R.I.P. PlayStation 3 20GB is officially no more

"It's a good idea to not produce a system nobody will buy"

it's hard to buy a system nobody carries, or Sony doesn't ship.

When was the last time a console maker stopped selling a model after 6 months?

Since they're using the Spiderman font for the PS3 anyway, where's the Spidey3/PS3-VenomEdition?

Please enlighten me on this multiple next-gen SKU debate. There's 360 CORE and PS3 20GB right? Well I thought the Premium, Elite and 60GB models were icing on the cake. The cream frosting.

All the gamers make them sound like it's the cake itself, though. (At such a high price too!)

Relax everyone, this is good news for all of us. This all but confirms that the 60gb, WiFi, media slot-having model with be $499 shortly. Personally I think it will happen right around the time MSFT drops the elite on us, but undoubtedly this will happen before the holiday season. Sony has to realize that they stack up VERY favorably to 360 when the 60gb PS3 is sitting right next to a 360 Elite. For $20 more you get BluRay and WiFi? It's a no-brainer.

What I'd like to see? Give us the 60gb for $499 soon, then around x-mas deliver that rumored $599 80gb model, this time including an HDMI cable and the bluetooth BluRay remote with it.

Sweet I just got a 20GB on eBay, which is now a collectors item

hegemonyhog has hit the proverbial nail on its proverbial, flat head.

The PS3 was not built as a mass-marketable machine. Sony fooled themselves into thinking it, based on their insistance to use a loss-lead strategy (stupidest strategy to use for any reason outside breaking into a new market), but facts still stand that the PS3 is not an everyman's game console.

Given the $500 price point (or even $400 for the 360 premium) is outside the realm of a reasonable purchase for something to just play games on now and again, as the bulk of game console owners do. Both the PS3 versions were built to cater to the "money is no object" crowd. Given that money is no object, there isn't a point in getting the $500 version simply because money is no object. The out-of-pocket expense is essentially the same for these guys, so why not buy the version with more stuff in it?

At $300, Microsoft hit the "money is an object" point, but one that works well for major holidays and birthday presents. The other $100 for the HD isn't a big deal if purchased down the road. We have to remember, the average consumer is not saavy enough to save money and by offering a $300 version, Microsoft can make the sale and still sell the bits and pieces extra when the consumer gets the money.

Sony miscalculated the monthly disposable income of the population. It isn't a matter of if they can save up and buy it this year, it is a matter if they can buy it on their next paycheck. People can do that with a 360 but not a PS3. The extra $200 between a Core 360 and the now-dead 20gb PS3 translates into $10,400 in yearly income extra needed to make the purchase. Someone pulling down $35k a year (the average US salary) can make a purchase of a 360 Core without much of a problem but can't make a purchase of a 20gb PS3, let alone the 60gb.

The best bet for Sony is to strip out as many features as it can and make that a "Core" product. Pull the hard drive, pull the WiFi, pull the extra ports for cards. I would also suggest pulling the Blu-Ray and going with DVD (subsequently telling developers to quit wasting our time with bloated HD video that takes up the entire space of a PS2 game), but we're past that point in the design stage. They can then sell all that stuff as add-ons when the customer gets the money.

The only reason I hate Sony is their business model is pathetic. Either price it at $1,000 and treat it like the enthusiast product it is or scrap the entire thing and redesign it with a $300 price point in mind. The unit is a great piece of technology, but they've seriously misjudged the audience. The only reason I'm holding out is becuase I'm not convinced the PS3 will ever reach a point where we will see those quirky PS2 games I fully enjoy show up, leaving me with an original Xbox experience that is nothing but cookie-cutter "blockbuster" titles with a limited selection of creative titles.

LaughingTarget: Couldn't' have said it better myself.

Hey "but... but... Wi-Fi is 100$!" people:

And the Playstation 3 move even more firmly in the realm of things only available to rich people. I hope you people enjoy your HDTVs and sports cars and houses the size of Rhode Island.

