TheEnforcer
03-15-2006, 04:00 PM
http://www.nytimes.com/2006/03/15/business/15cnd-sony.html?_r=1&oref=slogin
Sony Delays Launch of PlayStation3
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By MARTIN FACKLER
Published: March 15, 2006
TOKYO, March 15 — Sony said today it would postpone release of its next-generation PlayStation video game console until November, a potentially costly move that the company portrayed as a marketing decision but that analysts said may reflect difficulty in containing high component prices.
The delay of the new console, PlayStation 3, is an apparent setback for Sony's turnaround efforts at a time when the struggling electronics giant badly needs a new hit product. The once high-flying electronics maker has fallen on hard times as cheap competition from China has eroded earnings of bread-and-butter consumer electronics products like televisions.
Ken Kutaragi, president of Sony's game unit, apologized repeatedly during a hastily called meeting of game software developers, analysts and reporters for failing to have the console ready this spring, as originally promised. He said the delay was mostly the result of a strategic decision to give developers time to write game software, and to make a splash ahead of the pre-Christmas shopping rush.
"Instead of rushing, we want to have a solid launch," Mr. Kutaragi said. "We wanted to have time to make the big sales season that starts with Thanksgiving."
Mr. Kutaragi said Sony will be ready to produce 1 million consoles per month by November, and plans to make 6 million machines by March 2007.
But analysts said the delay will be costly for Sony. It means PlayStation 3 will not reach the market until nearly a full year after rival Microsoft released its competing machine, xBox 360. Sony has also been counting on PlayStation 3 to serve as a showcase for two new technologies upon which the company is betting its future: the Blu-ray DVD format and the powerful Cell processing chip, developed with IBM and Toshiba.
In particular, Sony had hoped the new PlayStation would give a boost to the Blu-ray format, which is currently locked in a separate battle with a competing technology from Toshiba to become the global standard for next-generation DVDs. Sony has hoped that installing Blu-ray drives into PlayStation 3 machines would help popularize the format, potentially giving it the upper hand in a fight over billions of dollars in sales and royalty payments.
Sony is also counting on these new technologies to make PlayStation 3 a success. With Blu-ray offering five times more capacity than current DVDs, and Cell boasting processing speeds dozens of times faster than its predecessor, PlayStation 3 promises a leap in graphics and realism that Sony hopes will dazzle consumers.
On Wednesday, Mr. Kutaragi cited delays in developing copyright protection technology for Blu-ray as a factor in the holdup. But he said that this and other technical problems will be resolved by June, and that Sony could have launched PlayStation 3 earlier had it chosen to do so.
"We were discussing selling it in September, and some even said put it out in July," Mr. Kutaragi said.
Some analysts were immediately skeptical of this explanation, saying Sony needed to get the console out as soon as possible to combat Microsoft's head start, and the expected release this year of Nintendo's next game console, Revolution.
They said Sony may be trying to buy time to bring down the production cost of key components, particularly untested technologies like Blu-ray and Cell. While Mr. Kutaragi did not reveal a price on Wednesday, analysts say Sony will likely try to sell PlayStation 3 for about $500. While that is far higher than the $299 roll out price of its predecessor, PlayStation 2, analysts said that will likely be significantly below the new console's actual building cost.
Mr. Kutaragi only compounded such fears on Wednesday by announcing that PlayStation 3 will also include a 60 gigabyte hard-disc drive, Linux operating software and the ability to handle broadband Internet connections. These additional features will allow the game console to double as a home server, further driving up production costs.
"Sony faces the prospect of swallowing several hundred dollars in losses per machine until production volumes get high enough to drive down costs," said John Yang, an electronics analyst in Tokyo for Standard & Poor's rating agency. "It may take years to bring those costs down."
One point on which Mr. Kutaragi and analysts seemed to agree was the need to ensure a kink-free rollout for PlayStation 3. Loading the consoles with so many new technologies increases the chances of a potentially costly and embarrassing recall if something goes wrong, analysts warned.
Sony needs a successful launch to help replicate the smashing success of PlayStation 2, which sold more than 100 million units over six years. Game consoles and related software have been Sony's most profitable products, contributing up to two-thirds of operating income in recent years.
"It has to get PS3 right," said Mr. Yang. "Sony wants to avoid a misstep at all costs."
Analysts also said Sony was unlikely to delay PlayStation 3 unless it absolutely had to because of the console's prominent role in the DVD format war.
Blu-ray backers have continually emphasized how PlayStation 3 consoles were going to aid their cause by doubling as low-priced Blu-ray players. Toshiba has already announced it will sell players this year using its standard, HD-DVD, at around $500. With most Blu-ray players expected to cost $1,000 or more, PlayStation had appeared the only hope for matching Toshiba's price.
Sony has had a bad couple of weeks in its quest to ensconce Blu-ray as the next standard. In a sign of growing frustration with delays in the Blu-Ray format, LG Electronics of South Korea said it may make machines capable of handling both formats instead of the Blu-ray-only players originally planned.
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Was talking to a worker at a Best Buy store a week or so ago and he said this was coming. I guess the specs on this thing is awesome. I've turned primarily into a computer gamer and hardly play console games anymore but I still play my PS2 once in a while. Supposedly because of the high tech nature of the products the price for the PS3 is gonna be rather expensive.
