Sony: “We haven’t started manufacturing [PS3] yet”

August 20, 2006

Sony PS3As we’re just under three months away from the PS3’s worldwide launch combined with the fact some insist the launch will play a critical factor in Blu-ray’s success, I felt it was time to revisit earlier discussions about the PS3 and its impact in the format war.

To some degree or another, the Sony PlayStation 3 will play a factor in determining the next generation DVD format. It won’t however be the “instant installed base of 2 million units”, Trojan Horse for Blu-ray movie sales many make it out to be. There are however other critical, albeit lackluster details to consider.

I’m not even interested in getting into the myriad of reasons the PS3’s impact alone isn’t enough to gain favor for Blu-ray as a standalone format. But the poor reception the first round of Blu-ray titles garnered and Samsung’s public relations disaster of even allowing the idea of a bug with the BD-P1000 out into the public, was a huge mistake.

To this day I see printed reports of the BD-P1000’s Genesis chip “bug” and in many of the same circles owners who have called Samsung for a resolution being told “no bug exists” which is it? If one exists why hasn’t it been addressed, and if it doesn’t exist why allow the idea to permeate the marketplace?

Those launch snafu’s aside the impetus for this post is a recent Game Spot interview where Sony Computer Entertainment president Kaz Hirai, is quoted as saying:

GS: So is the PS3 already being manufactured?

KH: We haven’t started manufacturing yet. Some of our ops guys were actually just in China, and also in Japan just reviewing the [production] lines and everything else. But they are, again, preparing as we speak to get the manufacturing going. We’ve not announced and we haven’t set really a specific date to say, “As of this day we’re going to start manufacturing.”

So with less than three months till launch the PS3 hasn’t entered into production? interesting. I suppose the real relevance in this admission is whether you believe the 2006 holiday season is critical for Blu-ray’s success or not, I happen to believe it is.

I’ve seen statements to the effect of “the format war starts in fourth quarter 07” and “most consumers won’t even care until 2007/2008”, rubbish I say. Every day that passes with HD DVD retaining or gaining on its 33% market share lead, is one step closer to another studio throwing their hat in the dual format ring, every studio that does that equals another nail in Blu-ray’s coffin.

Ignoring the potential problems with PS3’s not in production, let’s talk about how many consoles are likely to even penetrate the three major regions before years end. Sony plans for two million consoles produced by Nov 2006 for the launch and throughout the holiday season.

Divide that by three (U.S., Europe and Japan) and you get roughly 700k for each region. Wow 700k consoles for the U.S. alone? Sure, Sony could divert more consoles from that allotment into regions with higher sales potential but I think it’s reasonable to assume every one of those consoles will sell out in their respective regions.

With regard to the 2006 holiday season I just don’t see 700k (per region) game consoles amounting to much in the face of a 33% market share lead from HD DVD. Allow me to explain why. The studios based much of their support on potential installed base, but installed base alone won’t sell movie titles. One term you’re probably going to get sick of hearing in the coming months/year is attach rate. It’s critical so it’s worth an explanation.

Attach Rate’s Decide Studio Support in the Long Run:

‘Attach rate’ is the number of titles (movies or games) per console/player for its respective installed base. For example if 2 million insert-name-here consoles are sold and the studios determine that console has an attach rate of 4 movie titles per year, per console they can anticipate 8 million movie sales for that console, in that calendar year.

This is where it gets interesting however, it’s possible to sell more movies (and generate more studio support) with a drastically smaller installed base, if the attach rate is higher. Let’s assume that the HD DVD add-on is picked up by ¼ of the Xbox360 owners that’s 1.25 million HD DVD add-on’s.

Now is that a likely sell-through rate for the add-on? Hard to say, however it’s not hard to assume that the add-on will have a significantly higher attach rate than the PS3, as the HD DVD add-on’s sole purpose is the playback of HD DVD movies.

And then we get to the real nitty gritty in all of this. By all accounts HD DVD’s biggest shortcoming thus far was under-anticipating demand for the product. I’m going on record today, August 20th, 2006 stating that by the holiday season 2006 that supply chain bottleneck will be corrected.

Rumors of a second generation HD1 (HD-A2) are only getting stronger and just as important as those behind the scenes whispers of a second-gen HD DVD player, is who’s likely to manufacture them. Back on September 28th of last year it was announced that “Major Chinese DVD player Manufacturers to Support HD-DVD”.

Those ‘majors’ include two of the largest DVD player manufacturers in the world. Amoi Electronics and Sichuan Changhong Electric. Amoi and Sichuan had combined 2005 sales of 19,832,998,000 Yen, yes that’s 19 billion Yen folks. These two companies have the ability to flood the worldwide market with HD DVD players. Not only the ability to manufacture them in large quantities but the ability to manufacture HD DVD players with the benefit of months worth of user comments, complaints, suggestions and revisions.

