anything, the PS3's backwards compatibility with the PS2 might be a stronger selling point at the moment.

. But, they also leave the door wide open for those users to migrate over to a different platform, since the Xbox 360 doesn't have strong backwards compatibility as one of its selling points.

.

Just from the short time I've had with the XBOX 360 it's a no-brainer to say that gaming in HD is worth the upgrade. My daughter has several dozen original Xbox games, and so far ALL of them have been backwardly compatable. You have to download an emulator to make them play, but that it free.

http://www.xbox.com/en-US/games/backwardcompatibilitygameslist.htm

Honestly though, we really haven't played many.

Groundbeef

01-05-2007, 02:55 PM

Sony was going to lose exclusives regardless of what Microsoft is doing simply because the Xbox 360 made it to market first, and now has an installed user base in place. That's why just about every market analyst I've read has been projecting that the market share for the different console platforms will be much more evenly split this time around.

This is different this round. Last round Sony locked up exclusives, and left MS peeking in the window. This time MS actively courted companies that previously prompty shut the door on them. By offering deveolpment assistance (money) and asking for features that they would require MS gained much respect from developers that felt MS had been aloof to their needs. For example Gears of War deveolper Epic Games worked with MS and requested more memory. It cost MS $1 billion in extra cash for the 360, but now the advantage is clear. This is something MS would not have done in the first round. Your readings are corrrect, but your analysis is a bit off. Its not simply that they were first. MS has been very proactive in stealing exclusive titles and developers. Sony has not.

Major games for the PS3 that will supposedly better exploit the system's more powerful processors are still in development. I actually think that in the end the better graphical capability on the PS3 will start showing up with latter games. But, whether consumers are willing to pay the extra $100 for more powerful hardware and whether that translates into market share is a totally different question. After all, the original Xbox had a clear technical advantage over the PS2, but that did not translate into better sales. At this point, I'm not even sure if the HD resolution is all that big a selling point just yet. If anything, the PS3's backwards compatibility with the PS2 might be a stronger selling point at the moment.

Please, that is a lame arguement. The PS3 has been in extra development for over 8 MONTHS after the 360 release. With that rational you might as well say that SONY will never catch up because MS will ALWAYS be 1 generation of games ahead. The games that Sony had time to polish simply werent. Fight Night 3 for example looks no better, and in some play WORSE than the 360. Thats after 8 months of additional programming.

Games are still being developed, but I don't think that developers are too keen on continuing to support a platform with zero growth prospects on the hardware side. Microsoft has purportedly stopped all game development for the original Xbox, and stopping hardware production means no further growth in the installed user base. They're basically trying to force consumers to upgrade by taking their choices away (pretty much the same thing that they do on the PC side), and they've obviously taken the presumption that their Xbox users will follow through and upgrade to the 360. But, they also leave the door wide open for those users to migrate over to a different platform, since the Xbox 360 doesn't have strong backwards compatibility as one of its selling points.

Or, on the flip side, Sony is not offering gamers a compelling reason to switch to the new machine. After all, what is the loss for gamers if they can play the PS2 games on the new system? Why give them a choice. I see it differently than you I guess on this point. Any Xbox owner (original) woudn't switch to a PS2 because MS has stopped making the machine. Perhaps somone who never owned a console, but not a current owner. And now the Wii will help negate that influence..

Say what you will about Sony, but as Kex pointed out they will doggedly support their formats to the bitter end, so long as there are still consumers out there that will buy them. They only stopped making the original Playstation console last March, and obviously they plan to continue making and supporting the PS2 for at least the foreseeable future. The PS2 installed user base is still growing, and the backwards compatibility built into the PS3 means that developers can continue to support the platform until the market naturally transitions into the next gen consoles. If Sony had stopped production on the original Playstation and only offered limited backwards compatibility with the PS2, I think game development on the original Playstation would have ended much sooner and the PS2 would not have caught on with casual gamers as quickly as it did.
Again, blindy following a course of action may not lead to positive results.

BTW, AT&T kept offering rotary phones all the way until the old Bell system was broken up, and to this day, you can still make an outgoing call using a rotary phone.

And anyone who has an original Xbox will be able to play their games well into the future. You missed the point that AT&T didn't collapse because they stopped selling rotary phone. BTW there are situations were rotary phones are useless IE any menu requiring input. Sometimes there are operators to assist, but not always.

Woochifer

01-05-2007, 05:52 PM

Please, that is a lame arguement. The PS3 has been in extra development for over 8 MONTHS after the 360 release. With that rational you might as well say that SONY will never catch up because MS will ALWAYS be 1 generation of games ahead. The games that Sony had time to polish simply werent. Fight Night 3 for example looks no better, and in some play WORSE than the 360. Thats after 8 months of additional programming.

Why would it be a lame argument? The PS3 games that are out there right now are a relatively limited group. Are you saying that PS3 developers have hit the technical ceiling already? A lot of the early Xbox games looked no better than their PS2 counterparts, but that certainly was no indicator of what the platform would produce later on. You have no idea what the PS3 games will look like a year from now. My point was simply that the PS3 hardware has a technical advantage, but even if developers exploit that advantage, that does not guarantee market share for the platform (e.g., the original Xbox).

Or, on the flip side, Sony is not offering gamers a compelling reason to switch to the new machine. After all, what is the loss for gamers if they can play the PS2 games on the new system? Why give them a choice. I see it differently than you I guess on this point. Any Xbox owner (original) woudn't switch to a PS2 because MS has stopped making the machine. Perhaps somone who never owned a console, but not a current owner. And now the Wii will help negate that influence..

Eventually it's the casual gamers who will make or break these formats, and for anyone who has already made an investment in games and accessories the backwards compatibility is definitely one deciding factor among many. A hardcore gamer might not care at all whether a PS3 can play PS2 games, but for a parent deciding on a game system for the family, the ability to play PS2 games is very important. Why give consumers a choice? Because they generally want them, and markets are ultimately about choices. Consumers generally like them, monopolists like Microsoft hate them. With console gaming, they're competing in a market space where they don't have as much leverage over consumer choices, so it remains to be seen whether their move to abandon the Xbox was smart. I can see where they would want to focus all of their resources on their most current project, but they also have over 20 million legacy customers that they have placed into forced obsolescence.

An Xbox owner might not switch to the PS2, but they very well might switch to the PS3 or the Wii, since there is less of a continuity between the Xbox and the Xbox 360 as there is between the Playstation models.

Again, blindy following a course of action may not lead to positive results.

How's it blind to continue answering to consumers if market demand remains in place? Sony might have an absurdly low threshold to cross before they pull the plug on formats that they've developed, but I don't think it would be to their benefit if they followed Microsoft's model by killing the PS2 on the assumption that it would prop up the PS3. Consumers are still buying PS2s by the millions, so why deny them the choices that they want?

BTW, I popped by the local Best Buy during my lunch break. No PS3s in stock, no Wiis in stock, and even no PS2s in stock. But, they had about 60 Xbox 360s on the floor.