Sony Delays Launch of PlayStation3
E-Mail This
Printer-Friendly
Reprints
Save Article
By MARTIN FACKLER
Published: March 15, 2006
TOKYO, March 15 — Sony said today it would postpone release of its next-generation PlayStation video game console until November, a potentially costly move that the company portrayed as a marketing decision but that analysts said may reflect difficulty in containing high component prices.
The delay of the new console, PlayStation 3, is an apparent setback for Sony's turnaround efforts at a time when the struggling electronics giant badly needs a new hit product. The once high-flying electronics maker has fallen on hard times as cheap competition from China has eroded earnings of bread-and-butter consumer electronics products like televisions.
Ken Kutaragi, president of Sony's game unit, apologized repeatedly during a hastily called meeting of game software developers, analysts and reporters for failing to have the console ready this spring, as originally promised. He said the delay was mostly the result of a strategic decision to give developers time to write game software, and to make a splash ahead of the pre-Christmas shopping rush.
"Instead of rushing, we want to have a solid launch," Mr. Kutaragi said. "We wanted to have time to make the big sales season that starts with Thanksgiving."
Mr. Kutaragi said Sony will be ready to produce 1 million consoles per month by November, and plans to make 6 million machines by March 2007.
But analysts said the delay will be costly for Sony. It means PlayStation 3 will not reach the market until nearly a full year after rival Microsoft released its competing machine, xBox 360. Sony has also been counting on PlayStation 3 to serve as a showcase for two new technologies upon which the company is betting its future: the Blu-ray DVD format and the powerful Cell processing chip, developed with IBM and Toshiba.
In particular, Sony had hoped the new PlayStation would give a boost to the Blu-ray format, which is currently locked in a separate battle with a competing technology from Toshiba to become the global standard for next-generation DVDs. Sony has hoped that installing Blu-ray drives into PlayStation 3 machines would help popularize the format, potentially giving it the upper hand in a fight over billions of dollars in sales and royalty payments.
Sony is also counting on these new technologies to make PlayStation 3 a success. With Blu-ray offering five times more capacity than current DVDs, and Cell boasting processing speeds dozens of times faster than its predecessor, PlayStation 3 promises a leap in graphics and realism that Sony hopes will dazzle consumers.
On Wednesday, Mr. Kutaragi cited delays in developing copyright protection technology for Blu-ray as a factor in the holdup. But he said that this and other technical problems will be resolved by June, and that Sony could have launched PlayStation 3 earlier had it chosen to do so.
"We were discussing selling it in September, and some even said put it out in July," Mr. Kutaragi said.
Some analysts were immediately skeptical of this explanation, saying Sony needed to get the console out as soon as possible to combat Microsoft's head start, and the expected release this year of Nintendo's next game console, Revolution.
They said Sony may be trying to buy time to bring down the production cost of key components, particularly untested technologies like Blu-ray and Cell. While Mr. Kutaragi did not reveal a price on Wednesday, analysts say Sony will likely try to sell PlayStation 3 for about $500. While that is far higher than the $299 roll out price of its predecessor, PlayStation 2, analysts said that will likely be significantly below the new console's actual building cost.
Mr. Kutaragi only compounded such fears on Wednesday by announcing that PlayStation 3 will also include a 60 gigabyte hard-disc drive, Linux operating software and the ability to handle broadband Internet connections. These additional features will allow the game console to double as a home server, further driving up production costs.
"Sony faces the prospect of swallowing several hundred dollars in losses per machine until production volumes get high enough to drive down costs," said John Yang, an electronics analyst in Tokyo for Standard & Poor's rating agency. "It may take years to bring those costs down."
One point on which Mr. Kutaragi and analysts seemed to agree was the need to ensure a kink-free rollout for PlayStation 3. Loading the consoles with so many new technologies increases the chances of a potentially costly and embarrassing recall if something goes wrong, analysts warned.
Sony needs a successful launch to help replicate the smashing success of PlayStation 2, which sold more than 100 million units over six years. Game consoles and related software have been Sony's most profitable products, contributing up to two-thirds of operating income in recent years.
"It has to get PS3 right," said Mr. Yang. "Sony wants to avoid a misstep at all costs."
Analysts also said Sony was unlikely to delay PlayStation 3 unless it absolutely had to because of the console's prominent role in the DVD format war.
Blu-ray backers have continually emphasized how PlayStation 3 consoles were going to aid their cause by doubling as low-priced Blu-ray players. Toshiba has already announced it will sell players this year using its standard, HD-DVD, at around $500. With most Blu-ray players expected to cost $1,000 or more, PlayStation had appeared the only hope for matching Toshiba's price.
Sony has had a bad couple of weeks in its quest to ensconce Blu-ray as the next standard. In a sign of growing frustration with delays in the Blu-Ray format, LG Electronics of South Korea said it may make machines capable of handling both formats instead of the Blu-ray-only players originally planned.
===========================================
Was talking to a worker at a Best Buy store a week or so ago and he said this was coming. I guess the specs on this thing is awesome. I've turned primarily into a computer gamer and hardly play console games anymore but I still play my PS2 once in a while. Supposedly because of the high tech nature of the products the price for the PS3 is gonna be rather expensive.