So with all that, I’m left wondering what if any real, significant impact a game console will have in determining a home video format war. Toshiba seems to be finalizing plans for the production of HD DVD players on a significantly larger scale than the first wave. The Xbox 360 HD DVD add-on at $200 should provide a compelling alternative to Xbox 360 owners who aren’t quite ready to plop down $500 for a HD DVD player.

But I suppose my biggest reason for doubting the PS3’s real impact in the format war is quite simple. For every gamer interested in purchasing a PS3, there are hundreds, maybe thousands of non-gamers who aren’t. What will a game console offer them versus a standalone player?



Posted by Bryan Greenway | | Filed Under Blu-ray


Comments

  • B.Greenway

    Caleb thanks for the compliments, small world. I’ve kept up with http://aperionaudio.typepad.com/ for quite some time as well. I have to believe that physical media will have one last stand with one of the two formats, I just don’t know if the consumer at large is really ready for digital media (just yet) and all that goes with it.

  • B.Greenway

    Caleb thanks for the compliments, small world. I’ve kept up with http://aperionaudio.typepad.com/ for quite some time as well. I have to believe that physical media will have one last stand with one of the two formats, I just don’t know if the consumer at large is really ready for digital media (just yet) and all that goes with it.

  • Caleb

    Mr. Greenway,
    I’ve been reading your posts for about 2 or 3 months now. I am in the HE industry and, since I spend a lot of my time dishing out over-the-phone tech support on the fly (an art, if you ask me!) I don’t get nearly enough time to do the research I’d like. Your blog is just the catch up I need from time to time (you’ll be getting trackbacks from my blog soon, BTW) Now… an actual comment:

    I was at the HE show LA this year. I spent most of my time locked in a tiny hotel room showing off speakers but I did get an hour and a half to roam around and have a look. Given the number of exhibitors, this was far too little time. Imagine my frustration at having spent 45 minutes of that time in Sony’s Blu-Ray demo! I digress…

    Right off the bat, I wasn’t impressed. Here was the largest demo space in at the show, filled with the most expensive array of (Wilson) speakers, Sony’s top ‘o the line Projector and a MAMMOTH screen- but the receiver (right… receiver) wasn’t even in Sony’s ES line. Whatever.

    The point is that they concentrated on interactivity, enhanced menus and then, at the end, resolution of fine details. They used Chicken Little’s featers as an example (DVD Vs. Blu-Ray) They barely acknowledged a competitor.

    As it happened we (a Speaker maker, mind you) were the only exhibitors with an HD-DVD player. In all the time I spent at the show, I didn’t hear word one about Blu-Ray and even though the HD-DVD player got a lot of brief looks, it certainly wasn’t a star either. The few questions we did field were from enthusiasts about why the new audio formats on the discs were as yet unplayable.

    I write all this just to help purge some frustration that I happen to share with you. The consumer is getting screwed by this “pissing match” If the Blu-Ray camp weren’t so screwed up, then perhaps they wouldn’t get the bad press that they do. HD-DVD is ahead of the game right now but I’m still holding my breath… maybe when Toshiba FINALLY releases the firmware upgrade I’ll be able to get a little more excited.

    Until then, I’m going to stick to my bet that, in 5 years, we’ll speak as fondly of Blu-Ray and HD-DVD as we do now about LaserDisc and Minidisc (I still own and use both) I’m putting my money on Media Servers.

    Cheers.

  • Caleb

    Mr. Greenway,
    I’ve been reading your posts for about 2 or 3 months now. I am in the HE industry and, since I spend a lot of my time dishing out over-the-phone tech support on the fly (an art, if you ask me!) I don’t get nearly enough time to do the research I’d like. Your blog is just the catch up I need from time to time (you’ll be getting trackbacks from my blog soon, BTW) Now… an actual comment:

    I was at the HE show LA this year. I spent most of my time locked in a tiny hotel room showing off speakers but I did get an hour and a half to roam around and have a look. Given the number of exhibitors, this was far too little time. Imagine my frustration at having spent 45 minutes of that time in Sony’s Blu-Ray demo! I digress…

    Right off the bat, I wasn’t impressed. Here was the largest demo space in at the show, filled with the most expensive array of (Wilson) speakers, Sony’s top ‘o the line Projector and a MAMMOTH screen- but the receiver (right… receiver) wasn’t even in Sony’s ES line. Whatever.