Those of us still in the real world with real jobs and real bills will be playing our Wii's and, if we're lucky, 360's.

Great. I hear people don't want the 20GB to begin with. Now is the time to grab a 20GB on the cheap from eBay (seems to be going for $400-450), since they can't be returned to stores.

"50. Relax everyone, this is good news for all of us. This all but confirms that the 60gb, WiFi, media slot-having model with be $499 shortly."

But... I don't want to spend 500 bucks on a videogame system. If they lowered the 20gb to $400, I'd get that. But making the ridiculously expensive version of the PS3 slightly less ridiculously expensive doesn't interest me.


@LaughingTarget

tru dat

Hey people, remember, 20GB PS3s are on Ebay for only $300..


But i still find this amuseing. If i was going to get a PS3, it'd be a 20GB one. I still have no want to have my connection drop in the middle of a game like my Laptop's WiFi does. I mean, why go wireless, when it's got a fucking gigabit ethernet port in the back?

Then there is that Software thing... yeah....

The line is "Goodnight, sweet prince, and flights of angels sing thee to thy rest" - which I think is probably more appropriate. Now, if Nintendo had brought out a Shakespeare game for the DS, you'd have known this. ^_^

Im of mixed views about this. Fewer skus are better, but at times I like the idea of a cheaper model... if I got a ps3 I'd probably have gotten this one.

"The base-level PS3 is already at a premium price...and at that point, why bother skimping? There was no real value offered by it, except that you just got less for a lot of money."

Except you didn't. For $100 you got 40 gigs, chrome trim, a card reader and Wifi. Card readers are cheap- $10. The HD? You can get a 60 gig for about $47. For $43 can you add Wifi? Unless Sony supports USBU wifi adapters or you find a killer sale on a bridge, no. Other than the HD size (and I'm not sure how 40 gigs of additional HD space helps on the ps3) none of these things improve gameplay.

And don't hold your breath on a $500 Wifi 60 gb model.

"When has a console maker ever stopped production of a model after only 6 months?"

This is all so trumped up, it's preposterous.

You know why people wanted the 60GB model "10 to 1?" Because that's how they were shipped to retailers. If Sony loses more money up front with every 20GB sold, why would they provide it as an equal option? They had to have SOME out there so people would see the "value priced" model. But they want to lose, get this, LESS money per system sold. So they manufacture and ship more of the model that nets them a smaller loss (aka, the 60GB). Then, when people buy the 60GB system, 'cause--remember--that's primarily what has been shipped, Sony turns that info into, "The demand was higher for the $599 SKU." People bought more of what Sony had on shelves, and less of what they did not. This is just Sony being devious and underhanded as usual. Nothing new to report here.

If only MS would follow and drop the 360 core. I still get pissed thinking about how much MS fucked up by offering a version without a hard drive in the first place. Fuck the core. No one wants it, only tards buy it.

This is what SONY should do. If the 20GB isn't selling, stop making it. SONY is losing enough money on each 60GB, and at least $60+ more with the 20GB.

I've noticed that lots of idiots/360 fanboys like to post garbage on here. All versions of the PS3 have HDMI-out.

LaughingTarget: Ever build a PC? How about spending $500 on some low end barebones system with a midrange P4 and all of the cheap stuff, and then upgrading it to something like I've got.

I'm seventeen. I bought a launch 60GB. With my money. I also bought a $2000 gaming PC (custom, not pre-built). I use a 46" Sharp Aquos 1080p LCD HDTV, which I bought (go ahead and check the price). You don't have to be rich to get a PS3 if a seventeen year old making minimum wage can get one. But I was sixteen at the time.

16. @10. ps3 still the way to go, the elite with does have the larger hd but after buying the wifi adapter, $100 here in the states and the hddvd player, $200 here in the states, you end up paying more. so if youre looking at it from features right out the box and overall cost the ps3 is the way to go. but since your a gamer at heart, i assume, you will buy the system that has the GAMES you want to play


Actually add 150 to ps3 price for the 120 gb then you can start doing comparisions

This seems like a fine strategy IF you believe that your early adapters are like the ones late to the game. THEY'RE NOT.

