PS3 launch, price doubts batter Sony stock

Share price sinks 3.6 percent on predictions of $900-per-console manufacturing cost, spring 2007 US launch; contradictory corporate statements follow.

Across the United States, most Americans were relaxing this Monday, courtesy of the long Presidents' Day holiday weekend. Not so across the Pacific in the corporate offices of Sony. The electronics and entertainment giant saw its stock price sink 3.6 percent, dropping to 5,300 yen ($45) per share. The fall affected the entire Tokyo stock market, with the Nikkei index dropping 1.75 percent to 15,437.93 yen ($130.57).

Monday's drop follows a 2.8 percent decline in Sony stock on Friday, after Wall Street stock-brokerage firm Merrill Lynch published a report skeptical of the company's next-generation console plans. It predicted that the launch of the PlayStation 3 console could be delayed by 6 to 12 months from its current spring 2006 window, resulting in an autumn launch in Japan and a late-2006 or early-2007 launch in the US.

"We wrote last November that Sony’s design choices for the PS3 had resulted in an expensive and difficult-to-manufacture product," read the report, "and we think that we're seeing the consequences of those choices play out now. In particular, we think the problem points are the Sony Cell processor and the Blu-ray drive." Merrill Lynch also cited heat-generation issues with PS3 hardware and the far-from-finished state of most games for the platform as factors.

While other analysts have predicted that the PS3 might not hit North America until Q4 2006 or Q1 2007--which would miss the all-important holiday shopping season--Merrill Lynch's stature made many a trader skittish. The fires of unease were fueled further by another component of the report, which predicted that the manufacturing cost of the console could be much higher than previous estimates of around $500 per unit.

"Our updated analysis indicates that the initial bill of [production] materials for PS3 could approach $900," read the report. The report said that the production cost of a single Cell processor will be $230 at launch, with the Blu-ray drive setting Sony back $350 per unit. However, the $900 price tag presumably includes a $100 optional hard drive, as a breakdown of component costs in the report totals just $795.

If the $900 estimate is correct, that means the PS3 would have to sell for around $775-$800 to maintain a $100-$125 per-unit loss similar to that of Microsoft's Xbox 360. If the $795 estimate is correct, the console could sell for around $699--within the range recently forecast by a group of analysts and developers polled by CNN/Money.

Merrill Lynch expects that PS3 production costs will start falling after 2007, when Sony can shift the Cell chip's manufacture from the complex 90nm process to the more cost-effective 65mn process. Scaling Blu-ray to other devices will also bring down the drive's price. Merrill Lynch predicts that the PS3's production cost will fall to $320 in the three years after its launch, by which time the Cell will cost only $60 per unit and the Blu-ray drive only $100 per unit.

In the wake of the report, Sony issued a series of contradictory statements. In Japan, Sony Computer Entertainment spokesperson Kei Sakaguchi flatly denied that there would be any delay to Bloomberg News and other press outlets, saying, "There isn't any change in our plan to release the console in spring 2006."

However, a Sony Computer Entertainment America spokesperson was more cautious when she spoke with USA Today. "We're aiming for spring, but we haven't announced specific regions," she told the daily broadsheet. "We're waiting for [final PS3 specifications] until the last possible minute, but the launch could be pushed back if they're not decided soon."

Written By

Discussion

1109 comments
mrakuaku
mrakuaku

Hey Firefruze, Word to the Ryerson MKT 200 students indeed.

firefruze
firefruze

Hello to all the other Rye High Marketing 200 students..... hopefully these supplemental readings dont take too long to read.

bratzboy
bratzboy

farewell Sony hello Nintendo wii! nintendo will rule 1st: Wii-new style of gameplay all new games cheap price download gameplay,online gameplay, gamecube games playable controllers and memory cards also! need I say more! 2nd: Xbox 360: unique games and alot of new stuff but there r alot more nintendo fans then this! 3rd: PS3: apparently no mascots too much of a high price and games themselves will coast over 90 bucks! probrably!