    The point is that they concentrated on interactivity, enhanced menus and then, at the end, resolution of fine details. They used Chicken Little’s featers as an example (DVD Vs. Blu-Ray) They barely acknowledged a competitor.

    As it happened we (a Speaker maker, mind you) were the only exhibitors with an HD-DVD player. In all the time I spent at the show, I didn’t hear word one about Blu-Ray and even though the HD-DVD player got a lot of brief looks, it certainly wasn’t a star either. The few questions we did field were from enthusiasts about why the new audio formats on the discs were as yet unplayable.

    I write all this just to help purge some frustration that I happen to share with you. The consumer is getting screwed by this “pissing match” If the Blu-Ray camp weren’t so screwed up, then perhaps they wouldn’t get the bad press that they do. HD-DVD is ahead of the game right now but I’m still holding my breath… maybe when Toshiba FINALLY releases the firmware upgrade I’ll be able to get a little more excited.

    Until then, I’m going to stick to my bet that, in 5 years, we’ll speak as fondly of Blu-Ray and HD-DVD as we do now about LaserDisc and Minidisc (I still own and use both) I’m putting my money on Media Servers.

    Cheers.

  • Scott L.

    I think that you are right about the PS3 having a minimal effect on the next generation of disc media. However, I think that anyone who purchases a PS3 will be thankful for the Blu-ray technology from a videogame perspective at least. It is a huge jump in storage space. BUT, I can not imagine that anyone who owns a PS3 will also purchase a HD-DVD player. That is quite an added expense considering you will have instant access to HD movies on the Blu-ray format. And even if Blu-ray fails, I believe that PS4 will still be able to play those movies, outdated technology and all since backward compatibility is a huge selling point for Sony videogame systems.

  • Scott L.

    I think that you are right about the PS3 having a minimal effect on the next generation of disc media. However, I think that anyone who purchases a PS3 will be thankful for the Blu-ray technology from a videogame perspective at least. It is a huge jump in storage space. BUT, I can not imagine that anyone who owns a PS3 will also purchase a HD-DVD player. That is quite an added expense considering you will have instant access to HD movies on the Blu-ray format. And even if Blu-ray fails, I believe that PS4 will still be able to play those movies, outdated technology and all since backward compatibility is a huge selling point for Sony videogame systems.

  • cgw

    It is really shocking that PS3 is not in production “yet.” It is interesting that PS3 will be manufactured in both China and Japan. How does the process work? Will both countries’ factories make the complete product? Or, will China’s factories make the components and then Sony assembles them in Japan? It is painful to think about the logistics and scheduling issues under whatever the scheme is.

    The most important issue, however, is quality control. PS3 is a sophisticated product. With no previous production experience, it is rather ambitious to pull this off in a short time frame. Remember the production issues related to Microsoft Xbox? I believe that Sony is looking for a manufacturer in China which can meet six sigma quality standards. This is not easy, and there will be a learning curve. Will the quality of PS3 be able to meet its customers’ expectations? These customers (700K for US alone), who should consist both hard-core gamers and early Blu-Ray adopters, could be picky at what they paid for.

    It would be admirable if Sony can achieve all of these in three months. Even so, the attach rate question still remains. Toshiba can move its HD-DVD production capabilities to China now since it has experiences with it already. Sony is gambling on PS3 big time, and it is a high risk game. We will debate this for months until the first quarter earning report for one of the major format war players is out next year.

  • cgw

    It is really shocking that PS3 is not in production “yet.” It is interesting that PS3 will be manufactured in both China and Japan. How does the process work? Will both countries’ factories make the complete product? Or, will China’s factories make the components and then Sony assembles them in Japan? It is painful to think about the logistics and scheduling issues under whatever the scheme is.

    The most important issue, however, is quality control. PS3 is a sophisticated product. With no previous production experience, it is rather ambitious to pull this off in a short time frame. Remember the production issues related to Microsoft Xbox? I believe that Sony is looking for a manufacturer in China which can meet six sigma quality standards. This is not easy, and there will be a learning curve. Will the quality of PS3 be able to meet its customers’ expectations? These customers (700K for US alone), who should consist both hard-core gamers and early Blu-Ray adopters, could be picky at what they paid for.

    It would be admirable if Sony can achieve all of these in three months. Even so, the attach rate question still remains. Toshiba can move its HD-DVD production capabilities to China now since it has experiences with it already. Sony is gambling on PS3 big time, and it is a high risk game. We will debate this for months until the first quarter earning report for one of the major format war players is out next year.

