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[sonycowboy]

I was just thinking about the incredible risks that Sony seems to take for the releases of their consoles.

PSOne introduction

It was truly ballsy to get into the console market with absolutely NO experience, no games development teams, no arcade IP's to rely on, etc. Now, back in 1993/1994, I'm sure their investment in SCEI was relatively small and that they couldn't have imagined succeeding as well as they did.

Llet's look at the PS2:

They decide to design and manufacture their own CPU (Emotion Engine) and GPU (Graphics Sythesizer). That required big outlays of R&D, when at that point, they could have gone to AMD/Intel/Motorola for the CPU and Nvidia/ATI for the GPU. Companies whose business it was to do such things. Then they decide to manufacture the things themselves. They had to put out EVEN more money for fabrication plants, then they overhaul their plants to go to 90nm processing (and soon 65nm). Oh, and throw in a DVD drive, which were at the time quite expensive.

I'm sure they thought that the PS2 would be a hit, but the cash outlays must have been staggering.

Now onto the PS3:

Again, going their own way, they decide to invest billions into a completely different type of CPU. They decide to develop and included their next generation storage media Blu-Ray into the system, even though Blu-Ray isn't guaranteed to be THE format, and they have significant opposition.

And this generation looks to be the toughest yet, with them most likely having their smallest market share since the mid-90's.

Compared to Microsoft and Nintendo's approaches, if Sony makes the slightest misstep, you could imagine it having dire consequences for thier corporation as a whole. I see that the reward is great, but the risk seems incredibly high. It just seems remarkable to me that they would bet the company (or at least, mountains of money), to do so much themselves (or at least pay for alot of it) as opposed to going to experts in each field.

 

[Shard]

They like to live and die by the console I guess.

 

[FeedMeAStrayCat]

And sadly enough, it is foreseeable that if Sony takes a tumble in the future, the entire industry could follow. It's looking less likely since the Xbox brand is actually gaining in popularity among the masses now, but it's still possible. Somewhat possible.

 

[doncale]

they could have gone to AMD/Intel/Motorola for the CPU and Nvidia/ATI for the GPU.

you mean Nvidia or 3Dfx or PowerVR. back then in the mid to late 1990s, ATI was not much of a force in 3D graphics. it was mostly 3Dfx and PowerVR, with Nvidia on the rise.

 

[ourumov]

The 3 solution they used on the 3 different gens have just one thing in common: they are revolutionary for the time they appeared.


1. PSX. Way before PC GFX cards they decided to do a 3D machine. Instead of relying on a monster CPU they decide to add the GTE in order to do 3D calculations. They also do a GPU that was fairly advanced for its time allowing for framebuffer effects, and Z-ordering (didn't made use of a Zbuffer but a pretty advanced ordering table).

2. PS2. The whole design was around 2 factors: monster fillrate and enormous capability for 3D operations in FP. The final design beats every kind of consumer hardware when it comes to this two factors.

3. PS3. Then again they bring their ideas even further. A new chipset design promising the most GFLOP number ever per mm2.


The first 2 have proved us that although it wasn't the best approach of that gen, it sure was enough good to last a whole generation and to please consumers.

 

[ferricide]

Again, going their own way, they decide to invest billions into a completely different type of CPU.

with important partners. toshiba and IBM are not to be discounted. plus, as noted repeatedly, even just look at sony, it has more uses than the PS3.

They decide to develop and included their next generation storage media Blu-Ray into the system, even though Blu-Ray isn't guaranteed to be THE format, and they have significant opposition.

well, you're looking at it backwards. since the PS3 is very likely going to be successful, putting it into the PS3 will help it reach critical mass faster than HD DVD. since it's a format war, whatever sony can do to get blu-ray players into consumers' hands will help them win it.

also, these days, sony is much more SCE focused than they once were. kutaragi also seems to be quite brazen and he's got a lot of power in the company at large. this adds up to really seriously competing in the marketplace. which is neat, as PS3 will be better relative to its generation than PS2 was.

 

[The End]

Don't forget the massive loss they're taking on every PSP just to outclass Nintendo.

 

[DarienA]

Don't forget the massive loss they're taking on every PSP just to outclass Nintendo.

Massive? I only perused through the other thread so I missed the figure being reported... how much?

 

[monkeyrun]

You see betting the farm is part of the marketing campaign. If they didn't bet the farm it wouldn't create such a hype for the system. without the hype they would not sell that many consoles.

 

[DonasaurusRex]

Yeah its alot of money spent , but at the same time their following is huge, so while theres a possiblity of failure it doesnt seem likely i mean come on its sony they got most of the AAA developers on their side. This would be a farm bet if they tried to push cell on as PC platform against AMD and INTEL because x86 has MS and thousands of apps, but they have it spread out over many different markets. And THEN theres the PS3 which is only gonna need a killer app and its gold. I guess on the counter example theres the SEGA saturn which dominated japan for a year and then whoops here comes FF and it was over.

 

[gofreak]

Massive? I only perused through the other thread so I missed the figure being reported... how much?

They're apparently losing $96 on each PSP sold in Japan (this is based on a report from a day or two ago that mentioned it costs Sony 30000 yen to make a PSP). I don't know how it'll work out in America.