This is going to make it even harder for them to make numbers; I really don't believe that the majority of gamers are willing to pay $600 for a system (non-hardcore ones, anyway). It's going to be even longer before the price becomes palatable to the mass market which is death to this business. More heads is more games, more games is more heads. I don't see this working out too well for Sony.

"...penetration is high and price is low."

ahhhh, I love taking words out of context.

@17 - the PS2, at least in the UK, took around 7-8 moths before seeing a £30 drop, then within 11 months of launch it had dropped by £100.

That's been even quicker with some retailers here with the PS3, the price has been droppped by quite alot of retailers by £25 within a matter of weeks, which seems likely to drop further (i've seen one retailer with a £35 price reduction).

I think it was pretty much planned by Sony to get rid of the 20GB model - if it was selling in any decent amount of quantity, it would have been released across the world with such models. The fact that they only released the 60GB model seemed to suggest they weren't really interested in offering any other models anytime soon, and as we now now - ever.

"The PS3 was not built as a mass-marketable machine. Sony fooled themselves into thinking it, based on their insistance to use a loss-lead strategy (stupidest strategy to use for any reason outside breaking into a new market), but facts still stand that the PS3 is not an everyman's game console."

What are you talking about? The majority of modern consoles have used a loss-leader strategy. What business texts have lead you to conclude that its a bad strategy except for new businesses? Razor companies obviously use the strategy. Printer companies use the strategy, making their money back with ink cartridges. Cellular service companies dramatically subsidize the upfront cost of cell phones, and MS at least used to be losing money on each X360. What are you referring to?

"Both the PS3 versions were built to cater to the "money is no object" crowd."

Thats a ludicrous statement. I would very much like to see you back that up with facts. Show me that the 2.8 million+ consumers who have bought PS3s are all in the top 2% of the income bracket. Or even something close to this.

"Given that money is no object, there isn't a point in getting the $500 version simply because money is no object. The out-of-pocket expense is essentially the same for these guys, so why not buy the version with more stuff in it?"

Besides that your "money-is-no-object" argument is ridiculous, there is then the economic reality that $100 at the margin is $100 at the margin. People can either spend that money on improvements to their PS3 (extra storage, wifi, and flash card slots) or on beer... or anything else. Marketing experts could do nothing but laugh at your reasoning.

"The best bet for Sony is to strip out as many features as it can and make that a "Core" product. Pull the hard drive, pull the WiFi, pull the extra ports for cards."

Pulling all those components- the 20GB hdd, the wifi, and the flash card slots, would save them MAYBE $50 per unit, probably less. The cost in the PS3 systems (and you can actually look these numbers up in financial analyst papers) is in the CPU, GPU, high-end RAM that those components use, and the Blu-ray drive components.

"I would also suggest pulling the Blu-Ray and going with DVD (subsequently telling developers to quit wasting our time with bloated HD video that takes up the entire space of a PS2 game), but we're past that point in the design stage. They can then sell all that stuff as add-ons when the customer gets the money."

No they couldnt have sold it as an add-on. Only a percentage of PS3 users would have bought an add-on Blu-ray drive, and publishers could never have published games in Blu-ray, just as publishers will never make X360 games that require the HD-DVD drive. Blu-ray component prices, as well as cell processor and memory prices will come down, and within a couple years you will be able to get a PS3 for $300.

Wow. I knew they "gone", but now they're actually gone? $600 is too much for a game system. Japan is really getting a good deal with their $420 20 Gigs and $504 60 Gigs...

@Ebiggs...

A 16-year-old making minimum wage can certainly afford all sorts of toys... This is because you don't pay a mortgage or rent, buy groceries, pay insurance premiums, car payments, heat bill, water bill, phone bill, cable bill, household odds and ends, or anything else that comes with being out on your own in the real world. Everything you take for granted in your parents' house costs THEM money. Just feeding your 16-year-old ass probably costs them more than you make in a month.