gatsbythepig
gatsbythepig

merrill lynch give me a break probably 599 they just can't predict hardware prices for the game industry probably 599 they are stock analysts theirprediction falls outside the domain of their discipline probably 599 they are wrong probably 599 the ps3 will cost either 499 or 599 non-bundled probably 599 end of story, don't listen to the reports or price conversions probably 599

eternal_dragon0
eternal_dragon0

First of all, there's no way in hell Sony (or any console producer) will price their machine at anything over $600. Noone'll be able to afford it, at least not the general public. I think the PS3'll come out with a price tag close to the XBox 360 or else ppl'll start defecting over to Microsoft, if they haven't already. Oooor, just get a top-of-the-line computer, which costs less than $1000 nowadays instead of getting the PS3, which only handles games. (no internet, no printing, no downloading...) And a last note, I'm actually pretty curious to see where all this is leading, since it's obvious that Sony hasn't come out with the PS3 yet, and it's getting closer to summer than spring now. Then another mystery is why they aren't giving the public any idea of the price yet. (Are they simply afraid their huge price tag will scare everyone off?) As for buying the PS3, I'm guessing that I'll be waiting the year for the price to drop within my range... lol

niro1885
niro1885

OH thats a low blow to all sony fans.I think microsoft might be the big company for games. if this is true,i hope nintedo wont be like this also.

vivaladaryl
vivaladaryl

thats crazy. Ps3 going to lose next generation

vivaladaryl
vivaladaryl

thats crazy. Ps3 going to lose next generation

Dougystyle79
Dougystyle79

Wasn't this the same price as the Neo-Geo system almost 15 years ago? Wow... and look how well that console did in the states!

indrid-cold6684
indrid-cold6684

all sony needs to do to make the ps3 work is hold squaresoft hostage until they remake final fantasy 7 then a $700 price tag becomes nothing more than a simple question of entering nirvana or sitting on your couch :D

Bowzer115
Bowzer115

And it Goes 1st: Nintendo 2nd: MICROSOFT!!!!!! 3rd: Sony Sony makes t.v.'s leave the games to the other 2.

Bowzer115
Bowzer115

The Revolution is the only system worth paying for, its gonna be low of costs and a new way to play games. Think of this, how many people do you think still likes to play the old school Zelda, Mario ect. games, a lot more than you know. The graphics are very bad compared to the games nowadays, but we still play'em. The truth is that games that are better at the Story, Gameplay and just games that are fun BEAT ANY GAME THAT A GOOD GRAPHICS OR FOR THAT MATTER GREAT GRAPHICS. Nintendo has been in this Video game field way longer than Sony and Microsoft together, trust the Company that only make games, and not the ones who make T.V's, dvd players, camera's and software. You dont get a Sandwich from Sports Store so why buy a game system from someone who wants to just sell you something that will be out dated in q year or two ?.

Thuganomic05
Thuganomic05

Farewell Sony, hello Microsoft, Sony just lost a customer

senjutsu
senjutsu

are you all stupid? Do you really think It'll cost 900$? lol yes they won't go on store before fall japan, and not a good chance the america can have it before late 2k6, but by waiting the 6month, the prices will drop a little for them, and the chip will be made easilly. So I say that the ps3 will be on sale in samerica in september-november, and it'll cost ~600$. So what, at least you have a media center! It's WAY better than to pay 500$ for an xbox360 who's just an "extender" of media center. anyway, launch games are pure fun! and metal gear solid will find my hands cause I'll buy it =D . Anyway, Sony is not stupid, so stop worrying all day :S Sony is a superstar in marketing, lol. I would'nt be suprised the xbox360 won't sell anymore after the launch of the ps3. like: if you have money, put 100$ more for something that worth it you have not a lot of money? buy a ps2 ( they will upgrade it with the magic wand , a design made long time ago but never used, this will a little bit, conter the nintendo revolution tith a ps2 price of 99$ when the rev will come up ) so Sony Kicks asses! Anyway microsoft made less sales than the game buy micro who doesn't sell pretty much anyway in japan. So in japan you won't see a lot of x360 lol. Japan is the land of Sony, so Sony will always be safe to try! as america is not a big industry of video games like japan. Anyway, I say: 1st: PS3 2nd: REV 3rd: x360 with lot less overall sales Anyway, you have a x360? no? why I'm not suprise, anyone with sense ( or lack of money lol ) will wait to see what's the best out of the 2 consoles, not buy every one of them. So if PS3 can do what it says, they're in! =D

AuronGamer
AuronGamer

If they release it in the orginal alotted time period then i dont care for the price of the console becasue I will buy it no matter what the cost as long as i get my hands on it soon...now if it will take them over a year past the orginal launch date then I better get a price drop because this will not fly over very well if you make people that want it, wait for up to a year longer and have the price increase.....sony i hope you know hwat your doin... PS3 Savings to date= More than you got..YEEE!

