<xenos> wrote in message news:NMudnYyozuVvbFzfRVn-oA@comcast.com...
> http://www.gamespot.com/news/2005/06/28/news_6128295.html
> Report: PS3 to sell for $399, cost $494 to make
>
> Merrill Lynch Japan predicts Sony will lose more than $1 billion on 
> hardware during its next-gen console's first year on the market--a sum it 
> may not be able to recoup.
> According to the latest issue of Japanese magazine Toyo Keizai, Merrill 
> Lynch Japan Securities has recently calculated an analysis that the 
> production of a single PlayStation 3 console will cost Sony approximately 
> 54,000 yen to make ($494), as of its initial release in 2006.
>
>
> Merrill Lynch Japan estimates that the machine's main components--namely 
> its Cell chip, RSX, and BD-ROM drive--will cost about 11,000 yen ($101) 
> each. After adding the other electronics that will be used in the PS3, the 
> machine's production cost goes up to 54,000 yen.
>
> Given that Sony's PS3 will face stiff competition from Microsoft's Xbox 
> 360, the chances that Sony will release its console at its production cost 
> is slim. Under the assumption that the Xbox 360 is expected to sell at 
> around $299, Merrill Lynch Japan predicts that Sony will sell each PS3 at 
> the price of 44,800 yen ($410) in Japan and $399 in America. That would 
> mean Sony would suffer a loss of more than 130 billion yen ($1.18 billion) 
> during the first year of the PS3's release.
>
> By comparison, the PlayStation 2 cost 39,800 yen ($364) in Japan and $299 
> in America when it launched in 2000. During its first year of release, 
> Sony Computer Entertainment suffered a loss of 51.1 billion yen ($458 
> million), but it recovered the next year with a profit of 82.9 billion yen 
> ($759 million), followed by 112.6 billion yen ($1.03 billion) the year 
> after.
>
> It is normal for game companies to take a loss on hardware whenever a new 
> console launches, since they typically focus on acquiring market share 
> rather than generating a profit during the first year. During the second 
> year and afterward, they can recover the losses with the savings that come 
> from mass production and with licensing fees from publishers.
>
> However, Merrill Lynch Japan warns that the normal console business cycle 
> may be disrupted if Microsoft cuts the Xbox 360's price when the 
> PlayStation 3 launches. The report goes on to say that such a move could 
> hurt Sony's plans, bringing an additional loss of 80 billion yen ($730 
> million) in its second year and 50 billion yen ($457 million) in its third 
> year. Thus far, Sony has already invested 200 billion yen ($1.83 billion) 
> into development and production for the Cell chip alone.
>
> Toyo Keizai goes on to interview Sony Computer Entertainment president Ken 
> Kutaragi, who avoided revealing the PS3's price but hinted that it would 
> not be marked down excessively. "Whether consumers think a product is 
> expensive or cheap all depends on the balance between its appeal and 
> price," he said. "Our ideal [for the PS3] is for consumers to think to 
> themselves, 'OK, I'll work more hours and buy it.' We want people to feel 
> that they want it, no matter what."
>
> "When Nintendo was selling its 16-bit machine at around 12,500 yen ($114), 
> we sold the first PlayStation at 39,800 yen ($364)," continued Kutaragi. 
> "The press was saying that it was expensive, but it was a huge hit. It's 
> the same thing with the PlayStation Portable from last year. The Game Boy 
> Advance is a same handheld gaming machine, and it costs less than 10 
> thousand yen ($91). On the other hand, our PSP had cost 25,000 yen ($229). 
> But people lined up overnight to buy it, and it sold out on the day of its 
> launch. It all depends on whether people want it. Of course, I'm confident 
> that the PS3 is a product that people will definitely want."
>
>
>

Call me crazy but I think they'll somehow manage to sell them at $299 from 
launch. I mean, weren't people saying the same thing about the PS2 well 
before it was released?