Come back and tell me how many expensive toys you buy on minimum wage when you aren't getting everything paid for by mommy and daddy, kiddo. For those of us who work for a living, and have to maintain a household, being told by Sony to "get a second job" or "save up" for their toy is pretty lame.

And to think it was only a few weeks ago we were hearing:

"HAHA, now the 360 is the same price as the PS3!!1!!"

and

"How stupid could MS be? Raising the cost of the 360, what a bonehead move!"

Oh sweet delicious irony.

2007 MS "ELITE" -BD -WiFi = 2006 Discontinued low end PS3 model :-) Sony know how to make competition look silly… funny

this is pure bullshit. There is a HUGE retail demand for the 20GB PS3. I, along with countless others would be much more willing to buy a 20GB PS3 over a 60GB PS3. I have no need for WiFi or media card slots. This simply comes down to the fact that Sony loses less on the $600 PS3.

Early adopters tend to be enthusiasts who want to high end model, but they don't reflect the majority of consumers who will be potentially buying the PS3 one to two years from now. I'd bet if Sony kept both systems, the demand for the cheapest version would eventually increase as parents and casual gamers start to buy the system, because those people just want to be able to play games and don't feel they need to get the "best" system (proof: look at the millions of people still buying PS2s).

"this is pure bullshit. There is a HUGE retail demand for the 20GB PS3. I, along with countless others would be much more willing to buy a 20GB PS3 over a 60GB PS3. I have no need for WiFi or media card slots. This simply comes down to the fact that Sony loses less on the $600 PS3."

Retail demand = buy; not want to buy.

This comes as no surprise to me. And it means that Sony can reduce costs by trimming back on the 20gb's production lines. Or to even use those production lines to make more 60gb's. A price drop could be in the works.

I would also not be surprised to see some announcements about minor revisions to the product line in less then tangible areas. Like a tighter CPU fab process and the removal of unneeded hardware that was present in the first run. But this is all just speculation on my part.

ZeroCorpse:

I couldn't have said it better myself.

Ebiggs:

Your style of thought and warped logic troubles me. I recommend a vasectome immediately to offer the rest of us peace of mind that your indulgent, arrogant and oligarchical ignorance will remain with you and you alone.

charlie -

Console loss leading is a relatively new idea. Check Sony's stock price just before they announced the "loss lead" strategy with the PS2 and notice a large dump in price (which was compounded by other things). Nintendo doesn't loss lead, Sega didn't loss lead, 3D0 didn't, Atari didn't. No one did before the PS2. Loss leading, in successful business models, is used to penetrate markets that are otherwise saturated or dominated by a major player. Case in point - Hyundai's cut-rate prices at the turn of the millenium and 100k mile warranties. They lost money hand over fist but got a foothold in the US market. Sony has no reason to loss-lead anything. They have the market. Sony has effectively ensured the PS3 will never make them any money (they'll take a loss on it, I guarantee it) and no business can function by not making money. But, I've never said Sony had an intelligent business model. They've managed to get this far on pure luck (they did get the Playstation handed to them and without it, Sony wouldn't exist today). Sony has the worst project management that I've ever seen in a major company.

2.8 million people over a combined population of around 1 billion (600 million Europe, 120 million Japan, 300 million US, 50 million Canada/Australia) is peanuts at0.28%. Yes, I can easily believe those 2.8 million people are mostly in higher income situations or have abnormally large disposable incomes (kids living at home with part-time or full time jobs, college kids with scholarships or parents paying, etc). The top 2% is just that, 2%, or around 20 million. The PS2 sold 120 million, and if we assume only the top down purchased them, that is only 12% of the combined populations. However, data suggests that a large portion of the PS2 ownership (aka those that made the PS2 the most popular console ever), the people that purchased it after it reached $200, couldn't have purchased it at a higher price point. This eliminates around 70 million customers plus the others who are eliminated because of the now $300 price point difference between an early PS2 unit and the current PS3 price.

