The European PS3 Debacle
Sony announced that the PS3 was going to get a simultaneous worldwide release on 17th November 2006. A handful of weeks before this date they dropped the following bombshell to Europeans: the PS3 release date was going to slip by four months because of blue-laser diode production problems for the machine.
Bombshell number 2: the European PS3 would be substantially more expensive than its Japanese and American cousins. The UK PS3 will retail for £425 when it’s launched on 23rd March 2007; which at current exchange rates translates into $832 US. The US PS3 retails for $600. That’s a difference of $232 (£118). The difference between the Japanese and UK machines is £200.
Bombshell number 3: I knew that something bad was going to happen when Kevin Jowett (Sony’s UK Sales boss) quit just five weeks before the European launch of the PS3. I thought that it was going to be something that would upset gamers on a grand scale (like a gross over-estimation of the number of units to ship on launch); but I never considered Sony would remove PS2 backwards compatibility from the PS3.
Sony knows that the quantity of PS3 titles upon launch is severely limited. They know that early adopters will want to play their old PS2 games (and some newer PS2 releases like Okami) on their shiny new machines while they wait for big PS3 titles like Metal Gear Solid 4 to arrive; so they seem to be actively encouraging a reduction in demand for the PS3.
It’s hard not to come to the conclusion that Sony wants the PS3 to fail - at least in the short-term. It sounds like a ridiculous idea - until you do the financial calculations. Sony has lost $200 US for every single PS3 that’s been sold, so it’s no wonder they want to discourage as many gamers as possible from buying a PS3.
The PS3 will be moving to a 65nm chip die process sometime this year, which will translate into reduced manufacturing costs. It’s estimated that the removal of the PS2 chipset from the PS3 will save the company around $27 per console; so I would guess that the revised 65nm machines will translate into a PS3 design that will lose Sony $100 per console instead of the currently disastrous $200 per console. Scale that up to millions of units and we’re talking about a huge reduction in losses.
The PS3 technology is powerful stuff - there’s no denying that; but it’s also power-hungry under the current design implementation, running at an outrageous 380w. These first-generation 90nm machines need massive cooling elements to stop them from overheating. There’s simply too much energy running through these 90nm machines for them to last. I estimate that there will be a high failure rate of these first-generation machines within two years. Sony knows that European law dictates that they are obliged to either repair or replace faulty consoles within two years of sale. Large numbers of sold consoles translates into large numbers of consoles being replaced or repaired over the next couple of years - which will prove to be a very costly business … so one can understand the corporate desire to paint the European PS3 in an unattractive light to prospective purchasers.
The bottom line is that Sony must be pretty confident in the PS3’s long-term future to adopt this crazy corporate strategy. I will write about that in another post.
