Look out, George Foreman!

November 24, 2006 2:52 AM

Not only does the Playstation 3 play Blu-Ray discs, it also knocks out the fat!
posted by melorama (28 comments total)

Looks like these guys are actually building one of these things.

I'm sure this will piss off the PS3 fanboys, but at least it's more constructive and creative than what the moronic idiots at SmashMyPS3.com did...
posted by melorama at 3:04 AM on November 24, 2006

I thought forcing your customers to pay $600 for a video game system (one with the same controller as the previous generations, no games included in the box, and a copy of Taladega Nights) was a sure way to piss them off.
posted by Leather McWhip at 3:24 AM on November 24, 2006

Leather: Ahhh...NOW I understand the point of SmashMyPS3.com. Now it all makes sense.
posted by melorama at 3:27 AM on November 24, 2006

Oh, and the graphics are comparable to an Xbox 360, which you can get for $200 less.

Sony sells their PS3 at a huge loss. If more people bought the system just to smash it, turn it into a waffle iron, use it to accelerate atoms at a high velocity, whatever... as long as you're not buying licensed games (or Blu-Ray discs), Sony is losing money. These people that have no intention of playing games on their PS3? They are this century's Sons of Liberty.


All of my rage stems from Taladega Nights on Blu-Ray. Whomever decided a Wil Ferrel movie was an appropriate display of a new technology needs to be dragged out into the street, shot in the face, have reconstructive surgery, dragged back out and shot again.
posted by Leather McWhip at 4:30 AM on November 24, 2006 [4 favorites]

talladega nights, starring will ferrell. you got somethin' against ll?
posted by sergeant sandwich at 4:59 AM on November 24, 2006

Thanks to the genreous people who have donated money, but were still looking for donations.

How do I paypal an apostrophe?
posted by StickyCarpet at 7:20 AM on November 24, 2006

Their photoshopped PS3 Grill reminds me of a parody I did years ago.
posted by tomierna at 7:46 AM on November 24, 2006

AskMe
posted by matteo at 8:03 AM on November 24, 2006

Sony sells their PS3 at a huge loss. If more people bought the system just to smash it, turn it into a waffle iron, use it to accelerate atoms at a high velocity, whatever... as long as you're not buying licensed games (or Blu-Ray discs), Sony is losing money. These people that have no intention of playing games on their PS3? They are this century's Sons of Liberty.

Do we know this to be true? Additional units have a negative contribution margin?
posted by Kwantsar at 8:21 AM on November 24, 2006

Do we know this to be true? Additional units have a negative contribution margin?

That in particular is almost certainly not true. They're manufacturing costs are probably dependent on the number of units they sell, so while they make a loss on the first x units, buying one more unit doesn't increase their losses.
posted by cillit bang at 8:55 AM on November 24, 2006

That in particular is almost certainly not true. They're manufacturing costs are probably dependent on the number of units they sell, so while they make a loss on the first x units, buying one more unit doesn't increase their losses.

In most cases, that's true, but in this case Sony is actually selling the PS3 for less then the cost of the parts, plus the cost of putting it together, supposedly. So it's not a startup cost problem, they're actually selling the units at a loss. The idea is they'll make the money back in sold games over the lifetime of the unit. And that as part prices drop, the machines will eventually become profitable.
posted by delmoi at 9:04 AM on November 24, 2006

Also, cillit, you realize that you're way out on a limb by saying Sony isn't losing money, basically everyone in the game industry seems to believe this, as well as veteran semiconductor analysts. Sony doesn't have to say if they're losing money or not, but everyone seems to believe it indicates that it is true. If you want to disclaim that, you really should bring some evidence to the table, as you're actually making a rather extraordinary claim.
posted by delmoi at 9:08 AM on November 24, 2006

In most cases, that's true, but in this case Sony is actually selling the PS3 for less then the cost of the parts, plus the cost of putting it together, supposedly.

Yes, but the reason their costs are so high is the development costs. It does not actually cost $100 to stamp out each chip. They may well be paying IBM, Toshiba and NVidia that much in the short term to cover their costs, but once they've sold enough units that price will go down. This effectively makes the loss a fix cost in the long term, irrespective of how many units they sell in the short term.

Also, cillit, you realize that you're way out on a limb by saying Sony isn't losing money

Where have I claimed that?
posted by cillit bang at 9:22 AM on November 24, 2006

They may well be paying IBM, Toshiba and NVidia that much in the short term to cover their costs, but once they've sold enough units that price will go down.