I also didn't say Sony could eliminate BluRay, it is too integral to the machine at this point and would make unusable all current software. However, they can eliminate all other aspects and sell a bare-bones PS3 and sell all those extras later.

Sony doesn't have the luxury of waiting for the unit to drop to $300. The amount of investment Sony took out on the PS3 requires them to make money on it now. Their financials currently look like the numerous DotCom startups from the late 90s that flopped because most of their income was phantom. Sony also mirrors the famous case that is now referred to as the "Fly By Night" case where the company overextended debt to purchase inventory and other assets but failed to improve sales by the same margin. Sony increased their physical asset base by 30% but sales only increased by 4%. Sony needs to increase sales by the same margin lest the PS3 ruins the company and it will. This is a mark of a failing company. I don't want Sony to fail, Nintendo and Microsoft are hardly ethical companies and without Sony, they'll just get worse.

Ebiggs -

Yes, I build top-end PCs, but that is also because I make a bucket load of money. However, when I was only making $40k a year, I couldn't imagine buying a PS3 on a month's salary with all the other stuff I have to pay for. Just doesn't float it. Given the average person has zilch in the way of money management skills (the total savings level in America has declined the last few years, showing people spend more than they earn), no one making that amount of money could even hope to own a PS3 because they've blown it before they could reach the $600+tax price point. Video games rank around the bottom of the priorities list, even when compared to more immediate and cheaper forms of entertainment like movies or bars.

Fact is, you don't have to pay for rent/mortgage, electricity, cable, internet, gasoline, car insurance, homeowners/renters insurance, food, clothing, health insurance, etc, etc. That is why you can waste your money on stuff like this, though I do suggest putting that money into investmenets instead, I don't want to be taking care of you via my Social Security taxes.

erac3rx-

you would pay another $100 for another 20GB and an HDMI cable?

Why? You could buy an 80GB laptop HDD for $50 and spend another $10 on an HDMI cable and get the same result. Sony will not be releasing a "higher end" version of the PS3. It completely conflicts with their marketing of the PS3 being the ultimate in console gaming.

Meanwhile, the best deal of the bunch, the $399.99 Premium 360 will also likely see a drop to $350 or less by next christmas and it will sell like hot cakes along with Halo 3.

70. This is what SONY should do. If the 20GB isn't selling, stop making it. SONY is losing enough money on each 60GB, and at least $60+ more with the 20GB.

I've noticed that lots of idiots/360 fanboys like to post garbage on here. All versions of the PS3 have HDMI-out.

LaughingTarget: Ever build a PC? How about spending $500 on some low end barebones system with a midrange P4 and all of the cheap stuff, and then upgrading it to something like I've got.

I'm seventeen. I bought a launch 60GB. With my money. I also bought a $2000 gaming PC (custom, not pre-built). I use a 46" Sharp Aquos 1080p LCD HDTV, which I bought (go ahead and check the price). You don't have to be rich to get a PS3 if a seventeen year old making minimum wage can get one. But I was sixteen at the time.


I'd like to say that I can't wait for you to get into the real world where there are other things to pay for other than your toys, but I suppose if you're ever hard up when that time comes, you can always run back to mommy and daddy for some help as long as they're alive. Spoiled brat!

i love seeing you nerds talk about the real world yet you are fighting over game consoles. You all are most likely over 18 and stick up for company's or bash them. Talk about living in the real world, you all definitely need to wake up.

"Come back and tell me how many expensive toys you buy on minimum wage when you aren't getting everything paid for by mommy and daddy, kiddo. For those of us who work for a living, and have to maintain a household, being told by Sony to "get a second job" or "save up" for their toy is pretty lame."

Thank you.

@Ebiggs
When I was your age I worked my ass off but most of that went to college. I take it either your not going or your mom and dad is paying. I hope you win the lottery, my friend, otherwise you'll have a rude awakening when you grow up.