Groundbeef

01-06-2007, 06:51 AM

Why would it be a lame argument? The PS3 games that are out there right now are a relatively limited group. Are you saying that PS3 developers have hit the technical ceiling already? A lot of the early Xbox games looked no better than their PS2 counterparts, but that certainly was no indicator of what the platform would produce later on. You have no idea what the PS3 games will look like a year from now. My point was simply that the PS3 hardware has a technical advantage, but even if developers exploit that advantage, that does not guarantee market share for the platform (e.g., the original Xbox).

Ok, heres why that is a lame arguement. During the buildup Sony portrayed the PS3 as the end-all console of consoles. I think only the Second Coming of Jesus himself could have edged out the excitement that Sony was dishing out. Now, add to the hype an EXTRA 8 months development time. Now remember, we were promised that this machine would BLOW the 360 out of the water.

So guess what? The hype didn't match up. Even though developers had an EXTRA 8 months developent time, they still cant match the 360 in graphics OR gameplay. That is downright stupid.

I never said that the PS3 has hit its tech limits. But they sure shot themselves in the foot with this. Who wants to buy the "Next Gen Console" and then be told by the salesman...."Just wait TILL NEXT YEAR FOR THE REALLY GOOD GAMES!!!".... In essence you are suggesting that the PS3 will forever be behind the 360.

And as for "Technical Advantage", depends on what tech nerd you are quoteing. The cell my be a hardier processer, but the badwidth, and the level of RAM is 1/2 that of the 360. In essence it has a bigger engine, and is hobbled with a 2 gear transmission. If you want to argue this line, we had better start another thread.

MS delivered on the promise of HD games, enhanced online content, and solid gameplay. They didn't engage in trash talk like the Sony Managment team. Yes they had some supply issues, and some hardware issues, but that was resolved.

Eventually it's the casual gamers who will make or break these formats, and for anyone who has already made an investment in games and accessories the backwards compatibility is definitely one deciding factor among many. A hardcore gamer might not care at all whether a PS3 can play PS2 games, but for a parent deciding on a game system for the family, the ability to play PS2 games is very important. Why give consumers a choice? Because they generally want them, and markets are ultimately about choices. Consumers generally like them, monopolists like Microsoft hate them. With console gaming, they're competing in a market space where they don't have as much leverage over consumer choices, so it remains to be seen whether their move to abandon the Xbox was smart. I can see where they would want to focus all of their resources on their most current project, but they also have over 20 million legacy customers that they have placed into forced obsolescence.

You ought to read the Wall Street Journal today. Has a really interesting article on Motorolla getting killed and having to revise its profit #'s. Seems the Razar (PS2) is a HUGE seller. So big in fact that Motorolla (Sony) cant get it customers to buy its new phone Krazar (PS3). Margins are down, and they are stuck with a bunch of customers that see no need to buy the fancy new phone (console). Sucks to be them.

An Xbox owner might not switch to the PS2, but they very well might switch to the PS3 or the Wii, since there is less of a continuity between the Xbox and the Xbox 360 as there is between the Playstation models.

Ummmm, no I don't think so. PS3 doesn't play legacy MS games.

How's it blind to continue answering to consumers if market demand remains in place? Sony might have an absurdly low threshold to cross before they pull the plug on formats that they've developed, but I don't think it would be to their benefit if they followed Microsoft's model by killing the PS2 on the assumption that it would prop up the PS3. Consumers are still buying PS2s by the millions, so why deny them the choices that they want?

Again, read the Wall Street Journal today. Some interesting parallels between Motorolla and Sony.

BTW, I popped by the local Best Buy during my lunch break. No PS3s in stock, no Wiis in stock, and even no PS2s in stock. But, they had about 60 Xbox 360s on the floor.

Cool did you buy one? They are even coming with a free game!

Groundbeef

01-06-2007, 01:58 PM

Heres a bit of news flash from a game site discussing this very issue.

http://www.joystiq.com/2007/01/06/ps3-available-on-bestbuy-com-still/

Woochifer

01-06-2007, 02:32 PM

Ok, heres why that is a lame arguement. During the buildup Sony portrayed the PS3 as the end-all console of consoles. I think only the Second Coming of Jesus himself could have edged out the excitement that Sony was dishing out. Now, add to the hype an EXTRA 8 months development time. Now remember, we were promised that this machine would BLOW the 360 out of the water.

So guess what? The hype didn't match up. Even though developers had an EXTRA 8 months developent time, they still cant match the 360 in graphics OR gameplay. That is downright stupid.

I never said that the PS3 has hit its tech limits. But they sure shot themselves in the foot with this. Who wants to buy the "Next Gen Console" and then be told by the salesman...."Just wait TILL NEXT YEAR FOR THE REALLY GOOD GAMES!!!".... In essence you are suggesting that the PS3 will forever be behind the 360.

And as for "Technical Advantage", depends on what tech nerd you are quoteing. The cell my be a hardier processer, but the badwidth, and the level of RAM is 1/2 that of the 360. In essence it has a bigger engine, and is hobbled with a 2 gear transmission. If you want to argue this line, we had better start another thread.

MS delivered on the promise of HD games, enhanced online content, and solid gameplay. They didn't engage in trash talk like the Sony Managment team. Yes they had some supply issues, and some hardware issues, but that was resolved.

And again you're making the comparison of the Xbox 360, as it is right now with a one-year head start versus the PS3, which has had a rocky launch. How did the Xbox 360 look at launch? Pretty shaky as well from my recollection. As I said before, a lot of the original Xbox games also didn't look any better than the PS2 games at launch. The capabilities of that platform did not get highlighted until later. How will things shake out a year from now? We'll know better at that point, especially since past precedence suggests that these game consoles take about two years before sales start to hit their stride.

You ought to read the Wall Street Journal today. Has a really interesting article on Motorolla getting killed and having to revise its profit #'s. Seems the Razar (PS2) is a HUGE seller. So big in fact that Motorolla (Sony) cant get it customers to buy its new phone Krazar (PS3). Margins are down, and they are stuck with a bunch of customers that see no need to buy the fancy new phone (console). Sucks to be them.

Completely different market because in the cell phone market Motorola only makes money by continuing to sell hardware. Game consoles, as you've pointed out repeatedly, are loss leaders on the hardware side with the profits coming from software and licensing. With 100 million+ PS2 owners, Sony's still making money off of that platform because games are still being produced and sold. Once Motorola sells someone a cell phone, they don't get much more revenue from that customer until they buy another phone.

Cool did you buy one? They are even coming with a free game!

If you buy me a HDTV first, I'll consider it. :D

Groundbeef

01-06-2007, 03:10 PM

And again you're making the comparison of the Xbox 360, as it is right now with a one-year head start versus the PS3, which has had a rocky launch. How did the Xbox 360 look at launch? Pretty shaky as well from my recollection. As I said before, a lot of the original Xbox games also didn't look any better than the PS2 games at launch. The capabilities of that platform did not get highlighted until later. How will things shake out a year from now? We'll know better at that point, especially since past precedence suggests that these game consoles take about two years before sales start to hit their stride.

Thats the problem in a nutshell. Before release Sony was beating the band explaining how they were going to kill the 360. And now all we are hearing is how much better the PS3 will be NEXT year. As far as the 360 is concerned I would agree that the initial launch titles were not super duper. But unlike Sony, MS didnt engage in trash talk.