DrakFirez
DrakFirez

Technically they can charge whatever they want, at $900 a unit (give or take, hard drive, cost at time ect.) only upper class peeps will be able to afford this system...is that enough for sony to sell it for that much.....sure it is, when people start dishing out 5g's for a tv then another extra thou will mean peanuts to them. Face it people, the middle/lower class gamers are getting kicked in the balls here. Microsoft with their basic/FULL system "choices" and x-box like crap, noe sony with their advanced specs......hmm.....maby nintendo will come out on top this time. Innovative controls, downloadable games, probably a good price, you do the math.

sargentpsgamer
sargentpsgamer

i have alot of money saved for ps3 i justh ope it can go to more than a ps3 system, like games. sony said they will lose money many times and i think this is where that falls, they also said they are trying to reach a price of the other systems, my guess is the ps3 will be 399 or 499. i just hope sony gets the product ive been waiting for out whith the date they back so much, SPRING. a high price means major loss. i just want quality and a date for now so i can reserve mine.

Curufenwe
Curufenwe

i dont think they would charge over $600 it would be a suacide

anobleloss
anobleloss

i guess i gotta sale my soul for dis system LMFAO

PSPdude79
PSPdude79

With that price,i'm buying a 360.

Mkgodofwar
Mkgodofwar

NO problem ,Who cares about 900$ if u r buying a stuff

pvtvaladez
pvtvaladez

maybe its 900 bucks because it might come with all the accessories and come with games and possibly a tv???????????????????/ this is my opinion

localbasketcase
localbasketcase

People spend 5000 dollars on gaming PC's why is it so hard to believe...

joshfrequency
joshfrequency

they are only quoting people who are speculating on the release of the system, and whats its components are going to cost.... of course the cost is going to be up there at the beginning thats how it usually is, ive seen two quotes from sony executives who say that it will NOT go over $500. sony can afford to make their system cheaper at the beginning, because yes, they might fall short for the first day or two, but after that with the hype, the game vaule, and mass-production the value of ALL those components will dramatically decrease. and again, they arent quoting any specific Sony execs ... who are going back on what they have allready said, the majority is stock/economy analysists, who have egos the size of Jupiter. ... and xbox sucks /theend. sold my unit the first month i had it. haters can go destroy themselves.

SaBy_69
SaBy_69

Ps3 looks like a scanner. Its game controller is a batarang. Its has Spiderman font on the front. It will most likely cost over 700$. Nintendo Revolution's game controller is a TV remote. Xbox 360 looks sleek and sexy. Its controller is perfect. No one can match Xbox Live. It costs 399. These words speak for themselves. Period.

Deadpool2000
Deadpool2000

Sony is basically screwed if this is true. No one will pay $800 or a console except for rich parents who spoil their little brat kids. But theres only so many rich ppl in the world :p

muzaffersezen
muzaffersezen

ohh my god 900$ wow no body buy it x-box 360 399$ so

nicecheese
nicecheese

All i can say is you have lost my vote sony im going to stick by my xbox 360(microsoft)

xcom44
xcom44

I think everyones forgetting something. Remember all of the rumours about the ps2, it was gonna cost this, it wasn't coming to Europe, all it did was make people want it more. Sony are not stupid, there is no way on this earth that they would charge 900 dollars for the ps3. The truth is Sony's marketing department are running the show. Lets face it, they make loads of rumours about the ps3 costing 900 dollars, and when it finally comes out they charge less. Everyone will go out and buy one. By creating unceartinty Sony are stopping people from going out and buying the Xbox 360, many people are waiting to see what happens with the PS3. Bottom line is that sony will not charge 900 dollars for it, because they know that they can't.