I cannot f***ing believe that Sony in all their infinite wisdom *sarcasm* didn't see this coming.
At the very moment they said there was going to be 2 SKU's at E3, I was thinking..."WTF? Why don't they just have 1 SKU for $550?"

This just goes to show you the obvious.
A. Early adopters are early adopters because they want the best. 20 gig, was NOT the best.
B. If North America is now out of the "early adopter stage," then that also goes to show you NOBODY wants a cut down neutered console even if it costs $100 less than its counterpart.
C. $499 is still expensive as hell so WTF, why not just get the $599? If you are willing to spend $500 on a console, chances are price doesn't interest you too much, so why get the cheaper model? That's common god damn sense and basic psych right there kids.

Now there are rumors abound for an 80 gig version. My guess is that Sony is so god damns stupid they aren't going to lower the price of the PS3, only make the HDD 80 gigs instead of 60. Tip from a consumer, lower the price YESTERDAY!!!

I call BS on this.

I have never seen a 20GB PS3 for sale. The demand was/is there the supply wasn't.

This is nothing more then PR spin since the PS3 future isn't looking as bright as it should they are making an early move to cut losses to a minimum.

ZeroCorpse - Well said.

EBiggs - Enjoy being 17 for now. Unless your parents are well off and you'll never actually have to work (aka Paris Hilton), you'll get a rude awakening in a few years. Mortgage or rent, car payment, car insurance, food, utilities...

I'm actually going through this with my kids right now, as they're just a little older than you are, although apparently a lot more mature. They've already figured out that it'll cost them (each) about $900 per month just for rent, gas, vehicle and assorted bills - without any extras. Working 40 hours per week at a $10/hour job means $325 bring home - $1300 per month. That'll leave them $400 per month for college and extra expenses. It's a great learning experience to see more than one whole paycheck go just to pay your rent.

People are still wondering about the core system for Microsoft. Here's the story on that.

There are, amazing as it may sound to some of you, a LOT of people in this country that still live in areas where there is no broadband internet service. The core system is a way of getting the 360 into their hands cheaper, because they really don't have much need at this point for a HD, Wi-Fi, or anything else. Chances are they've also got a standard def TV, which is why the core comes with regular cables. Buy a memory card (now for $29) and you do your game saves. I've helped sell several cores to people just for those reasons.

Now, the OTHER reason behind the core is simple. Say you bought your system on launch, and it's now 2008 - your console dies for some reason that is NOT due to Microsoft. (Your kids pull it off the shelf and bust it open, whatever...) Go buy a new core, swap your HD, and you're good to go again.

If - and I'm saying it this way because I AM a rep - there is a price drop this holiday, that also makes the core system a value way of getting a 360 into peoples homes. Then they can add accessories as needed. (For example, I've got wireless controllers - but I actually prefer using wired - but I'm weird like that.)

Like some of you have said. There IS a demand for the 20GB, but Sony made sure they were not available. So they could claim there was no demand and discontinue it. I would like to talk to some retail insiders and find out what their profit margin was on the 20GB. I'll bet the profit margin at retail was so low, or nothing at all, that no retailer wanted to order it.

“Console loss leading is a relatively new idea. Check Sony's stock price just before they announced the "loss lead" strategy with the PS2 and notice a large dump in price (which was compounded by other things). Nintendo doesn't loss lead, Sega didn't loss lead, 3D0 didn't, Atari didn't. No one did before the PS2.”

I defy you to find me an analyst that sees the PS2 as anything but an amazing success.

“Loss leading, in successful business models, is used to penetrate markets that are otherwise saturated or dominated by a major player. Case in point -… Sony has no reason to loss-lead anything. They have the market. Sony has effectively ensured the PS3 will never make them any money (they'll take a loss on it, I guarantee it) “

I identified several industries where loss-leading is the norm… the razor business, consumer printer business, and cell phone business. There are countless more examples. Basically, in any business where there are large upfront costs for a consumer that provides a reliable flow of current expenses for the company, they have an incentive to essentially offer credit to the consumer in order to get them to use their product. For example, in the printer industry, if there was even the slightest thought that consumers might rather pay the full price of printers and then get their ink cheaper because it wasn’t subsidizing the printer, than a printer company would have released a line of printers that use ink cartridges based on an open standard that any company could manufacture for. No companies do that. They all try their hardest to make you use their ink. Consoles are the same general concept: when someone buys one, you can also expect them to buy accessories and games.

