Sony: “We haven’t started manufacturing [PS3] yet”
August 20, 2006
As 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
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