  • B.Greenway

    Well Shaka in the last 14 days alone I’ve posted about HDMI, Star Wars in HD, I did an InFocus IN72 review, a post about INHD, a post about the ELF foundation, one on grey market goods, a Denon DVD-2930 review, several posts on the Sony Pearl projector, and one on the Sharp XV-Z21000 projector. Isn’t that the kind of stuff I’ve always posted about?

    I’m sorry you feel like you’ve entered a spin zone, that’s kind of what I feel like every time I hear about how superior Blu-ray is, when every thing I’ve seen since its launch leads me to believe otherwise.

    Every day that passes with this bullshit imposed on us is one less day we could have been enjoying insert-name-here movie on our big screens. I’m pissed about that and rather than sit by and take it, I’d rather voice my opinion and maybe in some tiny way move the process along.

    I have a determination to see the best image quality win. if Blu-ray was delivering that and or I had the feeling that was even their goal then you’d probably be just as sick of me talking about Blu-ray, because that’s what I’d back. I feel that NOW is the time to discuss what’s going on, not after we’ve become complacent to whole idea and just settle on whatever offers the quickest and easiest solution.

    Hi-def DVD’s are (in my opinion) one of the most important things to happen in home theater in the last 10 to 15 years, I rank its importance just behind HDTV, would you begrudge me talking about HDTV? Home theater has always been about the best image and sound reproduction possible, so I consider hi-def discs extremely important.

    I hope that whatever relevance or worth I bring to this site is based on what I’m really thinking about on that given day, if I can’t bring my own opinion or point of view to the subject then what’s the point? regurgitate what everyone else thinks because its less inflammatory? I’ll pass.

    I’ve also never tried to tow any corporate line or regurgitate the opinions of others unless I felt they were spot-on and relevant to what I was trying to relay in the post. HD DVD is what I’m interested in right now, and I don’t feel like turning a blind eye to what’s going on.

    Would you have said the same when DIVX was being pushed on the consumer? If I’d had a site then, I guarantee you I would have been screaming about how wrong it was as well. So, let me ask you, do you not find the “PS3 hasn’t even entered into production yet” newsworthy? Also how about the very concept of a game-console playing a role in deciding a home video format? maybe it “doesn’t really matter”?

  • B.Greenway

    Well Shaka in the last 14 days alone I’ve posted about HDMI, Star Wars in HD, I did an InFocus IN72 review, a post about INHD, a post about the ELF foundation, one on grey market goods, a Denon DVD-2930 review, several posts on the Sony Pearl projector, and one on the Sharp XV-Z21000 projector. Isn’t that the kind of stuff I’ve always posted about?

    I’m sorry you feel like you’ve entered a spin zone, that’s kind of what I feel like every time I hear about how superior Blu-ray is, when every thing I’ve seen since its launch leads me to believe otherwise.

    Every day that passes with this bullshit imposed on us is one less day we could have been enjoying insert-name-here movie on our big screens. I’m pissed about that and rather than sit by and take it, I’d rather voice my opinion and maybe in some tiny way move the process along.

    I have a determination to see the best image quality win. if Blu-ray was delivering that and or I had the feeling that was even their goal then you’d probably be just as sick of me talking about Blu-ray, because that’s what I’d back. I feel that NOW is the time to discuss what’s going on, not after we’ve become complacent to whole idea and just settle on whatever offers the quickest and easiest solution.

    Hi-def DVD’s are (in my opinion) one of the most important things to happen in home theater in the last 10 to 15 years, I rank its importance just behind HDTV, would you begrudge me talking about HDTV? Home theater has always been about the best image and sound reproduction possible, so I consider hi-def discs extremely important.

    I hope that whatever relevance or worth I bring to this site is based on what I’m really thinking about on that given day, if I can’t bring my own opinion or point of view to the subject then what’s the point? regurgitate what everyone else thinks because its less inflammatory? I’ll pass.

    I’ve also never tried to tow any corporate line or regurgitate the opinions of others unless I felt they were spot-on and relevant to what I was trying to relay in the post. HD DVD is what I’m interested in right now, and I don’t feel like turning a blind eye to what’s going on.

    Would you have said the same when DIVX was being pushed on the consumer? If I’d had a site then, I guarantee you I would have been screaming about how wrong it was as well. So, let me ask you, do you not find the “PS3 hasn’t even entered into production yet” newsworthy? Also how about the very concept of a game-console playing a role in deciding a home video format? maybe it “doesn’t really matter”?

  • shakaZOLO

    What I don’t understand is why you have such a determination to see HD-DVD the winner in this “war”? I believe my first post on this blog was joking that you must be on the HD-DVD payroll. Everytime I return to read your posts, I feel like I’ve entered the HD-DVD spin zone.

