Ken Kutargi talks about PSP (profits,how the low price is possibile,shipments)

Sony declares war on iPod:

"The music player iPod is selling for 30,000 yen (US$300; euro 200) and 40,000 yen (US$400; euro 300), and all it does is play music," Kutaragi told reporters at the Tokyo office of Sony Computer Entertainment. "We set a price that's just right to hit a sweet spot."
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Ruh-Roh.
 
Sony plans to sell 200,000 PSP machines in the initial shipment, 500,000 by the end of this year, and 1 million by March 31, 2005, in Japan, Kutaragi said.
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Uh oh...

500,000 by the end of this year... They must be talking about fiscial year, right?
 
Add in the cost of storage and they're toe-to-toe w/ iPod pretty much. From a music playback standpoint.
 
I fail to see the ipod war. The Ipod can store a ton of music. When PSP accepts all music formats and has a 20/40/60GB hard drive, then it's direct competition.
 
Kutaちゃん said:
But he acknowledged the Japanese electronics and entertainment giant doesn't expect to turn a profit on the machine until the fiscal year that starts April 1, 2005.
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Huh? They're gonna put the price up? :)
 
Midas said:
Uh oh...

500,000 by the end of this year... They must be talking about fiscial year, right?
Click to expand...

No their fiscal year ends 31 March and by then they want 1 million only in Japan.
 
ravingloon said:
I fail to see the ipod war. The Ipod can store a ton of music. When PSP accepts all music formats and has a 20/40/60GB hard drive, then it's direct competition.
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not to mention sonly already has an HD based music player out there.
 
this is great it may force cheaper iPods and maybe the DS will become cheaper faster
Nintendo has to fight back they cannot afford to lose in the handheld market
 
SantaCruZer said:
What a lie.
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Yeah. If DS didn't influence the price then the Gameboy certainly did.

If niether of them were even on the market, Sony would probably have this set at 200$+.
 
ravingloon said:
I fail to see the ipod war. The Ipod can store a ton of music. When PSP accepts all music formats and has a 20/40/60GB hard drive, then it's direct competition.
Click to expand...

I think he means it has more all around functionality compared to the iPod. No one is debating the iPod as a music player only is a much better alternative. But the PSP playes games and movies as well.
 
naz said:
this is great it may force cheaper iPods and maybe the DS will become cheaper faster
Nintendo has to fight back they cannot afford to lose in the handheld market
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cheaper ipods? doubt it.

cheaper ds? Where is that mysterious 10,000 yen image?
 
Tritroid said:
Yeah. If DS didn't influence the price then the Gameboy certainly did.

If niether of them were even on the market, Sony would probably have this set at 200$+.
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You don't go around saying you're changing your plans according to the other guys. It makes you look like a weak company being lead around.

Remember in industry it's not a lie...it's PR!
 
sp0rsk said:
cheaper ipods? doubt it.

cheaper ds? Where is that mysterious 10,000 yen image?
Click to expand...

Not only is the mystery 10000yen DS image still lurking, but that image also had a 11/21 date which would give it a lot more lead time than the tiny 10 gap of 12/2.

Hmm....
 
Bebpo said:
You don't go around saying you're changing your plans according to the other guys. It makes you look like a weak company being lead around.

Remember in industry it's not a lie...it's PR!
Click to expand...
Oh I know they wouldn't admit to that, I'm just saying that the influence is obviously there.
 
Bebpo said:
Not only is the mystery 10000yen DS image still lurking, but that image also had a 11/21 date which would give it a lot more lead time than the tiny 10 gap of 12/2.

Hmm....
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What's this about?
 
Elios83 said:
http://www.forbes.com/home/feeds/ap/2004/10/27/ap1613048.html

Basically he says:

1)200k units on day one,500k units by the end of December,1 million in Japan only by March 2005.
2)No profits on the hardware until next fiscal year (April 2005)
3)The low price is possibile because half the hardware is made in house by Sony.
Click to expand...


What it all boils down to:

-Sony taking the biggest bath per unit in the history of the business.
-Sony using the most powerful accounting scheme ever devised to hide costs from regulators.
-Ken using his relatively new boss powers to convince Sony brass that they should take the hit.

I've still got issues of Edge and Nextgen where the american heads of Atari and Sega threatened to bring every ounce ot legal muscle against Sony for pricedumping on the PlayStation if it happened too fast. This time, by blowing billions on in house production, the company is basically untouchable and, for better or worse, only has to answer to their own bottom line.

Weakness or not, I would be surprised if the DS launches without a pricedrop.
 
ravingloon said:
I fail to see the ipod war. The Ipod can store a ton of music. When PSP accepts all music formats and has a 20/40/60GB hard drive, then it's direct competition.
Click to expand...

When Ipod plays movies, games, music, has wifi, and is priced cheaper then it'll have an edge over PSP.
 
Crazymoogle said:
What it all boils down to:

-Sony taking the biggest bath per unit in the history of the business.
-Sony using the most powerful accounting scheme ever devised to hide costs from regulators.
-Ken using his relatively new boss powers to convince Sony brass that they should take the hit.
Click to expand...