I think the constant drumbeat of "Wait Till Next Year" gives the PS3 a sort of Cubs Fever. It'll ALWAYS be better next year. BTW what did Sony do with that extra 8 mos? Imagine if it had been released on time. What would the games look like then?

Completely different market because in the cell phone market Motorola only makes money by continuing to sell hardware. Game consoles, as you've pointed out repeatedly, are loss leaders on the hardware side with the profits coming from software and licensing. With 100 million+ PS2 owners, Sony's still making money off of that platform because games are still being produced and sold. Once Motorola sells someone a cell phone, they don't get much more revenue from that customer until they buy another phone.

Except Sony has bet the farm on the PS3. Royalties from the PS2 isn't going to keep the shareholders happy. The model may be a bit different, but the concept is very similar. Seriously read the article. You seem like the educated sort that reads the WSJ anyway.

If you buy me a HDTV first, I'll consider it. :D

Umm yea, its on its way. Go ahead and get the 360, and wait for it! :)

kexodusc

01-07-2007, 05:37 AM

Thats the problem in a nutshell. Before release Sony was beating the band explaining how they were going to kill the 360. And now all we are hearing is how much better the PS3 will be NEXT year. As far as the 360 is concerned I would agree that the initial launch titles were not super duper. But unlike Sony, MS didnt engage in trash talk.

I think the constant drumbeat of "Wait Till Next Year" gives the PS3 a sort of Cubs Fever. It'll ALWAYS be better next year. BTW what did Sony do with that extra 8 mos? Imagine if it had been released on time. What would the games look like then?

Back up for a second - did anyone else here really hear all this so called over-hype from the PS3? I vaguely remember hearing rumours about it a few times, but it was hardly a pre-launch marketing campaign of epic proportions.
The only people who were exposed to Sony's ravings (whatever they were) were the super-hardcore gaming enthusiasts who went out of their way to buy magazines or search websites for PS3 development news. A lot of these gaming fanatics are going to but PS3, Xbox 360 and Wii regardless.
This is not a big share of the market however, most consumers only know that PS2 was the big thing, and now there's 3. That's it. They probably don't know why it's supposedly better than PS2, but hey, it's got a 3 and higher number is always better. They probably don't know anything about it's early problems, it's market share, profitability, etc. They don't even care.

Except Sony has bet the farm on the PS3. Royalties from the PS2 isn't going to keep the shareholders happy. The model may be a bit different, but the concept is very similar. Seriously read the article. You seem like the educated sort that reads the WSJ anyway.
Sony hasn't be the farm. The future of Sony is not contingent on the success of PS3. Not at all. That company is big enough to absorb those kinds of huge losses, and has a history of doing so. Don't kid yourself. A few bad quarters on Wall Street isn't going to scare Sony.

The phone analogy was interesting, but really doesn't apply here - gaming consoles undertake dramatic improvements and changes. These 2 cell phones, not as much. The Krazar's primary function is to be a cell phone, and it really doesn't do that better than the Razar - the difference is the # of toys you get and how much consumers are willing to pay for it. That's more a case of product cannibalism. There's always a bit of that in gaming, but that's remedied by the planned obsolescence approach. PS2 will slowly be phased out, at whatever rate benefits Sony the most.
The gaming industry has decades of evidence of consumers migrating to the next generation of consoles, (and doing so gradually - a few years after launch) because they do the job better than the previous generation. All you have to do is look at Xbox 360's early success to see most recent example of this. Most people tend to buy cell phones only when they re-enter service contracts.

thekid

01-07-2007, 07:21 AM

Groundbeef

01-07-2007, 08:54 AM

Back up for a second - did anyone else here really hear all this so called over-hype from the PS3? I vaguely remember hearing rumours about it a few times, but it was hardly a pre-launch marketing campaign of epic proportions.
The only people who were exposed to Sony's ravings (whatever they were) were the super-hardcore gaming enthusiasts who went out of their way to buy magazines or search websites for PS3 development news. A lot of these gaming fanatics are going to but PS3, Xbox 360 and Wii regardless.
This is not a big share of the market however, most consumers only know that PS2 was the big thing, and now there's 3. That's it. They probably don't know why it's supposedly better than PS2, but hey, it's got a 3 and higher number is always better. They probably don't know anything about it's early problems, it's market share, profitability, etc. They don't even care.

Heres Some Tidbits for ya:

http://www.kotaku.com/gaming/sony/sony-exec-microsoft-is-not-a-technology-company-206399.php

http://www.gamespot.com/pages/forums/show_msgs.php?topic_id=25247543 (This one kinda sums up various statements and mis-steps)

http://www.gamepro.com/news.cfm?article_id=83692 (this one is kinda ironic)

Theres others, but I gotta run down and finish the rest of my basement.

Sony hasn't be the farm. The future of Sony is not contingent on the success of PS3. Not at all. That company is big enough to absorb those kinds of huge losses, and has a history of doing so. Don't kid yourself. A few bad quarters on Wall Street isn't going to scare Sony.

Did you bother to read the articles that I pasted earlier. Sony has invested much of its future on the PS3. Whether to drive business to the Blu-Ray, or Flat panel displays, or other Sony products. The PS3 is the linch-pin for its future sucess. As far as a few bad quarters? This has been going on for some time.

I am not suggesting that Sony is going belly up tommorow. But for you to simply dismiss the current finiacial crisis that Sony is experiencing is also disengenious. A few years ago, Sony may have had the finiancial padding to absorb these losses, but that cushion is mighty thin now.

The phone analogy was interesting, but really doesn't apply here - gaming consoles undertake dramatic improvements and changes. These 2 cell phones, not as much. The Krazar's primary function is to be a cell phone, and it really doesn't do that better than the Razar - the difference is the # of toys you get and how much consumers are willing to pay for it. That's more a case of product cannibalism. There's always a bit of that in gaming, but that's remedied by the planned obsolescence approach. PS2 will slowly be phased out, at whatever rate benefits Sony the most.
The gaming industry has decades of evidence of consumers migrating to the next generation of consoles, (and doing so gradually - a few years after launch) because they do the job better than the previous generation. All you have to do is look at Xbox 360's early success to see most recent example of this. Most people tend to buy cell phones only when they re-enter service contracts.

The differences are there, but so are the similarities. The discussion was about how MS cut off support for the orginial Xbox when the 360 came out. They removed the ability for its customers to continue to purchase the "old" and hold off buying the new. Because Sony has allowed the PS2 to stay out they have limited ability to compell consumers to upgrade. Coupled with the fact that the PS3 really doesn't have any great launch titles it sort of reinforces the rational NOT to upgrade.

And who is going to drop $150 on a PS2 and then turn around and buy a PS3 in a week or two? Probably not too many people. I just think the thought process is flawed for Sony. And I see similarties between Motorolla and Sony.

Groundbeef

01-07-2007, 08:58 AM

In my limited knowledge of this industry, which is based on what my son tells me the consoles are pretty much secondary to the software which is somewhat dependent on the graphics ability of the console. If a game becomes hot and is exclusive to a particular console then it can go a long way towards selling the console. A lot of my son's friends who are hardcore gamers actually have multiple consoles so that they can play whatever software is hot. I am sure Sony can be patient and as the software comes along they will build a following. From a price standpoint and ease of use for those of us in the "older" crowd I have to say I like the Wii and can see it expanding new markets in the gaming area.