True to an extent. Sony still needs to sell as many PS3s as possible before 3Q '07, when retaillers expect an updated round of rebates, discounts and/or value bundling of the consoles. Microsoft and Nintendo are better prepared for that moment with their products, but Sony's stiff pricetag raises questions on the matter.

Another factor to consider: quality control on the units should certainly improve as material costs lower in value. The expense of servicing and replacing broken/defective PS3s will nonetheless figure highly in the unit's chance of surviving.
posted by Smart Dalek at 9:55 AM on November 24, 2006

Yes, but the reason their costs are so high is the development costs. It does not actually cost $100 to stamp out each chip. They may well be paying IBM, Toshiba and NVidia that much in the short term to cover their costs, but once they've sold enough units that price will go down. This effectively makes the loss a fix cost in the long term, irrespective of how many units they sell in the short term.

Do you have any evidence for that claim? What people are saying is that the absolute costs of the chips is $800, which is more then the cost of the console today. That's excluding all the costs associated with research and development.

Researchers from electronics supply chain iSuppli have performed their latest 'teardown analysis' on Sony's new PlayStation 3, and have calculated the manufacturing cost of the 20GB model at at $805.85 - over $300 more than its retail price.

posted by delmoi at 10:03 AM on November 24, 2006

Oh, and I meant to post this youtube video in this PS3 thread, not the other one. More relevant here, still someone NSFW.
posted by delmoi at 10:10 AM on November 24, 2006

What people are saying is that the absolute costs of the chips is $800,

No, what iSuppli are saying is what they think Sony are paying for each component this quarter (it's all in that press release).

The PS3 is not especially more mechanically complex than the PS2 or XBox 360, and the raw materials aren't any more expensive, so the only possible explanation for the high costings is the R&D associated with new chip processes and other new technologies.
posted by cillit bang at 10:30 AM on November 24, 2006

A good portion of the PS3's expense is centered around cooling. One heatsink, four spreaders, three heatpipes and a 160mm fan are involved.
posted by Smart Dalek at 11:07 AM on November 24, 2006

And that's not including the assembly shield atop the fan.
posted by Smart Dalek at 11:09 AM on November 24, 2006

cillit: you're talking about people who work with microprocessor and electronic component sourcing as a profession. Who are you to claim their wrong based on, as far as I'm concerned your assumptions about the way business works. I'd rather trust people who do this for a living then some random guy on the Internet. How many chips do you know the prices of? How many computers have you taken apart and counted the cost of the components? For these guys it's a lot.

There is a huge credibility gap between you and them. Sure in theory you could be right and they could be wrong, but it's unlikely unless you can produce some evidence to back up what you're saying.

The PS3 is not especially more mechanically complex than the PS2 or XBox 360, and the raw materials aren't any more expensive, so the only possible explanation for the high costings is the R&D associated with new chip processes and other new technologies.

I'm not sure what you mean by "mechanically" The PS3 has a hard drive, and it also has a very intricate cooling system. As you can see in this disassembly video (see around 2:48) it appears to have a liquid cooling system (and a seven or eight inch fan!) Those are mechanical things, not present in the ps2.

Of course measuring computer cost by "mechanical" parts is a bit silly, as we all know it's the electronic components which cost money. Different CPUs cost different amounts of money, despite the fact they are made from the same "materials" One of the biggest cost differentiators is semiconductor yield. Basically not all the chips on the wafer are going to end up working, but each wafer costs the same amount of money to produce. So a chip with a 10% yield will be far more expensive then a chip with a 90% yield, even though they were manufactured the same way. If it the only question was "materials" cost a 486 would be the same price as much as a dual core Opteron.

Also there's this bit from iSupply:

"If someone had shown me the PlayStation 3 motherboard from afar without telling me what it was, I would have assumed it was for a network switch or an enterprise server. ... in the entire history of the iSuppli Teardown Analysis team, we have seen only three semiconductors with 1,200 or more pins. The PlayStation 3 has three such semiconductors all by itself."

Which hardly makes it seem as "simple" as the ps2

In any event, I'm happy taking the consensus view, supported most people including industry analysts (not just game industry but microprocessor industry) over some evidence free prognostication on the internet.
posted by delmoi at 11:12 AM on November 24, 2006

Delmoi, I don't especially disagree with iSuppli (although I think they've oversimplified to make their press release more readable). What I disagree with is your interpretation that they represent baseline manufacturing costs and the suppliers haven't built the costs of R&D into the prices they're currently charging Sony.