That's pretty much it. I mean ... as a consumer, I'm thrilled by the 19800 yen pricepoint. It makes me incredibly more likely to buy a PSP now rather than later.

From an industry perspective, I'm still in shock wondering how Sony is gonna cook the books on this one. This is suicide bombing.
 
200$ + 150-200$ memory card and you might have a worthy competitor... to the Ipod Mini :p

If they can convince people that storing your entire music collection onto one device is not that needed for a portable system (and it's not; nice as it is) and can cut down the price of memory sticks substantially (to the 80$ for 512 for the Pro Duo (as MSRP)) then they can probably win the mobile entertainment industry with this device. As long as they don't mandate ATRAC music format. Haha
 
I thought they already said that the PSP will support MP3 playback. Anyhow, my wallet hopes this means the DS see's a $100 launch price and the GBA drops to $50.
 
JackFrost2012 said:
That's pretty much it. I mean ... as a consumer, I'm thrilled by the 19800 yen pricepoint. It makes me incredibly more likely to buy a PSP now rather than later.

From an industry perspective, I'm still in shock wondering how Sony is gonna cook the books on this one. This is suicide bombing.
Click to expand...


PS2 was sold at a loss for more than a year,with PSP Kutaragi says they'll be profitable on the hardware by next fiscal year and that they can have a low price thanks to the 'in house' developed components so I really can't see where's the problem,they can do their maths,they know their cash and want Nintendo to have a serious headache in the market.
 
Crazymoogle said:
What it all boils down to:

-Sony taking the biggest bath per unit in the history of the business.
-Sony using the most powerful accounting scheme ever devised to hide costs from regulators.
-Ken using his relatively new boss powers to convince Sony brass that they should take the hit.

I've still got issues of Edge and Nextgen where the american heads of Atari and Sega threatened to bring every ounce ot legal muscle against Sony for pricedumping on the PlayStation if it happened too fast. This time, by blowing billions on in house production, the company is basically untouchable and, for better or worse, only has to answer to their own bottom line.

Weakness or not, I would be surprised if the DS launches without a pricedrop.
Click to expand...
The year was 1999. The same stuff was being said about another Sony system, the PS2.

[Deadmeat]This is impossible. The PS2 costs $500 to make, and they are losing more money than they are bringing in.[/Deadmeat]

Flash forward about a year and a half and Sony's not only already created an installed base of over 20M eager game buyers, but they're also starting to turn a profit. Flash to present and they are killing it. It's not even a competition. They'll lose money on the launch hardware, but they won't take a bath. The largest (or 2nd largest depending on the market) consumer electronics company in the world isn't cooking its books, and isn't gonna take a risk that will sink them into financial ruin. Unlike Sega and Nintendo, they have more to lose overall, gaming's just another industry for them. The low price creates the excitement and the userbase which may cost them millions of dollars, but will reap them billion in the long-term. It's an order of magnitude turn around in like two years. When that price puts 20+M PSPs in the pockets of gamers by '06, they'll have the last laugh. Ken Kutaragi is quite possibly the best thing to have happened to Sony, ever. The guy knows the gaming industry. He's been second-guessed by everyone every time. From the PS1 to the PS2 to the PSP now, and he's made the doubters look foolish everytime. I'm not gonna doubt that this is the business model they need to go forward with. They're gonna get me to buy one, and I don't like handhelds. But the PSP is quite cherry. :) PEACE.
 
PS2 was sold at a loss for more than a year,with PSP Kutaragi says they'll be profitable on the hardware by next fiscal year and that they can have a low price thanks to the 'in house' developed components so I really can't see where's the problem,they can do their maths,they know their cash and want Nintendo to have a serious headache in the market.
Click to expand...

Profitability = estimate based on selling X millions of units, where X equals lofty expectations. In house developed components doesn't make it cheaper so much as giving them a tremendous accounting blanket where they can leverage costs around the company as a whole. If Sony starts being profitable on PSP units next fiscal year, it might happen on a per unit basis from then on, but I would be surprised if he includes the tremendous losses and R&D costs before that point.
 
Elios83 said:
PS2 was sold at a loss for more than a year,with PSP Kutaragi says they'll be profitable on the hardware by next fiscal year and that they can have a low price thanks to the 'in house' developed components so I really can't see where's the problem,they can do their maths,they know their cash and want Nintendo to have a serious headache in the market.
Click to expand...

It's great Kutaragi says that, but PSP hardware won't be profitable for Sony before mid-2006. And keep in mind they'll have several years of DEFICITS to pay off by that point ... it's not like you start making money once you're profitable; you gotta pay off all your debt, first...
 
Crazymoogle said:
Profitability = estimate based on selling X millions of units, where X equals lofty expectations. In house developed components doesn't make it cheaper so much as giving them a tremendous accounting blanket where they can leverage costs around the company as a whole. If Sony starts being profitable on PSP units next fiscal year, it might happen on a per unit basis from then on, but I would be surprised if he includes the tremendous losses and R&D costs before that point.
Click to expand...