I see your point, but it is MUCH easier to have multiple consoles when they cost $150-$200.

Unless your name is Gates, most people are not going to shell out $1000 plus extras so you can play 1 or 2 games you like on each console. The price of the new consoles are going to limit players to either a 360 or PS3 and then perhaps pick up a "Wii".

emorphien

01-07-2007, 09:15 AM

I don't know how keen developers are to develop for the PS3 when it has little or no performance benefits over the older Xbox 360 and is much harder to program for. If they want to show off graphical gee-whizzery the Xbox 360 is an easier platform to do that on.

kexodusc

01-07-2007, 09:42 AM

Did you bother to read the articles that I pasted earlier. Sony has invested much of its future on the PS3. Whether to drive business to the Blu-Ray, or Flat panel displays, or other Sony products. The PS3 is the linch-pin for its future sucess. As far as a few bad quarters? This has been going on for some time.

I am not suggesting that Sony is going belly up tommorow. But for you to simply dismiss the current finiacial crisis that Sony is experiencing is also disengenious. A few years ago, Sony may have had the finiancial padding to absorb these losses, but that cushion is mighty thin now.

Not downplaying Sony's difficult times at all or being disingenuous. But I'm not getting as excited and using phrases like "bet the farm" implying all-or-nothing with PS3. Sony's going to sell a crap load of PS3 even in the worst case scenario, they'll probably make some off BluRay (I'm guessing by caving into a hybrid format if the going gets tough). Wasn't that long ago Microsoft and AMD where pretty poorly situated financially and they turned themselves around. I highly doubt PS3 being a bust would even be the biggest crisis in Sony's history.
They might make some money, they might lose some. Wall Street's not banking on them making a killing but that can change really fast. 10 years from now Sony will still be selling cheap electronics. That is certain.

And who is going to drop $150 on a PS2 and then turn around and buy a PS3 in a week or two? Probably not too many people. I just think the thought process is flawed for Sony. And I see similarties between Motorolla and Sony.
How's the thought process flawed? By trying to maximize profitability for the entire basket of goods collectively instead of looking after each product in isolation? That's the difference between Sony and Motorolla - Sony is the former, Motorolla the latter.

I don't think PS2 sales are are anticipated to carry on so strongly for too much longer - but they'll enjoy them while they can. No, nobody's likely to buy a PS3 just 1 year after a PS2, but many of the millions of late PS2 buyers are quite likely to show up late to the PS3 party too.

Carl Reid

01-07-2007, 11:32 AM

Just my two cents on the Next Gen Wars.... (I've read most of the comments in this thread so far... a lot of interesting points and that article on Sony's financial position was good though long)...

Anyway, IMHO both Sony and Microsoft have done below average to downright crappy jobs of entering the Next Gen Wars.... Only Nintendo has done a 'decent' job this time around....

Sony and Microsoft have been more concerned with outgunning each other (by having the best graphics and the next DVD format) than with actually analyzing the market and seeing what consumers want....

I don't believe that this cycle will be the death of any of the three major players (unless Sony manages to bankrupt themself... but even that is far fetched)... People are way too quick to dismiss game manufacturers as dead... Many were predicting well in advance of any news about the Wii that it would be Nintendo's last gaming console... all based on the third place finish of the Gamecube in the last cycle (note that the 3rd place finish is in terms of volume not profitability)... Interstingly those same persons are no longer prediciting doom and gloom for Nintendo, now that they see that the Wii is in fact a viable product....

Of the three, I doubt that any will be the obvious heir apparent to the PS2.... Both the 360 and the PS3 are out of the running because they have gone for a poor market strategy... they are both attempting to sell a high volume of units but have chosen to go for expensive luxury items.... which makes no sense...

The PS2 was essentially a Toyota Camry (in terms of price and features) while the PS3 and 360 are more like Benz and Lexus.... Now how can Sony and Microsoft expect two luxury cars to outsell a solid mid-tier car? Luxury items are profitable based on low volume and high markup, while cheaper items are high volume and low markup.... that's a simple recipe for profit... Both the PS3 and 360 have low (or even negative) markup despites a high price but are trying to sell high volume... Which is a really poor strategy...

The only console that is even trying a remotely sane strategy is the Wii... which is low price and high volume sales...

Let us not forget the most important factor in truly pushing sales volume over the top... CASUAL GAMERS.... I can't see either the 360 or the PS3 capitilizing on casual gamer market share.... simply because Casual Gamers will not be willing to spend that kind of money on a console they may only play once or twice a month... (unless they are seriously wealthy).... so the only console that I can see stealing the wallets of Casual gamers this cycle is the Wii....

I think the market will be far more evenly split this cycle... with tremendous dissapointment for both Sony and Microsoft... since they both somehow expected to simply outgun each other, by dumping the most of amount of tech they could into overpriced consoles and expecting consumers to eat it up like a hungry stray dog...

I think the real excitement will be in the next console cycle when Sony and Microsoft have had a chance to learn from their numerous mistakes and hopefully focus more on what the consumer wants (and ripping off the strong points of the Wii), than trying to push whatever new dvd format they have in development or creating a living room SuperComputer...

Groundbeef

01-07-2007, 03:18 PM

I highly doubt PS3 being a bust would even be the biggest crisis in Sony's history. They might make some money, they might lose some. Wall Street's not banking on them making a killing but that can change really fast. 10 years from now Sony will still be selling cheap electronics. That is certain.

So tell me does Sony pay you by the word or per post? MS just cuts me a fat check each month. Perhaps PS3 failure wouldn't be the biggest failure, but I cant think of a larger capital expenditure on a single line that Sony has invested in recently. Coupled with the fact that Apple basically stole the portable music party that Sony once had (Walkman) and that Sony was very late to the Flat Screen Party, and that the Movie division seems intent on only releasing stinkers, yeah Sony has problems all over.

How's the thought process flawed? By trying to maximize profitability for the entire basket of goods collectively instead of looking after each product in isolation? That's the difference between Sony and Motorolla - Sony is the former, Motorolla the latter.

Were going to have to agree to disagree on this point. Perhaps it was easier for MS to cut the Xbox Console because it had a smaller installed base. But MS hasn't abandoned those gamers. Deveolpers are still releasing games for the console. 14 in Nov-Dec alone. With the PS2 base being larger, I can see that it is tempting to want to cater to them. But, without compelling them to upgrade, it only gives MS more of a lead in the next gen console arena.

I don't think PS2 sales are are anticipated to carry on so strongly for too much longer - but they'll enjoy them while they can. No, nobody's likely to buy a PS3 just 1 year after a PS2, but many of the millions of late PS2 buyers are quite likely to show up late to the PS3 party too.

Probably, unless future PS3 releases don't show marked improvement over the 360. Realizing that my anecdotal stories carry small weight, I work with several PS2 owners. In the past 3 months 6 have gotten 360's. Only 1 was considering the PS3, but couldn't pull the trigger for $600+. So we shall see who shows up late for the party!

