What is known and what is left to ponder on…
Sony is apparently running into another stony outcrop that could slow the release of the PS3 to all those gamers who are willing to fork out the six hundred dollars necessary to haul that little baby back home. What is the reason for this, you ask? Well, the difficulty lies with the piece of the PS3 hardware that was one of it's major selling points in addition to being the corporeal manifestation of Sony's economic hopes for the future: the Blu-Ray drive.
Essentially it's that the manufactures of the Blu-Ray diodes, which are necessary components of both HD-DVD drives and Blu-Ray drives, are unable to produce these fast enough to keep up with the demand that Sony and all it's customers have set for it. The upshot of this was that Kaz Hirai, the CEO and President of Sony Computer Entertainment America, made a statement that Sony will have 2 million consoles on hand for the November and December releases this year and still more by March 07.
Now, 2 million units isn't anything to sneer at, but it does seem to indicate a further complication with the sales figures of the PS3. For one thing it IS expensive. Discounting all the shiny gear contained within it's sleek shape, the PS3, alone and without accessories, costs six hundred dollars. Add to that the price of accessories, games, and if you want to jump for the warranty too, you could easily fork out a grand for this device. A grand is a lot for a high school or college student who is working at a minimum wage job or, failing that, is substituting that on an allowance from the folks. So, right off the bat, you are preventing the most reliable target audience from purchasing the product without risking possible bankruptcy on their part.
Secondly the number of units being released will be halved. While the cost of the PS3 might drive some away, it will still cause a stampede of gamers who want to purchase one, along with the frustrated parents forced to camp out in lines to be able to have one in time for the holiday season. A delay in production means that Sony will be making less of a profit, at first, than they intend and that those who were planning on buying a PS3 will decide to just buy a X-Box 360 or a Wii from Father Nintendo. That's even sounding like a good idea to me right about now.
Thirdly, and most importantly, it comes down to money. A single PS3 costs roughly $800 dollars a piece to make, since many of it's vital components such as the CPU($230 dollars) and the Blu-Ray($350 dollars) along with other miscellaneous parts mean that Sony will take a loss of $200 to $300 dollars on every console sold. This is just a little steeper than Microsoft's $126 dollar profit loss per console. For more information on the production costs of the PS3 you can take a look at this report by Merril Lynch. What is certain is that, looking at this, Sony will be losing huge amounts of money with every console sold.
Now, I may be jumping the gun here, but this doesn't look good. Even if the pr ice of the PS3 doesn't drive customers away, there is still the high intial construction costs, the bugs in the Blu-Ray system, and the difficultly of ensuring a reliable supply of materials. Add that to what it takes to actually construct new PS3s and the time and effort needed to construct them. When those things are visible, it may lead people to believe Sony will have to start bailing out the boat soon. I guess only time will tell.
By Nick McCavitt (nmccavitt@forumwizard.net)