PS3 Price Over Time

so.  there’s this pseudo-report that came out today from “seeking alpha” — whatever that is.

anyway, it’s very good.  i actually agree with everything they’ve said.  analyst todd mitchell from kaufman bros. appears to have a good head on his shoulders.

i should go check his starmine rating on yahoo.  hang on….

there he is: Mitchell, Todd.  too bad he doesn’t have an accuracy rating.  somebody should really figure out how to accurately measure this stuff.

as i was saying, i read this report summary thing.  good stuff.  prompted me to put down on paper (blog) even a few thought rolling around in my head.  i actually posted it as a comment over at joystiq, but here’s the results:

39. “They will wait, like me, for PS3 to come down in price and be more available”

heh. every time someone says this, another ps3 game dies.

i know!

let’s do some math!

so, i’m pretty sure everyone will agree that consoles prices come down about 20% per year. for example, last generation’s systems would go something like this:

year 1: $300
year 2: $240
year 3: $192
year 4: $154
year 5: $123

not exact, but a pretty decent “rough estimate.”

now, let’s look at this generation’s consoles:

year 1: $400
year 2: $320, $600, $250
year 3: $256, $480, $200
year 4: $205, $384, $160
year 5: $163, $307, $128

so, all of you folks who are waiting for the ps3 to come down in price before getting one are giving the 360 and the wii a crazy software ramp-up period.

what does that mean?

that means without an install base, the ps3 won’t get the software support it needs. that’s why it dominated last generation — not because developers loved sony, but because they enough units out there that making exclusives made financial sense.

if you don’t buy a ps3 in its early life, you’re guaranteeing the only games you’ll ever see on it will be first party and ports.

m3mnoch.

Posted at 3:19PM on Dec 15th 2006 by m3mnoch 7 stars

i always knew in my head that everyone who says “i’m waiting on the price to drop” was in for a hard time.  tho, looking at the actual numbers penned, it seems even more painful than i imagined.

the 20% edict means 4 years of xbox 360 games before the ps3 even reaches the launch price of the 360.  who’s going to hold out that long?  even then, who’s going to buy a ps3 for twice what the competition is selling them for — still!  after four years!

you know what the heartbreaker is for the ps3 tho?  blu-ray.  (heh.  you saw that one coming, eh?)

the price on stand-alone blu-ray players will fall even faster than the ps3 prices.  for 2 reasons:

  1. stand-alone players don’t have cell or rsx parts to pay for too.  for other players, it’s just a manufacturing process for an optical drive that needs to be refined.
  2. sony can’t afford to subsidize like they are forever.  the ps3 needs to make money — badly.

bottom-lined?

stand-alone blu-ray players will be cheaper than the ps3.

other game consoles will be cheaper than the ps3.

ouch.

m3mnoch.

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3 comments so far

  1. Factory on

    Dubious. The cost of transistors in chips essentially approaches zero in the long run, essentially making that part of the cost irrelevant. When you are into the fifth year of console hardware it’s the case, the cost of the drive, the physical size, controllers, etc that start becoming the dominant costs of the console.
    Which tends to make every console end up costing about the same although there are exceptions, like the xbox which unwisely chose components where they could not control the costs.

    This gen will prolly see the Wii being a bit of an outlier. It doesn’t have much c/gpu power as the other consoles so it will prolly not see as much cost savings from cheaper c/gpus. Ergo it will prolly not fall in price as much as the other two will. OTOH it doesn’t have a hard drive, so it will prolly be able to maintain it’s position as the cheapest console, but prolly not as dramatically cheaper as it is nowdays.
    As for the PS3/360 situation, the 360 will always be a year ahead on price (or at least cost to manufacture). But methinks that if one of them emerges as a clearly dominant leader (as the PS1/PS2/NES/etc did) then that console will prolly always cost more than the competition. The best consumer result is if the three consoles are all tied when it comes to marketshare, which should drive prices to the lowest they will go.

  2. m3mnoch on

    nah. the ps3 will always and forever cost about twice what the others do.

    1) it’s the blu-ray drive. it’s built on a whole new manufacturing process. those head assemblies are crazy. everything else is silicon or other fairly standard manufacturing processes. the standard dvd drive in the xbox 360 for example.

    2) you’re forgetting the subsidization. right now, both the wii and the 360 are profitable hardware. the ps3 is taking a $300 bath. as the cost to manufacture the console goes down, it’s just taking from the subsidy, not from the console price.

    they’ve screwed the pooch because not only is it a crazy expensive console, but, it’s got a crazy high subsidy tied to it too.

    you can’t do both.

    m3mnoch.

  3. Grindstone on

    That, and all the negative press isn’t helping much either:

    http://www.joystiq.com/2006/12/18/time-magazine-deems-ps3-a-bust/#comments

    TIME magazine is even pulling punches now.

    I honestly have nothing personal against Sony and I am interested in them sticking around in the industry. But when the press, who normally cater to the winner, start in with pre-doomsday predictions, it starts to influence the right people — the casual purchasers.

    I never focused on business classes in college, but from my vantage point, I would not want Sony’s current position.

    Best line from the article: “you know you’re in trouble when you’re beat by something called a Wii.” ROFLOL!


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