Groundbeef

01-07-2007, 03:40 PM

Just my two cents on the Next Gen Wars.... (I've read most of the comments in this thread so far... a lot of interesting points and that article on Sony's financial position was good though long)...

Nice to see you here. Always nice to have fresh viewpoint. I'll take credit for the interesting points, and credit Wooch and kexodusc with ones that weren't :)

Anyway, IMHO both Sony and Microsoft have done below average to downright crappy jobs of entering the Next Gen Wars.... Only Nintendo has done a 'decent' job this time around....

Well techinically Nintendo isn't "Next Gen" More like last gen with a snazzy control feature. The Wii is fun for sure, but doesn't even play DVD's. Or music CD's. So its truly a dedicated gaming machine with limited internet capabilities.

Sony and Microsoft have been more concerned with outgunning each other (by having the best graphics and the next DVD format) than with actually analyzing the market and seeing what consumers want....

Technically the 360 doesn't utilize the next DVD format. It uses traditional DVD tech for the gaming portion. If you want the Optional HD-DVD drive that is sold seperatly. The PS3 is based on Blu-Ray, and requires Blu-Ray for playback of games unless using PS2 games. So in effect the 360 is offering what consumers wanted in Next Gen gaming using proven DVD formats.

I don't believe that this cycle will be the death of any of the three major players (unless Sony manages to bankrupt themself... but even that is far fetched)... People are way too quick to dismiss game manufacturers as dead... Many were predicting well in advance of any news about the Wii that it would be Nintendo's last gaming console... all based on the third place finish of the Gamecube in the last cycle (note that the 3rd place finish is in terms of volume not profitability)... Interstingly those same persons are no longer prediciting doom and gloom for Nintendo, now that they see that the Wii is in fact a viable product....

No disagreement on that one. The Wii is a great product. Now lets see what happens as HD is more widly accepted in 2007. As Flat panel prices dive and more consumers pony up for HD experience will they be satisifed with old school graphics and non-HD gameplay? This may be an issue for Nintendo.

Of the three, I doubt that any will be the obvious heir apparent to the PS2.... Both the 360 and the PS3 are out of the running because they have gone for a poor market strategy... they are both attempting to sell a high volume of units but have chosen to go for expensive luxury items.... which makes no sense...

Ummm...I don't think you can dismiss either the PS3 or 360. Currently MS is making about $75-125 (depending upon source of info) per 360. As mfg cost are driven down a price cut should be in 2007. Not so with the PS3, unless Sony wants the blood to really flow. With the 360 the expensive options are just that OPTIONS. If you don't want HD-DVD playback, dont buy it. Sony is saddling consumers with unecessary tech, and thus the expensive price tag.

The PS2 was essentially a Toyota Camry (in terms of price and features) while the PS3 and 360 are more like Benz and Lexus.... Now how can Sony and Microsoft expect two luxury cars to outsell a solid mid-tier car? Luxury items are profitable based on low volume and high markup, while cheaper items are high volume and low markup.... that's a simple recipe for profit... Both the PS3 and 360 have low (or even negative) markup despites a high price but are trying to sell high volume... Which is a really poor strategy...

Again, this has been covered before. Most console makers (with the exception of Nintendo) ALWAYS lose money on the console in the beginning until the experience curve, and economies of scale for parts drive the costs down. Licencing agreements help negate the red flow of ink.

The only console that is even trying a remotely sane strategy is the Wii... which is low price and high volume sales...

Again, we'll see if the blush is off the rose later in 2007 as HD gains more traction.

Let us not forget the most important factor in truly pushing sales volume over the top... CASUAL GAMERS.... I can't see either the 360 or the PS3 capitilizing on casual gamer market share.... simply because Casual Gamers will not be willing to spend that kind of money on a console they may only play once or twice a month... (unless they are seriously wealthy).... so the only console that I can see stealing the wallets of Casual gamers this cycle is the Wii....

Or the PS2 as it is still for sale. Considering the 360 only costs $299 w/o hard drive thats not out of range either. I wouldn't buy one (core unit) but it can be had.

I think the market will be far more evenly split this cycle... with tremendous dissapointment for both Sony and Microsoft... since they both somehow expected to simply outgun each other, by dumping the most of amount of tech they could into overpriced consoles and expecting consumers to eat it up like a hungry stray dog...

Any market share that MS picks up directly relates to market share that Sony has LOST. Its all gain for MS, all loss for Sony.

I think the real excitement will be in the next console cycle when Sony and Microsoft have had a chance to learn from their numerous mistakes and hopefully focus more on what the consumer wants (and ripping off the strong points of the Wii), than trying to push whatever new dvd format they have in development or creating a living room SuperComputer...

We will have that discussion some time in 2012 when they come out. Until then, lets deal with the current formats.

Carl Reid

01-07-2007, 04:47 PM

Nice to see you here. Always nice to have fresh viewpoint. I'll take credit for the interesting points, and credit Wooch and kexodusc with ones that weren't :)

Clearly humility is your strong point... LOL

Well techinically Nintendo isn't "Next Gen" More like last gen with a snazzy control feature. The Wii is fun for sure, but doesn't even play DVD's. Or music CD's. So its truly a dedicated gaming machine with limited internet capabilities.

Not sure I can agree with you on that one... What makes a console Next Gen? Just Prettier Graphics? Or does taking gameplay in a fresh direction with only a modest graphical upgrade count? And as for the Wii's inability to play DVDs or even CDs... I don't think either is particularly relevant to today's gamer.... great dvd players can be had for $30 now.... the days when the PS2 was the cheapest consumer DVD player are long gone... So now is probably a good time to return to dedicated gaming machines... and keep the price down....

No disagreement on that one. The Wii is a great product. Now lets see what happens as HD is more widly accepted in 2007. As Flat panel prices dive and more consumers pony up for HD experience will they be satisifed with old school graphics and non-HD gameplay? This may be an issue for Nintendo.

That may indeed be an issue for Nintendo.... but a cheap enough price will likely allow consumers to look past the lack of HD compatibility.... Besides... Nintendo's strategy has been to give gamers a dedicated game machine... that is truly fun to play... rather than just competing on which machines has the best graphics... so since people aren't buying the Wii for graphics, then HD may not be a big issue for Nintendo... but only time will tell.

Ummm...I don't think you can dismiss either the PS3 or 360. Currently MS is making about $75-125 (depending upon source of info) per 360. As mfg cost are driven down a price cut should be in 2007. Not so with the PS3, unless Sony wants the blood to really flow. With the 360 the expensive options are just that OPTIONS. If you don't want HD-DVD playback, dont buy it. Sony is saddling consumers with unecessary tech, and thus the expensive price tag.

Yes, Sony is undoubtedly the worst offender in the current war.... but I really find it hard to imaging either console outselling the PS2.... unless they have a ridiculously long life cycle... which I can't see happening... since there are currently 3 major players in the Market and at least one of them... will probably launch a new console within 5 years...

Again, this has been covered before. Most console makers (with the exception of Nintendo) ALWAYS lose money on the console in the beginning until the experience curve, and economies of scale for parts drive the costs down. Licencing agreements help negate the red flow of ink.