sirzepp
sirzepp

So let's say they release at $299...no matter what...and let's say the console cost $700 to manufacture. let's say it blows up and sells 10 million the first year...that's a loss of 4.3 BILLION dollars in the FIRST YEAR, ouch. I'm not investing in Sony this year...

venieris65
venieris65

all these could be mind games from sony......at least i hope they are

pspboy666
pspboy666

there goes your number one seller position,Sony

Llothos
Llothos

other rumors and speculations say that sony will have to sell the system for less than the 360 so they can actually compete. Yes this could be their downfall but we will never know until something is "OFFICIAL" and none of this speculation and aparent "studies". I hope they announce something at e3 but i guess we wait. If it does turn out like that i guess i'll just have a lot more time to play my revolution until the prices start to drop on everything.

BrodiMan
BrodiMan

Wow, to the previous poster, comparing Sony to Hitler....wtf is going through your head... People tend to forget that consoles are usually sold for less than what it cost to make them. Companies lose money on the console, they always have and always will. What makes the money for the companies is the software and accessories. Those A/V cables you buy for $5 probably cost 50 cents to make, yet the console you bought for $200 probably cost about $400 to $500 to make. Sony knows what it is doing. They know that any price over $400 would be marketing suicide. So everyone calm down and take a deep breathe...

Frank__i
Frank__i

sony is crazy, there going to far and they will fail , like when hilter attacked russia. biiiig mistake ....

knowitall55
knowitall55

You guys, Sony is an experienced company, they know what to do. I am gessing it will cost more the sooner they will be releasing it. Remember, the ps3 comes with Blu-ray, thats alot of $$ right there. There is no way it will cost that much. Anaylysts do not not knoe much about video gaming. Most im paying is 500, and thats with hard drive. They mean 900 to make, not to buy. That means about $600. remember, the ps3 is still supposed ro be a better console. But anyways, PC gaming is sooo much better than console gaming exept for a few exceptions like playing with your friend on mario kart and then tring to kill him in some multiplayer game. And maybe games like mario bros 8 or other platformers. Console gaming is just horrible, but wait dont worry about it being over priced. Im willing to bet the price of a ps3 that the ps3 will be anymore than 500 with the hard drive.

redrobodragon
redrobodragon

sony lost the game when microsoft launched the 360... even if they do lunch in the sam price as 360, they will stilll loose the game.

Kiith_Somtaaw
Kiith_Somtaaw

Microsoft will rule the world.. Mwuhahahaha...

Rainforest76
Rainforest76

I can't believe this! This is Crazy! No way am I planning to buy this. Not even in a couple of years. Go for the reveloution!

BigB76
BigB76

if sony thinks at 700-900 dollars they can sell a new system with what will be 1st generation games that wont use more than 10 % of the system's power, along with the fact that by that time we will start to see 2nd generation games for the xbox 360 possibly including halo 3, wow...it would suck to own sony stock.... microsoft must be grinnin!

boolow407
boolow407

Sony doesnt care. Look at their overpriced TV's and what you can get from a different manufacturer. If the PS3 is a flop, they will move on to make some other electronic device that they will monopolize, then leave us high and dry again. They have little to lose here. There are so many different branches of electronics that they are involved in, they can care less. If they go ahead with this, I will no longer buy any sony products. Each day they stay silent, is another grip of customers lost. Also, have a look at gamespots poll of whats the highest you will pay for a PS3, 1 % said they would pay $799. A whopping 1%. Nice knowing you Sony.

malan4ever
malan4ever

Ok what the big deal! Jeez guyz it's not so bad we still got the 360 and revolution. I've been saying tiz for awhile now Sony is way over it'z head on tiz one. They're getting desperate and do stupid stuff which in the end will be their downfall. So hooray for "The Revolution". Sweet I say, don't you agree? $900 Hilarious!!! Wahaha...

INACT1VE
INACT1VE

I'd rather build another gaming PC with the money. If that is true, Sony, you have betrayed your loyal fans. You better make it up to us somehow.

mavikytta
mavikytta

900 Bucks? American? That's like... $1500 Canadian.... Yea right.

boomsnake
boomsnake

I dont think we should worry too much companies like this always find a way out and im pretty sure that sony has experience in that