Merrill-Lynch report on Xbox 360

http://biz.gamedaily.com/features.asp?article_id=10996&section=feature

Titled simply "The Next Game Consoles," the report gives the Xbox 360 a major advantage when it comes to cost. "Sony has in PS3 a console with plenty of impressive proprietary technology, but also a high manufacturing cost. The launch is coming just as Sony tries to come to grips with its deteriorating financial situation. Our analysis of the bills of material for the Xbox 360 and the PS3 indicates that the PS3 will not only be significantly more costly than Xbox 360 at launch, but will continue to operate at a cost disadvantage for several years," stated Merrill Lynch.
With that cost analysis in mind, the report also predicted a key price advantage for the 360 by the end of next year: "Based on the cost analysis as well as our analysis of the two companies' strategies, we think that Xbox 360 could be selling at half the price of PS3 in the latter half of 2006."

Taking all of this into account Merrill Lynch (ML) expects the 360 to come out on top: "Taking Sony's weakened financial condition and Microsoft's deep pockets into consideration, we conclude that Microsoft's Xbox 360 should emerge as the early winner in the next round of the game console wars."

Digging deeper within the report, however, reveals that ML thinks the Xbox 360 (premium SKU) will sell for $249 when the PS3 launches for $500 later in 2006. This, of course, is a big assumption and Sony has not yet indicated any possible price points for the PS3, other than SCE president Ken Kutaragi hinting that it would be "expensive."

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The firm said that MS will likely break even during Year 1 and following that the Xbox business will be able to start generating profits. "Microsoft is in a strong position to assert its claim to #1 market share in the next generation console cycle with a lead in the launch. Microsoft is looking to build a large installed base, possibly around 10 million consoles by the end of 2006. The first year will be very critical, especially the Holiday season of 2005, during which an estimated 65% of console sales are likely to take place," stated ML.

Furthermore, the report casts some doubt as to whether the PS3 will even make it to North America during 2006: "... given the manufacturing challenge that Sony faces with Cell, it's possible that the PS3 does not make the holiday 2006 selling season outside of Japan."

 

One thing that kills Sony this time is the same thing that they banked on for the PS2...which is the disk format. They were the champions of selling a great game system that doubled as a cheap DVD player. People bought them up like crazy because it was likely the first DVD player to many people.

Now they're trying it again with their Blu-Ray format, but will see a much different outcome.

I'm sure most people couldn't give less of a shit what format a DVD eventually goes to. A DVD is a DVD. Who cares if a disk can hold 8,000 gigs if you are just interested in seeing a 2 hour movie? I wonder how many people really think there is a compelling reason to upgrade a dvd format, for movies anyways. The only reason Sony is doing it is for DRM purposes. I don't think the cost of implementing it is worth it...

 

Break this down for me. If I were going to buy a gift, buy the new xbox or the one that has the hard drive in it for 100 more?

 

i'd get the xbox with the hard drive added for the extra $100. They've said they'll charge that for the HDD alone later, so you might as well pay that now and get the extra controller and stuff too.

The xbox 360 should come with the HDD standard, but they made it optional just to advertise it at a lower price even though you'd win up paying more for the same later on anyways.

 

I have never owned a DVD player. To this day I use my PS2.

 

That's false. A DVD is a DVD, but Blu Ray is not. The games themselves do not benefit much from being on Blu Ray, there is a ton more storage and faster loading times, but it isn't going to help the games look better. However, Blu Ray movies will look a ton better than their DVD counterparts. These movies will ideally be remastered from the original print, and can potentially (depending on the condition of the print) be close to high definition. A high quality film print can approximate 1080i, the print of Lawrence of Arabia is supposed to be breathtaking as that is the showcase Blu Ray disc.

Now, you obviously need an HDTV to take advantage of these new discs, but DVD is not the best a movie can look. The space is already limited with the sound and picture and commentaries, but the visuals are 480p. This means the DVDs will look better on an HDTV than they do on a regular tv, but it won't be in HD nor will it look as good as a Blu Ray print.

As you can see, HD movies is the holy grail to get people to buy their movies all over again, so you can bet that the DRM will be tight. DVDs are immensely popular, and it may prove too soon for a new format. That will only mean that Blu Ray will fail, it will not mean DVDs will last forever. There is at least one more cycle in there before the source will look and sound as good as it can. It's not just about the size of the disc.

 

I still stand by my original statement. The target market of a ps3 is probably not people that have a whole HDTV setup. I have all of the current generation consoles hooked up to my 21 inch CRT tv in my dorm room right now.

The government keeps pushing back the HDTV date because not enough people have the stuff and it will cost money to update and/or give out the converting boxes for free. If Sony wants to make a blu ray player fine, let the people that want one buy it. I just don't see the general PS2 fan havng any real use or benefit for blu ray players yet, which is included in the cost of the machine.

 

No doubt the PS3 doesn't benefit as a game machine by being able to play Blu Ray discs. I was addressing the point of DVD. You made a statement about size not mattering for a 2 hour movie and that's false.

Another thing to consider is that Blu Ray players cost around $700, but they come with the ability to write Blu Ray discs as well. The PS3 is leaving the writing functionality off to lower costs.

Your point about DVD being huge to PS2 was right on. It was cheaper than any other DVD player in Japan when it launched, and damn near cheaper than any we had over here. Blu Ray could only hope to have half of that impact. The size from cart/CD to DVD benefitted games much more than the extra size that will be gained from Blu Ray.

For the record, I think both MS and Nin made the right decision to stick with DVD for this generation. However, don't underestimate the call for classic HD movies at home. The sets are dropping in price every day, and both MS and Sony have big plans for their videogames also regarding high definition.

 

anyone that serious about HD movies won't be playing them on a game machine, so it's a moot point.

 

That's probably true too, but $500 saved is $500 saved if you are planning on getting a game machine anyway. The point is, both X360 and PS3 are targeting high def TVs. The X360 does look better than the XBox on a standard TV, but the difference is nowhere near the difference between say Dreamcast over PS1. It's likely that the PS3 will look a little better than that, but neither of the machines will be fully experienced on anything but an HDTV.

In fact, I couldn't recommend buying an X360 for $400 if you didn't have an HDTV. It will likely fall to $300 by the time the PS3 launches, and have a substantially better lineup than it offers at launch. I am excited about XBox Live arcade though, that sounds sweet if done correctly.