This is one of the advantages Nintendo has (even though logic might imply that it should be a disadvantage)... because its core/sole business is gaming... it has to remain profitable (even at launch)... and will not try to subsidize an unprofitable console... Therefore Sony and Microsoft take years to make any real profit on there consoles which is obviously a far riskier stragegy and one that could backfire if they don't get the kind of market penetration they expect....

Again, we'll see if the blush is off the rose later in 2007 as HD gains more traction.

I'm really interested to see if HD has the huge impact that many are expecting... I'm currently on my 2nd High Def TV in 2 years.... yet I don't think I've watched even an hour of HDTV in the last 2 years (despite having HD channels on my cable).... Yes my HD channels mostly suck... and my TV is excellent with Standard Def.... but it's hard to analyze the significance of HD, since it is really a format that has been pushed on the consumer as the new standard as opposed to being pulled into the market by demand...

Or the PS2 as it is still for sale. Considering the 360 only costs $299 w/o hard drive thats not out of range either. I wouldn't buy one (core unit) but it can be had.

The Core Unit is a poorly implemented joke.... so serious gamers ignore it and even casual gamers find the thought of spending extra money on the crap version of the 360 to be laughable...

Any market share that MS picks up directly relates to market share that Sony has LOST. Its all gain for MS, all loss for Sony.

Agreed.

We will have that discussion some time in 2012 when they come out. Until then, lets deal with the current formats.

Also Agreed

Groundbeef

01-08-2007, 06:24 AM

Clearly humility is your strong point... LOL

Funny, your not the first to say that.

Not sure I can agree with you on that one... What makes a console Next Gen? Just Prettier Graphics? Or does taking gameplay in a fresh direction with only a modest graphical upgrade count? And as for the Wii's inability to play DVDs or even CDs... I don't think either is particularly relevant to today's gamer.... great dvd players can be had for $30 now.... the days when the PS2 was the cheapest consumer DVD player are long gone... So now is probably a good time to return to dedicated gaming machines... and keep the price down....

Certainly graphics play a strong hand in any "Next Gen" console. However, there are certain programming advantages that the extra horsepower allow. More immersive enviroments (less pop-ups), more realisitic AI behavior, and larger areas to explore. Granted the Wii is ingenious in its control feature, but again as HD gains more acceptance, are people willing to put up with 2D sprites? Just today in the WSJ they are forcasting that HD capable sets are going to surpass sales of older CRT sets for the first time in 2007. That is monumental in acceptance. People may not be willing to drop 2K on a TV and have it look worse than the old set did.

As far as using the console to play DVD's, its a matter of convinence not necessity. I pulled my Sony DVD player out, and now use the 360 to play DVD's. And as soon as I get around to it, I'll hook up the HD-DVD player. Why? Because it upconverts, and I only paid $159 for it at CC.

Dedicated gaming is great, but frankly some other aspects of the 360 are popping out that I didn't think that I would use much. (BTW the PS3 offers many of these same benefits, but I don't have PS3). For example, I have my 360 on the home network. When family come over, I broadcast all my photos on the Plasma, and have music streaming from my PC playing over the Stereo system.

Over the holidays I used the D/L function on the 360 and pulled down the "National Lampoons Christmas Vacation"> It took about 35 min to get enough to start the movie and only about 1.5 hours for full d/l. Movie never stuttered or paused. All that for only $2.00. Cheaper than driving to the store and renting. And now I can D/L HD movies for only $3-4.

So if I only use the machine to play games occasionally, there are other functions that make it much more appealing.

That may indeed be an issue for Nintendo.... but a cheap enough price will likely allow consumers to look past the lack of HD compatibility.... Besides... Nintendo's strategy has been to give gamers a dedicated game machine... that is truly fun to play... rather than just competing on which machines has the best graphics... so since people aren't buying the Wii for graphics, then HD may not be a big issue for Nintendo... but only time will tell.

I think it will be more of an issue as time goes on.

Yes, Sony is undoubtedly the worst offender in the current war.... but I really find it hard to imaging either console outselling the PS2.... unless they have a ridiculously long life cycle... which I can't see happening... since there are currently 3 major players in the Market and at least one of them... will probably launch a new console within 5 years...

I don't know. Depends on how developing markets play into the equation. Check out this article about the 360 in India:

http://informationweek.com/news/showArticle.jhtml;jsessionid=FE3K0HNO4AOH2QSNDLPCK HSCJUNN2JVN?articleID=196602650

You may have to go through an add to get to the article. Pretty interesting read though. I dont' think they are going to sell a million units, but shows the ways the companies are trying to get new markets to adopt the technology.

This is one of the advantages Nintendo has (even though logic might imply that it should be a disadvantage)... because its core/sole business is gaming... it has to remain profitable (even at launch)... and will not try to subsidize an unprofitable console... Therefore Sony and Microsoft take years to make any real profit on there consoles which is obviously a far riskier stragegy and one that could backfire if they don't get the kind of market penetration they expect....

Actually, MS is in the black in 1 year on the hardware. Not sure when they will recoup initial investment, but falling hardware costs have helped. As Sony developed its own tech (cell) and custom graphics card, those costs will fall more slowly.

I'm really interested to see if HD has the huge impact that many are expecting... I'm currently on my 2nd High Def TV in 2 years.... yet I don't think I've watched even an hour of HDTV in the last 2 years (despite having HD channels on my cable).... Yes my HD channels mostly suck... and my TV is excellent with Standard Def.... but it's hard to analyze the significance of HD, since it is really a format that has been pushed on the consumer as the new standard as opposed to being pulled into the market by demand...

You need to pull your signal OTA. If you think your SD is good watch LOST, 24, or Football in HD. Your tune will change after a few hours of HD programming. The detail, sound, and experience are totally different. PBS offers many hours of compelling HD programming as well. Considering youve already paid for it, you might as well expereince it.

The Core Unit is a poorly implemented joke.... so serious gamers ignore it and even casual gamers find the thought of spending extra money on the crap version of the 360 to be laughable...

Its actually not "crap". There are not any differences in hardware to the premium other than a lack of hard drive. If you simply want to play games, the Core unit will allow you to do it in full next gen glory. However if you have a HD tv, then I would suggest the premium unit to exerience full HD.

The Core is to simply fit the casual gamer pocketbook. Just gaming without all the extras.

kexodusc

01-08-2007, 07:33 AM

So tell me does Sony pay you by the word or per post? MS just cuts me a fat check each month. Perhaps PS3 failure wouldn't be the biggest failure, but I cant think of a larger capital expenditure on a single line that Sony has invested in recently. Coupled with the fact that Apple basically stole the portable music party that Sony once had (Walkman) and that Sony was very late to the Flat Screen Party, and that the Movie division seems intent on only releasing stinkers, yeah Sony has problems all over.
LOL. You couldn't find a company I dislike more an Sony - From what I've seen, I'll be sticking with XBOX 360 if it's price drops enough. Otherwise Wii has peaked my interest the most of the 3. PS3 is a distant 3rd, and it would take some pretty magnificent games for me to get into PS3. I'm not sold on BluRay, and I'm personally rooting for HD-DVD for cost/benefit reasons. I think consumers have more options this time around, and less incentive to upgrade. So this format war is still very, very early. There's a lot of early Xbox buyers, but it remains to be seen if they'll be able to keep up their sales now that Wii and PS3 are fighting them head on in 2007. I'll boldly predict 2007 is harder on them than 2006.
Truth, is I think I've agreed with every point you've made about Sony's troubles except the magnitude of the current crisis. Sony's missed the ball big time in a lot of areas - crappy hi-fi, poor quality products, a cost-ineffective brand name retail store, and now seemingly a poor start to their one star product in the PS. (Movies are different though, 1 good title can change a company's fate in movies in a matter of weeks- most studio's are struggling these days - past performance is not an indicator of future performance).