Now I agree that on all the millions of PS3s that they’ve already sold, they will not make their money back. I’ve read that they’re losing AT LEAST $260, probably more, on each one. They simply can’t make $300 per console back in accessory and game sales. However, Sony has multiple complicated motives. Firstly, they had to establish a user-base of PS3 owners if they were going to be competitive with X360 and Wii- especially when you consider that in Japan, its really only a race between Wii and PS3. Developers are only going to make games for a console that people own. Sony had a strong financial incentive to get consoles out there, even if they had to take extreme losses in the first couple years. When you figure that Sony has sold over 100 million PS2s worldwide in the 7 years its been out, and that its still supported with new games and it still outsells all the current generation consoles, and that if they support PS3 they should be able to sell even more over its life, you can see their reasoning. Sony can afford to lose $200 on each of the first 10 million consoles it sells if it only loses an average of $30 on the next 100 million. That’s an average loss of $45.50- which can definitely be remade through accessory and game sales. A $49.99 PS3 controller probably costs them $10 to make on average over the life of the console, and Sony nets about 20% of all game revenues (or about $12 for each $60 game) between licensing and printing (Blu-ray disk) fees. That number can change dramatically depending on the developer, publisher, and whether or not there is any exclusivity agreement, but it’s a good average. Looking at the PS2 in North America alone, they sold slightly less than 40 million consoles and about 400 million PS2 games- an attachment rate of over 10 games per console. Supposing Sony is able to maintain that average for the PS3 (and remember Sony isn’t done selling games or consoles for PS2), supposing they average only $6 for each of those games in licensing and printing fees after direct costs (their contribution to a marketing campaign and costs of their printing facilities) are accounted for, and supposing they sell 1.5 extra controllers per PS3 user at an average profit of $20 each, that’s $90 per console they’ve raked in.

Its not a good profit, but its enough to justify using the PS3 to cement Blu-ray. There were doubts at first that a gaming console could have anything to do with making a video format succeed, but I think PS3 should put those doubts to rest. At the end of 2006, Toshiba had sold about 120,000 HD-DVD players, and Microsoft had sold about 150,000 HD-DVD add-ons for the X360. There is no way there are more than 500,000 HD-DVD players total out there in consumer hands right now. In comparison, there are about 3 million Blu-ray players in consumer hands. This has shown up in media sales, as the latest figures show Blu-ray making up about 70% of the HD media market, with HD-DVD owning the other 30%. Sony’s massive monetary commitment to Blu-ray has convinced the top 3 studios of 2006 (Sony, Disney, and Fox) to go Blu-ray exclusive, and the number 4 studio of 2006, Warner, publishes in both formats. Without Sony’s massive financial backing of Blu-ray, there’s no way that could have happened. And WHEN Blu-ray wins the format war, it’s a cash cow for them. They own critical IP in the Blu-ray standard, and stand to make a royalty for every Blu-ray player ever made, every Blu-ray disk printed, and also stand to profit off their own Blu-ray disk printing business (mass printing Blu-ray media for other companies).

”I also didn't say Sony could eliminate BluRay, it is too integral to the machine at this point and would make unusable all current software. However, they can eliminate all other aspects and sell a bare-bones PS3 and sell all those extras later.”

