The woe of the little black box
The PS3 either needs a price drop or to drop out of the console war entirely
By: Robert Seitzinger
Issue date: 5/23/07 Section: Arts and Culture
In the universe of video games, it's amazing how quickly an empire can crumble. Less than a decade ago, Sony wowed gamers everywhere with news of their follow-up to the PlayStation console, then considered the height of cool for console gaming. The PlayStation 2 took Sony even higher in the console war, dominating longtime champion Nintendo and holding steady over Microsoft's Xbox.
The PS2 is still dominating eight years later with the best sales record of any console ever, totaling 115 million units sold through the end of 2006.
But their success has made them cocky as the top name in console gaming, leading them to make some costly mistakes with the new PlayStation 3. The biggest problem has been its price tag, which has been set at $600 since the PS3 was launched last November.
Of course, Sony didn't declare such high prices just to piss off gamers: the average manufacturing cost of a 60GB PS3 is $840.35, according to market researchers at iSuppli. With a suggested retail of $600, that's over $200 in losses for each unit sold, a profit/loss margin that is hurting Sony during a critical phase of the console war.
The high manufacturing costs come for three reasons: Blu-Ray disc support, an internal hard drive with as much memory as a common PC, and the Cell Processor, the very pricey heart and soul of the PS3. Each of these features are superb, but they're overkill for a gaming console, especially since Blu-Ray discs and the Cell Processor are cutting-edge technology that won't get cheap for a year or two.
The plan behind such a high-priced console was that the first year would be rocky, as devout gamers with fat wallets bought the first wave of PS3s. Sony would then make up their losses on the system manufacturing costs in game and accessories sales, as the technology market accelerated and the price of the PS3 guts dropped. Then, when Sony could afford a PS3 price-tag drop, it would start selling as well as the PS2 and catapult Sony back into the console war throne.
The PS2 is still dominating eight years later with the best sales record of any console ever, totaling 115 million units sold through the end of 2006.
But their success has made them cocky as the top name in console gaming, leading them to make some costly mistakes with the new PlayStation 3. The biggest problem has been its price tag, which has been set at $600 since the PS3 was launched last November.
Of course, Sony didn't declare such high prices just to piss off gamers: the average manufacturing cost of a 60GB PS3 is $840.35, according to market researchers at iSuppli. With a suggested retail of $600, that's over $200 in losses for each unit sold, a profit/loss margin that is hurting Sony during a critical phase of the console war.
The high manufacturing costs come for three reasons: Blu-Ray disc support, an internal hard drive with as much memory as a common PC, and the Cell Processor, the very pricey heart and soul of the PS3. Each of these features are superb, but they're overkill for a gaming console, especially since Blu-Ray discs and the Cell Processor are cutting-edge technology that won't get cheap for a year or two.
The plan behind such a high-priced console was that the first year would be rocky, as devout gamers with fat wallets bought the first wave of PS3s. Sony would then make up their losses on the system manufacturing costs in game and accessories sales, as the technology market accelerated and the price of the PS3 guts dropped. Then, when Sony could afford a PS3 price-tag drop, it would start selling as well as the PS2 and catapult Sony back into the console war throne.
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