I've maintained all along, I'm not ready to write of Sony based on the success of PS3. They could overcome PS3 being a big bust, and rebound with PS4. Now, if they continue to suck donkey balls for another 5-10 years they'll have serious problems. But that's assuming PS3 doesn't recover. I think there's lots of time for it to make Sony a lot of money on PS3. Not as much as they did on PS2, but not a wash either. People snarfed them up as fast as they could get them in most places. You can't find one in my region. Plenty of time left in the game.

Were going to have to agree to disagree on this point. Perhaps it was easier for MS to cut the Xbox Console because it had a smaller installed base. But MS hasn't abandoned those gamers. Deveolpers are still releasing games for the console. 14 in Nov-Dec alone. With the PS2 base being larger, I can see that it is tempting to want to cater to them. But, without compelling them to upgrade, it only gives MS more of a lead in the next gen console arena. The temptation to upgrade is the always taken care of in the new releases of supposedly better games on the next platform. That's going to happen regardless of how much support they provide PS2. When PS2 starts cutting into PS3 to the point that Sony is losing money on the total basket, they'll drop PS2 (well, significantly scale back at least). I think we also have to consider that a ton of 360 owners are going to also get the PS3. They'll probably wait a year or two though. We're what - 3 or 4 months into the PS3's launch?

Probably, unless future PS3 releases don't show marked improvement over the 360. Realizing that my anecdotal stories carry small weight, I work with several PS2 owners. In the past 3 months 6 have gotten 360's. Only 1 was considering the PS3, but couldn't pull the trigger for $600+. So we shall see who shows up late for the party!

I own a PS2 and XBox. I prefer the XBox by a wide margin. Enough that I have no brand loyalty to PS and some to XBox (though my recent experience with the Windows XP hotline has really soured me on MS).
I just found most of the common games were so much better on XBox.
I like XBox exlusives more than Sony exclusives too. And I like the HD-DVD aspect as well as the online gaming foundation XBox has. Significant advantages I think.
But those same advantages didn't translate into better sales in the last round. And at current prices, I don't see XBox 360 as being any better a value than the PS3 right now. I don't underestimate Sony's marketing ability, brand power, or the PS3 machine itself. I kind of suspect the vast majority of the market is going to wait until year 2 or 3 before finally buying the first console. I'll decide at the time what's a better value.

I agree with you - PS is gonna lose a ton of market share to Wii and XBox 360. I think Sony's tough talking aside, they recognize this and accept that. But I think the potential is there for them to make money off this.

One last thing - someone else mentioned it already, but I wouldn't be surprised if this generation fails to meet everyone's expectation - maybe too much, too soon, and too expensive for the average user. Wii really added a new dimension to the console war. I look forward to revisiting this a year from now to see where these 3 companies stand.

Groundbeef

01-10-2007, 01:08 PM

Looks like MS likes to throw down also. Check out this little outburst at the CES.

http://gamesindustry.biz/content_page.php?aid=22117

Groundbeef

01-13-2007, 01:48 PM

It appears that the sales of PS3 are so slow that Gamestop and EB games are now offering PS2 owners a $100 credit to trade in their PS2 machines for a PS3.

That is really pathetic that the PS3 has to be discounted so early in its life cycle for buyers. 360 only recently began offering incentives for purchase, and thats after a year of solid full price sales.

BTW was in BB today and they had a stack of PS3's (about 20 of them) right next to the 360 that was almost sold out. People were looking at them like they were going to bite, and no one bought any. Wii's are sold out.

http://www.gamestop.com/gs/weeklyad/current/olfsi_011207-1.asp

emorphien

01-13-2007, 02:42 PM

Our local BB had one PS3 (60gb), no Wiis and I didn't see any XB360s. My friend in NJ and I have been sending pic messages back and forth when we see them (or rather, he is mostly since he started it and keeps doing it). The store he went to today had about a dozen PS3s but no Wiis.

musicman1999

01-13-2007, 02:43 PM

emorphien

01-13-2007, 02:53 PM

It is just the opposite in my town,Xbox360 everywhere,Wii someplaces have stock,Ps3 is "we can put you on the waiting list,but we are not sure how long it will take".I do know one person that has the Ps3 and he loves it.BTW you should not make good or bad judgements about any product until they have at least been out a year.It is way to early to call the Ps3 a failure.

bill
How many PS3s are they delivering up there though? Perhaps they haven't met whatever demand exists in that area. In the US they've apparently saturated the market already... that or nobody knows they're available (doesn't seem likely anymore). You can say it's too soon to call it a failure, but as product launches and initial adoption goes, I'd say it's pretty bad.

Woochifer

01-13-2007, 04:07 PM

Maybe someone needs to send some units into my area! To this date, I've yet to see any PS3s in the store (aside from demo units), and I dropped by two Best Buy and two Fry's locations this week on various errands -- no PS3s to be found. If Sony follows thru on its projection to get 6 million PS3s shipped by the end of March, then it would stand to reason that they would start getting into stores at some point.

Groundbeef

01-13-2007, 04:09 PM

It is just the opposite in my town,Xbox360 everywhere,Wii someplaces have stock,Ps3 is "we can put you on the waiting list,but we are not sure how long it will take".I do know one person that has the Ps3 and he loves it.BTW you should not make good or bad judgements about any product until they have at least been out a year.It is way to early to call the Ps3 a failure.

bill

Your from Canada, and that doesn't count quite as much as the US. Don't take it personally, just meant that Sony didn't send as many units to you as the US. Canada didn't recieve nearly the stock that the US did. (Not that the US got that many anyhow.) The situation is to be improving shortly as Sony increases shipments.

Groundbeef

01-29-2007, 01:31 PM

It appears that the PS3 is cutting into Sony pretty deep.

http://www.bloomberg.com/apps/news?pid=20601101&sid=a4Jrqd8sIuJc

Not a "fanboy" rag I might add.

musicman1999

01-29-2007, 04:02 PM

Geoffcin

01-29-2007, 04:25 PM

It appears that the PS3 is cutting into Sony pretty deep.

http://www.bloomberg.com/apps/news?pid=20601101&sid=a4Jrqd8sIuJc

Not a "fanboy" rag I might add.

Since SONY is LOOSING mony on each and every PS3 sold, I don't see how not selling too many can hurt thier profits. Actually, NOT selling them means better cash flow!