    I own an HD-DVD player. I think that right now this is the better technology. Still, I could also make a million arguments about why this doesn’t matter right now and how Blu-ray has its own advantages, but it doesn’t really matter.

    Imagine an alternate universe where there is a site called “home theater golb”. Here they are adamant about the Blu-ray technology and spend most of their posts making a case by interpreting quote of executives and articles on the subject. Wouldn’t it get a little overwhelming?

    I enjoy reading your posts. You have excellent insight into the industry and technology. I’d like to see more product reviews and news about other facets of our world. Why not start a blog titled “HD-DVD versus Blu-Ray” to focus on this topic and return to what you did before this “war” began?

    Okay, soap box rant over…

  • shakaZOLO

    What I don’t understand is why you have such a determination to see HD-DVD the winner in this “war”? I believe my first post on this blog was joking that you must be on the HD-DVD payroll. Everytime I return to read your posts, I feel like I’ve entered the HD-DVD spin zone.

    I own an HD-DVD player. I think that right now this is the better technology. Still, I could also make a million arguments about why this doesn’t matter right now and how Blu-ray has its own advantages, but it doesn’t really matter.

    Imagine an alternate universe where there is a site called “home theater golb”. Here they are adamant about the Blu-ray technology and spend most of their posts making a case by interpreting quote of executives and articles on the subject. Wouldn’t it get a little overwhelming?

    I enjoy reading your posts. You have excellent insight into the industry and technology. I’d like to see more product reviews and news about other facets of our world. Why not start a blog titled “HD-DVD versus Blu-Ray” to focus on this topic and return to what you did before this “war” began?

    Okay, soap box rant over…

  • Dave Mueller

    I couldn’t agree more. I was just having this discussion with my wife (okay…more like I get on a soap box about A/V related causes, and she nods patiently and pretends she is interested. Hey-that’s what being married is about). I was questioning the big ‘given’ that’s been touted by the Blu-ray camp all along that the PS3 launch is going to mark the true dawn of Blu-ray era.

    I work for a systems integrator, and most of the people I work with couldn’t care less about the two formats. I can’t imagine the average PlayStation owner is going to care any more than they do. The sales of PS3 are going to give them ‘vapor’ statistics-marketing tools showing how many Blu-ray owners there are in the United States. Even if most of them don’t know it.

    And let me say also that-in case you didn’t realize it-I own the HD-DVD player. I just bought it recently when I realized I needed a new DVD player. I never had a preference one way or another before the two formats actually launched. I think I kind of stuck up for HD DVD in an ‘underdog’ kind of way. It seemed like Blu-ray was just going to bowl it over with its strong marketing presence and oddly devout advocates (who had never even seen the format).

    It seemed like most people’s decisions were being based simply on storage capacity (ironic now, I know). But my take was this: I don’t care about backing up my entire hard drive on fewer discs. I don’t care if one offers 30G or 50G. How much space do we need to display a movie in Hi Def? If its less than 30G, than I don’t care who has more storage space.

    Barring any other uses or benefits or storage capacity, which one delivers better looking movies? That should be our winner.

    The format war is only going to generate more confusion and apathy among the general public.

    Okay, soap box rant over…

  • Dave Mueller

    I couldn’t agree more. I was just having this discussion with my wife (okay…more like I get on a soap box about A/V related causes, and she nods patiently and pretends she is interested. Hey-that’s what being married is about). I was questioning the big ‘given’ that’s been touted by the Blu-ray camp all along that the PS3 launch is going to mark the true dawn of Blu-ray era.

    I work for a systems integrator, and most of the people I work with couldn’t care less about the two formats. I can’t imagine the average PlayStation owner is going to care any more than they do. The sales of PS3 are going to give them ‘vapor’ statistics-marketing tools showing how many Blu-ray owners there are in the United States. Even if most of them don’t know it.

    And let me say also that-in case you didn’t realize it-I own the HD-DVD player. I just bought it recently when I realized I needed a new DVD player. I never had a preference one way or another before the two formats actually launched. I think I kind of stuck up for HD DVD in an ‘underdog’ kind of way. It seemed like Blu-ray was just going to bowl it over with its strong marketing presence and oddly devout advocates (who had never even seen the format).

    It seemed like most people’s decisions were being based simply on storage capacity (ironic now, I know). But my take was this: I don’t care about backing up my entire hard drive on fewer discs. I don’t care if one offers 30G or 50G. How much space do we need to display a movie in Hi Def? If its less than 30G, than I don’t care who has more storage space.

    Barring any other uses or benefits or storage capacity, which one delivers better looking movies? That should be our winner.

    The format war is only going to generate more confusion and apathy among the general public.

    Okay, soap box rant over…