As I said before, the hardware that you plan on eliminating would hardly save them money, and would probably not be worth it. The flash card slots and on-chip 802.11b/g together don’t cost more than $15, and consumers see internal wifi as a benefit because otherwise they have to spend at least $40 on something like an Ethernet wifi bridge and have to deal with configuring and supporting it. Removing the 20gb hard drive doesn’t save them more than $30, and then not all of their consoles would have a hard drive and they’d be facing all the same problems Microsoft has with its core users, except magnified because Sony is relying even more heavily than Microsoft on digitally distributed content (PSN Home should be about a 1gb download, plus European and possibly future North American PS3s rely on software emulation). Then consider the slower read speed of the PS3’s Blu-ray drive compared to a modern cheap DVD drive, and the increased necessity of using disk caching for acceptable loading times.

The main costs of the PS3, besides the Blu-ray drive itself, are the same as the Xbox360: the CPU, GPU, and related high-end memory. Those prices will come down for Sony to the same degree that they’ll come down for MS, maybe later since Sony started later and uses newer components. The Blu-ray drive should have a steeper cost reduction curve since a lot of the costs are derived from shortages of diodes and lasers necessary for the system that should be resolved in the near future.

This was a move force by stores....
The downfall in this whole thing is the reason no one wen out to buy it is because there isnt the software. The hardcore fans will get the upper one, without a reason thers no need for the averege gamer to pick one up. Now say about mgs or FF13 comes out your averege consumer will splurge on the least expensive option, except its no longer there.

Long run this will be problematic for sony and retailers. But both are at fault sony set this thing out too early (they should have had it enter wiht a first console seller).

charlie -

PS2 had an estimated NPV of 2.3% making it a miserable business proposition for Sony. Basically, this means Sony would have been better off putting the PS2 development money into a money market account. Install base means nothing when you can't make money off it. I just defied you. Maybe it was a success from your point of view, but if I were running Sony, I'd have kicked Kutaragi to the curb and told him to quit wasting my time. The very first thing a fiscally responsible company does is run a cash flow NPV analysis on a full-cycle basis before continuing on. Since Sony is run by engineers, this clearly didn't happen.

I'll give you the razor business, but we also have to remember a 6 pack of razors are half the price of a standard video game and are an absolute necessity for a large portion of the public (as well as a pack of razors is useful for a year) - basically, a guaranteed sale, especially considering the near monopoly on the market. However, Gillette did sell out to Proctor and Gamble becuase they couldn't get the business model to work, so essentially it isn't a bright idea. Same with printers, no getting around the necessity to buy the ink. The PS3 is an entertainment device, there shouldn't be any subsidisation mainly because there is no reasonable expectation that the software and accessories will be purchased, and Sony has done nothing but prove that up and down as did Microsoft with the Xbox. Plus, the PS3 will have to significantly surpass the software and accessory attach rate of the PS2 to break even, which is unlikely to ever happen. The average PS2 software ownership was 6 games, which if it repeated with the PS3, would short Sony around $90 on each unit - and this is just the manufacturing costs. We haven't even got into the obscene R&D expense Kutaragi created. Even if we factor in the small royalties Sony gets with BluRay and the simple fact that BluRay is just not popular (don't give me HD-DVD vs BluRay comparison numbers, they are, combined, well below DVD sales at a similar point in 1998), BluRay will not cover the costs. They do have to consider paying off another R&D account in the consumer electronics division with those sales. Even Cell will have a minimal impact since IBM owns the bulk of the rights to the processor and will have a limited application outside the scientific and simulations community.

However, we are already beyond that point in the game. Sony made the thing, they can't unmake it or recoup those expenses. It will be a financial failure regardless of the install base and Sony will be unable to create a similar machine next generation and will have to design a console that costs $200 that can be sold for $300 or simply exit the console business entirely (or sit on the PS3 for 14 years before releasing a successor). They are not in a position to bleed cash in any division like Microsoft is. The PS3 is too far ahead of its time to be profitable. Future proofing is bad for business.

Sony did make a key first move, though, they put Kutaragi in a position where he can no longer impact the Playstation division. I have high hopes for the company at this point, but the ultimate failure the PS3 will face is going to make me wonder if Sony will make a PS4.

Now what's to become of us, with 20GB PS3s?
Are we virtually screwed because Sony will be making all their games for the bigger 60GBS?