They know their business,what they can afford and what they can't.
Of course I think Kutaragi means that by next fiscal year they won't sell PSP units at a loss,to recoup all the previous losses and investement they will need time.
But I can't see all this tremendous R&D costs,this is no PS2 or the future PS3 with all the Cell thing,PSP uses existing techology combined in a new way mostly.
 
I doubt that Nintendo is breaking even one the DS, so for me it is absolute shocking to see the PSPs retail price.

I feel the same way as Crazymoogle--Sony has pulled the big brass balls out of the suitcase. If they aren't cooking their books, they are must taking massive losses to do what they are about to do.
 
Insertia said:
When Ipod plays movies, games, music, has wifi, and is priced cheaper then it'll have an edge over PSP.
Click to expand...

And when the PSP has enough built-in storage to hold even 1/10th of what you can toss on an iPod Mini (or just about any other HDD-based music player), you'd have a point that doesn't cave in at the knees.
 
JackFrost2012 said:
It's great Kutaragi says that, but PSP hardware won't be profitable for Sony before mid-2006.
Click to expand...

you're forgetting all the profit they'll make off the games until the PSP hardware is profitable
 
Crazymoogle said:
Profitability = estimate based on selling X millions of units, where X equals lofty expectations. In house developed components doesn't make it cheaper so much as giving them a tremendous accounting blanket where they can leverage costs around the company as a whole. If Sony starts being profitable on PSP units next fiscal year, it might happen on a per unit basis from then on, but I would be surprised if he includes the tremendous losses and R&D costs before that point.
Click to expand...
R&D costs are deferred. Those fabs and plants are multi-purpose. Do you remember how many billions Sony dumped into the PS2 development? Did they include that in their profitability estimates? Suffice to say, the PSP development costs are a drop in the bucket compared to the PS2's big R&D costs. I mean, they built like two, then state of the art fabs to make the EE and GS. I think you're clutching at straws. Besides, what's Nintendo's profitability forecast, or do they just wave a magid wand and create bling? PEACE.
 
Crazymoogle said:
What it all boils down to:

-Sony taking the biggest bath per unit in the history of the business.
-Sony using the most powerful accounting scheme ever devised to hide costs from regulators.
-Ken using his relatively new boss powers to convince Sony brass that they should take the hit.
Click to expand...

I call BS. "Biggest bath per unit in the history of the business". Please.

The PSP is a huge risk, without a guarantee of success. The market doesn't exists, the tie ratio for handhelds is shit, and yet you would have people believe that Sony has just put the whole company on the line by selling the system for a 1/3 of what it costs (or 1/2, depending on which of you we're talking about).

Thier losses are not anything compared to the dev costs of the PS2 or certainly the PS3.

You bitch about the cost being too high, battery life too low. When that excuse gets destroyed, you cry that the're dumping the product on the market.
 
JackFrost2012 said:
Yes, it's the magic wand with Pikachu on the hilt.
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This is a strike directly at Pikachu. The profit margins and high sales they enjoyed with Pokemon are in jeopardy b/c of the PSP now. Pokemon may have kept them going before when they had no competition in the handheld market and could just pump out one sequel after another, but it's gonna be a lot different now. But besides the point, Pokemon still needs a large userbase to sell to. At some point, GB and GBA sales will hit a ceiling, and then what will they do? Nintendo has to hope the DS can compete with the PSP, b/c if not, there goes their last source of revenue. The PSP is gonna put the GB and GBA out to pasture. Fucking Nintendo slept on the handheld market too. This is just a repeat of the mistakes they made in the console market. PEACE.
 
Pimpwerx said:
Besides, what's Nintendo's profitability forecast, or do they just wave a magid wand and create bling? PEACE.
Click to expand...

They wave a magic wand, but that's just to distract you. The bling actually comes in from the GBA, Pokemon, and NES Classic series being Nintendo's own money factory. Their internal GCN development also probably sends some cash their way as well. People loves them some 1st party Nintendo games!
 
Panajev2001a said:
I disagree: their 65 nm process should be on-line way before mid-2006.
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I suppose you're gonna tell me that PS2 hardware is making a profit now too :D The investment they put into these plants is billions of dollars. They won't make this money back for a long time.
 
We might as well have some sort of guide to every Sony hardware launch:

*Insert inflated expected price here

*Sony announces lower price

*Low price shocks everyone

*Naysayers say Sony is going to take and bath and it is financial suicide to do this

*Sony turns a profit

I'm having serious flashbacks to the PS2 launch when it was talked about how there was no way Sony would recover from launching the hardware so cheaply.
 
Jonnyram said:
I suppose you're gonna tell me that PS2 hardware is making a profit now too :D The investment they put into these plants is billions of dollars. They won't make this money back for a long time.
Click to expand...

Johnny, Sony fanboys don't want to hear about things like "math" and "numbers" and "profit margins." PS2 has sold an incredible lot of systems! It must be profitable! PSP is also going to sell a lot of systems! Therefore, it too will be profitable!

Mrbob said:
*Insert inflated expected price here
*Sony announces lower price
*Low price shocks everyone
*Naysayers say Sony is going to take and bath and it is financial suicide to do this
*Sony turns a profit
Click to expand...
Except that Sony hasn't turned a profit.
 
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