They bet the bank on including BlueRay tech into the PS3, and I think the've sold about a dozen BlueRay disks at the inflated asking prices. Serves them right.

musicman1999

01-29-2007, 05:26 PM

I seem to recall reading in a post that blue ray discs are more expensive than hddvd in the USA,is this the case?Here in Canada both formats run $23-26 canadian.More expensive than regular dvd but not by much.

bill

Groundbeef

01-29-2007, 05:51 PM

Did you read the entire article?Profits are down yes,but they are still profits.Stock price is up almost 10 percent in the last six months,movie division is booming and other divisions doing very well.The drop was probably anticipated,it is not the first time a game console came out at a loss,i believe ps2 and xbox were money losers when they first came out.The hardware is sold at a loss to grab market share for software sales and thats where the real money is.Also the battery recall likely hurt more than the ps3 slow roll out.
I know you hate all things Sony but be objective.

bill

Settle down Beavis. Yes I read the article. Here's a gem:

"The game division, Sony's second-largest by revenue, probably lost 50.9 billion yen during the quarter, compared with a profit of 67.8 billion yen a year earlier, after sales fell 7 percent, according to the Bloomberg survey.

After botching the PS3's debut with production delays and cutting the price to compete against cheaper Wii and Xbox players, Sony will probably lose a record 191.9 billion yen from games this fiscal year, compared with profit of 8.7 billion yen the previous year, according to the Bloomberg survey. "

Lets review. Last year games profited 8.7 Billion Yen. This year, a LOSS of 191.9 BILLION Yen. Sounds like a banner year for Sony in the games division.

And no, I don't hate all things Sony. I just don't like the PS3 as much as the 360.

bobsticks

01-29-2007, 06:52 PM

I have a fair amount of young people that work for me, alot in that important 18 to 25 year old demographic. Most have ipods and flatscreens and many have Blackberrys. They are the techie kids of the new millenium and they are moderately more technically proficient than Joe Six-Pack. When I ask them their thoughts on Blu-Ray and HD DVD the perception is that it is virtually the same thing. Purchasing decisions for either of these two systems seems to have little to do with video formats, with controller preference, game catalog and cost all coming in as factors before any video sourcing considerations( seemingly in that order).
I don't know if this helps or hurts Sony but it I wouldn't bet that it would be good.

The XBOX is treating me pretty well these days. My only quibble is that the machine makes too much noise. I still buy regular dvds of course, but some of them there HD DVD thingies are just too sweet.

Woochifer

01-29-2007, 08:11 PM

Settle down Beavis. Yes I read the article. Here's a gem:

"The game division, Sony's second-largest by revenue, probably lost 50.9 billion yen during the quarter, compared with a profit of 67.8 billion yen a year earlier, after sales fell 7 percent, according to the Bloomberg survey.

After botching the PS3's debut with production delays and cutting the price to compete against cheaper Wii and Xbox players, Sony will probably lose a record 191.9 billion yen from games this fiscal year, compared with profit of 8.7 billion yen the previous year, according to the Bloomberg survey. "

Lets review. Last year games profited 8.7 Billion Yen. This year, a LOSS of 191.9 BILLION Yen. Sounds like a banner year for Sony in the games division.

And no, I don't hate all things Sony. I just don't like the PS3 as much as the 360.

Right, but was Sony expecting to make a profit in their games division during a year in which they launched a new console? A console in which they were projected to take a big loss on every unit that they sold, just on the parts alone?

Musicman already pointed out that the PS2 and Xbox were also money losers on the hardware side at launch. The more telling indicator will be down the road if these losses continue and/or grow. As of now, it's a case of tell us something we don't already know.

icarus

01-29-2007, 10:10 PM

Since SONY is LOOSING mony on each and every PS3 sold, I don't see how not selling too many can hurt thier profits. Actually, NOT selling them means better cash flow!

From a business stand point the majority of the loss would fall under overhead costs, such as machinery, managers wages, factory ect. so the more they sell the less the overhead is per product.

for example if the overhead cost was 1,000,000, and each playstation broke down to have a 400 dollar expense per unit, and a 200 hundred dollay profit margin. so with each unit sold that would bring the overhead cost down 200 dollars.

No company that has made a name for themselves such as Sony would make a product and sell it knowing that no matter how many units they sell they will just be losing more and more. If it is actually the case the president of Sony should fired, hung, and entered into the special olympics for being the dumbest person out there.

So when people say that they are losing money on each product.. that is just the initial costs, most manufacturing companies have to bite the bullet when they start producing a new product.

emorphien

01-30-2007, 05:26 AM

Isn't the sum of the parts and assembly on the PS3 a couple hundred more than the price of the console?

I recently read that the 360 had finally passed the point where they were making profit on each console sold. Aside from Nintendo everyone else loses money on the initial consoles until manufacturing improves and parts reduce in price.

Groundbeef

01-30-2007, 06:07 AM

Right, but was Sony expecting to make a profit in their games division during a year in which they launched a new console? A console in which they were projected to take a big loss on every unit that they sold, just on the parts alone?

Musicman already pointed out that the PS2 and Xbox were also money losers on the hardware side at launch. The more telling indicator will be down the road if these losses continue and/or grow. As of now, it's a case of tell us something we don't already know.

Yes, they were expecting to take a loss on the console. However, money managers were not expecting the sony corp to loose AS MUCH as they had.

I was just putting up a news article from a reputable financial source. Take it at face value.
It does appear that the PS3 is putting the squeeze on Sony finanacially. Musicman can spin it all he wants, but right now, the PS3 is a major drain of resources. Its not just each unit that loses money, but the enourmous capital expenditure to get the PS3 off the ground as well.

The Xbox was a money loser as well, and the 360 (although its now in the black...each console is making a small profit of about $75.00). However, at no point did the xbox or 360 for that matter drag MS overall profits down 50% for the year.

kexodusc

01-30-2007, 06:55 AM

Those figures aren't all that bad - and actually contradict the idea that corporate Sony is anywhere near crisis.

Not to mention, despite the fact PS3 was off to a bad start, Sony's stock is up quite a bit since summer, and an incredible 26% since October!!!
Stock prices reflect the intrinsic value of future cash flows. Despite all the negative press we're hearing about PS3, the market's confidence in Sony is increasing at a rapid rate.

Sales were down, not surprisingly, but the poor performance far exceeds the 7% loss in sales, that's easily attributed to PS3's startup costs. The games division of course employed big bath accounting to take as much of a hit from PS3's startup/launch costs in 2006 as they could. A massive portion of those costs aren't redundant and won't exist in 2007 when Sony's PS3 revenues increase. Easy to see a large reversal of fortune on the horizon, even if PS3 doesn't meet 2007 goals.
This is typical corporate accounting - when you have a bad year, make really bad, so you come out smelling like a rose when you recover the next year. I'm guessing 2007 PS3 builds some momentum, then 2008 is its breakout year if it's going to have one. We'll see.

Not a banner year, but 26% jump in 4 months isn't anything to sulk over. Nothing even closely resembling doom and gloom. I'm afraid Sony is alive and kicking, with its games division set to boast a big improvements in '07, and well positioned for 2008.
IIRC, PS3 doesn't even go global until March 2007 or something?

This isn't spin either. The only concern for analysts isn't whether Sony can make some money, but rather how much money can Sony make. They might disappoint and lose market share, but they're not going anywhere. If I were a betting man, I'd bet in 2011 when this generation of console is over and done with, we'll look back on PS3 losing some market share, but still being good for Sony.