What are you arguing with me about anyway? We all agree that Sony's losses amount to the number of units sold before component costs fall to below the wholesale price. My assertion is that those costs are more dependent on the cumulative number of units sold than the passing of time, so when Sony does reach the break even point, they will have sold the same number of units and lost the same amount of money, making their loss on PS3s a fixed cost, regardless of consumer behaviour. Which part of this do you disagree with?
posted by cillit bang at 11:55 AM on November 24, 2006

What are you arguing with me about anyway? We all agree that Sony's losses amount to the number of units sold before component costs fall to below the wholesale price. My assertion is that those costs are more dependent on the cumulative number of units sold than the passing of time, so when Sony does reach the break even point, they will have sold the same number of units and lost the same amount of money, making their loss on PS3s a fixed cost, regardless of consumer behaviour. Which part of this do you disagree with?

Okay, well, I thought you were saying that the individual unit cost of the PS3 was less then the sale cost, or something. At the beginning of the thread you said

That in particular is almost certainly not true. They're manufacturing costs are probably dependent on the number of units they sell, so while they make a loss on the first x units, buying one more unit doesn't increase their losses.

Which implied (to me) that buying two PS3s0 today wouldn't have any more effect on Sony's bottom line then buying one PS3 today. I think that's incorrect. It would cost Sony more money if they sold 10 million units before component prices came down and and then five million afterward then if they sold five million now and 10 million after prices came down. So When they sell the units does actually have an impact on their profit margin.

What I thought you were saying was that Sony was somehow getting some kind of deal with their suppliers for below market prices, and therefore not making a materials-cost loss on each machine.
posted by delmoi at 12:03 PM on November 24, 2006

It would cost Sony more money if they sold 10 million units before component prices came down and and then five million afterward then if they sold five million now and 10 million after prices came down.

But only if component costs are independent of unit sales. If component costs coming down is driven by unit sales, then the crossover point always happens after x units.
posted by cillit bang at 12:11 PM on November 24, 2006

If component costs coming down is driven by unit sales

Ah, but that's not always the case. Costs are also driven by market demand; sold or not, the initial investment value of PS3 will also depreciate over time. While Sony may be able to hold back a bit before recouping their expense in further console sales (or incorporating the technology into other products), their window of opportunity is far narrower than you may believe.

I made an earlier mention of 3rd Quarter 2007 as a sales deadline - that's because retail outlets are contractually held to Sony for the first few months to keep prices at a more or less even rate. Afterward, the stores can compete against each other with (marginal) incentive deals, including resale of pre-owned PS3s. They also expect Sony to sweeten the deal with incentive packaging, such as bundles game compilations, or additional controller offers. They're not going to aimly sit by waiting for the manufacturer to decide when it's convenient to ship additional PS3s into the marketplace; resellers like Gamespot/EB have too much at stake to wait for the MSRP descend at its own leisure.

It's evident from Japan's launch of the PS3 that Sony wants some artificial inflation of demand, so when it's time to ship the machines out at reduced rates (without altogether reducing them to white elephant status), the general public will remain excited enough to purchase one.
posted by Smart Dalek at 1:18 PM on November 24, 2006

Delmoi, I think the linked youtube video would be more accurate if the ps3 were represented by a dramatically overpriced and completely unattainable model, while the Wii would be played by an attractive, but attainable girl next store type who likes to "hang out with the guys."
posted by drezdn at 3:45 PM on November 24, 2006

Hmmm... not the only ones thinking this way, I guess.
posted by swell at 6:02 PM on November 24, 2006

But does it generate enough heat to grill? Like the xbox360... :)
posted by MonkeyAround at 11:37 PM on November 24, 2006

"Oh, and the graphics are comparable to an Xbox 360, which you can get for $200 less."

That may be true now, but remember that the first crop of games for ANY and EVERY system fail to exploit the machine to its full potential. I would say it's two or three years too early to say which machine has the better graphics, but much more importantly the better games!

The games are what absolutely make or break a system, and Sony's track record with the PS2 and the PS has been to release many times the number of titles than what are available with the competition. And since everybody knows that 90% of video games suck ass (and I'm being conservative here), that means that Sony is at any time likely to have several times as many worthwhile games.

It's too damn expensive at this point for sure. But I think within a year or so we'll see a price drop.
posted by Sukiari at 1:56 AM on November 25, 2006