by Playfuls Staff |
12th April 2007
Sony has officially stopped the production of the 20GB PlayStation 3, and is currently focusing only on the more expensive model, with the 60GB HDD.[more]
Dave Karraker, Sr. Director, Corporate Communications at SCEA, explained Sony’s decision in an interview with GameIndustry.biz: “At launch, we offered two separate models of PLAYSTATION 3 to meet the diverse needs and interests of our PlayStation fan base. Initial retail demand in North America was upwards of ninety percent in favor of the 60GB SKU, so we manufactured and shipped-in accordingly. Due to the overwhelming demand for the 60GB model from both retailers and consumers, we have ceased offering the 20GB model here in North America. In addition to the larger internal hard drive, the 60GB PlayStation 3 features added storage media slots and built-in Wi-Fi not found in the 20GB system. Based on retailer and consumer feedback, we have decided to focus our current efforts on the more popular 60GB model.”
Last month, Best Buy stopped carrying the 20 GB PS3 model, and even though Sony still claimed to be manufacturing it in mid March, their own SonyStyle stores now admitted that they hadn't had it in stock either for a month.
In the interview with GameIndustry, Karraker also pointed out that the cheaper and less powerful PS3 will continue to be sold at the retail price of $499 until all units are depleted. However, those who have acquired a 20GB model will not be forgotten, Sony’s official promising "100% support with software and services, since all PS3s have the same basic architecture (unlike if MSFT were to stop selling their Core system, which would allow publishers to actually use their hard drive for gaming purposes, leaving the Core user out in the cold)."
By axing the entry-level PS3, Sony is allegedly concentrating on the model that offers better functionality.
The announcement is not at all surprising, since in Europe the PAL PS3s are already sold only in the high-end form, with Karraker saying that “[Europe] probably took that route after seeing the huge demand we had here in the U.S.” (my question here is: who
exactly saw the huge demand, the Europeans or Sony’s officials?...). Actually, the answer is in one of SCEI’s older declarations, since before the PAL launch of PS3: the cheaper version, which is available in Japan for ¥49,980 (US$412) and in the U.S. for approximately US$500, was from the beginning “forbidden” in PAL territories due to "retailer and customer demand" (still, how could they have known
precisely what customers asked for in Europe
before the launch?...)
But what are the
real reasons behind Sony’s decision? Well, the first and most obvious reason is the financial aspect of producing the PS3. Sony is known to lose a lot of money with every PlayStation 3. The combined materials and manufacturing cost of the PlayStation 3 is $805.85 for the model equipped with a 20Gbyte Hard Disk Drive (HDD), and $840.35 for the 60Gbyte HDD version. This total doesn't include additional costs for elements including the controller, cables and packaging. At these costs, Sony is taking a considerable loss on each PlayStation 3 sold. Materials and manufacturing costs for the 20Gbyte model exceed the suggested retail price of $499 by a total of $306.85. For the 60Gbyte version, costs exceed the $599 price by $241.35. With Sony taking a smaller loss on the higher-end model, it's not a surprise the company is steering customers to the 60Gbyte version.
In contrast, the HDD-equipped Xbox 360 has a manufacturing and materials total of $323.30, based on an updated estimate using costs in the fourth quarter of 2006. This total is $75.70 less than the $399 suggested retail price of the Xbox 360.
In order to further cut down the costs Sony decided to offer software emulation in PAL PS3s as a replacement for the Emotion Engine that offers hardware backwards compatibility in NTSC PS3s for PS2 games. This of course posed the problem of how well PS2 games will be emulated in PAL areas, and the final list delivered by Sony on March 23 showed that software compatibility is inferior (you can check the reasons why
here).
The move is expected to save around $27 with each unit sold, and it also moves Toshiba out of the equation: the Emotion Engine is built by Toshiba, Sony, and IBM and is said to be two times faster than a 733 MHz Pentium III, giving Toshiba control over 11 percent of the total PlayStation 3 materials and manufacturing costs. Sony also considers outsourcing the production of PS3s powerful Cell processor, which is becoming too expensive to build “in house”.
However, the amount of money spared by removing the Emotion Engine in PAL areas (which is expected to occur also in NTSC areas) is still too small to meet the profitability expectations for the console. This is why, despite the increasing criticism, no price cut has been operated until now (it would actually be impossible: had PS3 been met with outstanding enthusiasm, Sony would have definitely not cut the price in order to cover its manufacturing costs and to increase its profits; if PS3 faces the sluggish sales we are witnessing today- especially in the PAL territories where it costs from US $779 to US $840- Sony is still in the position of avoiding a price cut, which would become disastrous for a console that has been out on the market for only about 6 months).
Another reason for discontinuing the 20GB unit could be a shift in the commercial strategy. In games theory, as well as in business models, Sony’s move could be classified as “choice limitation”- for both clients and the company. Sony limits the options its clients have by simplifying their choice (they only have 1 model left and that’s it) while at the same time concentrating the resources towards a “single pipeline” (thus avoiding losses from other “pipelines”- like the 20GB model- and consolidating the only pipeline left).
Or it could simply be a response to Microsoft’s Elite version of Xbox 360. One good reason to consider the death of the 20GB model as a result of Microsoft’s move is the speculation concerning a new version of PlayStation 3 with 80GB HDD.
According to a filling at the FCC (Federal Communications Commission) which was made last month, Sony plans to change PS3’s Bluetooth module. Sony’s filling, dated March 2, 2007, and signed by Hitoshi Tanabe, from the Product Quality Office, refers to “a reverse F Antenna” which is due to be added to the Bluetooth module. The filling speaks about an “original model” codenamed CECHA 01 and about “an addition of model” codenamed CECHE 01, which are to be separated “by the difference of the capacity of the hard drive”.
It appears that CECHA 01 (“original model”) refers to the high end 60GB PS3, while the CECHE01 (“addition model”) refers to the revised console, with 80GB hard drive.
The 80Gbytes PS3 would certainly be more adequate for what Sony has in mind. Just think of the fact that only Sony’s HOME application itself will take
about 500 MB from a console’s hard drive. And if you add the other possibilities Sony is exploring in HOME (game achievements, social networking, HD content, advertisement) the discontinuing of the 20Gbytes unit becomes a rational initiative.
