alephnull said:
My god, someone on vgchartz actually understands the difference between investment and operating costs. Squilliam you have destroyed my world view. Microsoft's initial loses on the xbox360 are irrelevant (even if the management at MS weren't nearly immune to any theoretical shareholder revolt) and the same is true for the PS3. If in the end the PS3 turns out to have a rather poor ROI (which seems likely), the only thing this will affect is a willingness to make so many abrupt hardware changes simultaneously in the future. The only thing that could possibly be change this is the difficulty firms currently face is raising capital. However Japan has a much more convoluted and opaque means of capital allocation than the rest of the "first world", which although criticized as sclerotic by the west when times were better, seems to be holding up rather well at the moment. The economist actually had an interesting article on this last week.
The actual marginal cost per unit of using blue-ray over dvd is tied to the difference of the costs of producing diodes for for both. That you can now buy a blue-ray drive (set top boxes are incomparable as the blue-ray standard requires 256mb and significant cpu horsepower which dvd did not) off of newegg for $80 tells me that those differences have narrowed significantly. And these prices are going to appear more drastic than they are as the degree of "commoditization" as dvd drive manufacturing is going to be a much lower margin business at this point. So at this point blueray at least is going to mostly be a sunk cost.
Guessing the size of any potential pricecut however, is something of a futile exercise unless someone here has access to some price discovery studies Sony has no doubt done and will do. There was one recent study in which it was discovered that people were willing to spend more money at a place called Cafe17 than Cafe97. The only way to figure these things out is empirically.
Currency fluctuations and some of the more nuanced aspects of competitive game theory are also in play here. But predicting the first is harder than predicting the weather and the second is made extremely complicated by the fact that firms cannot easily raise prices.
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Thanks for the compliment. 
Have you heard of the expression, you've got to spend money to make money? In this case, they have to sell enough PS3s to cover the overhead of their 1st party developers, PSN and other operating expenses. Long term its the operating expense which I believe will kill the PS3, not the cost of the hardware. At this point im not sure what the long term break even point is for the PS3 1st party developers, it would guess its at least 35 Million PS3s. Effectively its the third party royalties that are keeping their 1st party developers alive.
Its easier to predict the actions of the party behind than the party in the lead. The party in the lead can simply choose to do nothing whilst the one trailing behind doesn't have that luxury in this case. Microsoft has their Xbox Live service and Sony has their 1st party developers. Both necessitate increasing the size of the userbase and in both cases their value increases more than proportionally to the install base. Thats the obvious positive incentive to increase their install base, on the other side if they fail to increase their userbase fast enough their console will lose the all important battle on the ground for the hearts and minds of their potential customers.
The interesting part about amatuer cost analysis of the PS3, and even some professionals is that only the negative aspects of the current recessions are being noted. The actual raw materials and many of the finished components will be cheaper due to the reduced demand for computer products. Its not a completely one way street of all bad news for Sony. Also that Blu Ray drive you talked about is probably a much higher margin item between NewEgg and the supplier, so the actual cost of the drive(s) may be a lot closer between the Xbox 360 and PS3 than NewEgg indicates.
Any profit they do expect to make this year with SCE is probably better reinvested in SCE than in other departments. All this reminds me of the game Age Of Empires 2. Every PS3 sold is like a villager, it takes a while for that villager to pay himself back but the payoff in the end is increased production. One of the rules of that game if you want to play competitively is never slow their production down or you'll fall behind, unless you have good reason to. The question really is, will they have enough revenue and will they lower the costs enough to pull a price cut? A delta of $50 is manageable between cost and final sale price, but much more than that and the liability increases far too steadily.