 

[ourumov]

Intel has x86 emualtors for Itanium that run fairly good...I wish Sony did the same and gave us the oportunity to leave the crappy x86 architecture...

 

[Diablos]

I wouldn't be very sad if Sony doesn't take the throne next gen. They dominated with PSX and PS2; someone else can be in first place for a while. Five years ago a lot of us would've liked to say Sega, but that isn't happening.

 

[monkeyrun]

Intel has x86 emualtors for Itanium that run fairly good...I wish Sony did the same and gave us the oportunity to leave the crappy x86 architecture...

I don't that would ever happen.

You might wanna wait for Microsoft though, since they have to do that for the G5, in order of xbox360 (lol) to be backward compatible with xbox .

 

[ourumov]

Actually I thinK MS perhaps is having some agreement with IBM in order to do some kind of deal.
There was WIn NT4 for PPC processors...Perhaps the new releases of Win will appear for G5 cores too and they could also pack there a x86 emu for x86 apps....
Surprise: Intel and AMD out of the business

 

[sonycowboy]

with important partners. toshiba and IBM are not to be discounted. plus, as noted repeatedly, even just look at sony, it has more uses than the PS3.

Well, that's what they thought of the emotion engine. Remember, there was going to be workstations, licensees, put into all of the consumer electronics, etc.

The initial rumbling (admittedly premature) is that the CELL will be great for the PS3, but might have problems with other applications. Now, given that IBM and Toshiba have bet big on the CELL as well, I think it has much better capability to be in more than just the PS3, but we'll have to see.

What would be really interesting is, since Sony paid, are they entitled to ongoing revenue related to the CELL's success?

 

[jarrod]

It was truly ballsy to get into the console market with absolutely NO experience, no games development teams, no arcade IP's to rely on, etc.

Well, not to get nitpicky but Sony's had a game devlopment divison since the 1980s and had been working closely with Nintendo since at least 1989 on various hardware R&D projects, as well as helping Sega with MegaCD. They weren't total newbies.

 

[Azih]

One thing this time that's different is that Sony is facing competent competition for the first time in Microsoft.

With the PSX Sony was facing an arrogant Nintendo that was shooting itself in the foot (carts) and a SEGA that was busy shooting itself IN THE FACE.

With the PS2 Sony was confronted by a 'simpler is BETTAR' Nintendo, a Sega that had finally run out of blood due to self inflicted wounds, and a complete neophyte Microsoft. Man, the Xbox still holds the title for the worst pre launch showings ever. Remember how much oxygen used to get crucified after every early Xbox showing ? :lol good times good times.

Now I'm certainly not saying that the PS3 is doomed or anything. I'm just saying that this is the stiffest competition that any PS console has faced.

 

[sonycowboy]

They're apparently losing $96 on each PSP sold in Japan (this is based on a report from a day or two ago that mentioned it costs Sony 30000 yen to make a PSP). I don't know how it'll work out in America.

Given that Sony doesn't give costs of their products, it's merely an estimate where they try to add up the current costs of the components. Given that quite a few are made by Sony, that's a meaningless excercise at worst, and incomplete at best. In addition, it ignores the fact that Sony has contracted with these suppliers for specific quanities and an extended timeframe, that are sure to affect the actual costs involved.

Basically, I wouldn't put too much stock in it.

 

[sonycowboy]

One thing this time that's different is that Sony is facing competent competition for the first time in Microsoft.

With the PSX Sony was facing an arrogant Nintendo that was shooting itself in the foot (carts) and a SEGA that was busy shooting itself IN THE FACE.

With the PS2 Sony was confronted by a 'simpler is BETTAR' Nintendo, a Sega that had finally run out of blood due to self inflicted wounds, and a complete neophyte Microsoft. Man, the Xbox still holds the title for the worst pre launch showings ever. Remember how much oxygen used to get crucified after every early Xbox showing ? :lol good times good times.

Now I'm certainly not saying that the PS3 is doomed or anything. I'm just saying that this is the stiffest competition that any PS console has faced.

What's interesting is how differently Microsoft is approaching the same industry. It's clearly a highlighting of the fact that this a consumer electronics vs software battle. Microsoft's expertise is in development (environments, tools, developer relations, and end software) whereas Sony always seems to approach it from the design and horsepower angle.

But design and horsepower cost ALOT of money relative to tools that Microsoft has been developing ANYWAY.

 

[SantaC]

Compared to Microsoft and Nintendo's approaches, if Sony makes the slightest misstep, you could imagine it having dire consequences for thier corporation as a whole.

I agree that PS3 is a risk, but I still think that Nintendo is taking the biggest risk next-gen with the "paradigm shift" of Revolution. Nintendo will start to lose a lot of money if the Rev is a failure. Plus that PSP wont give Nintendo easy handheld money anymore .

 

[jarrod]

Given that Sony doesn't give costs of their products, it's merely an estimate where they try to add up the current costs of the components. Given that quite a few are made by Sony, that's a meaningless excercise at worst, and incomplete at best. In addition, it ignores the fact that Sony has contracted with these suppliers for specific quanities and an extended timeframe, that are sure to affect the actual costs involved.

Basically, I wouldn't put too much stock in it.

Well, it's an estimate that jives with what others have been hearing as well and really we have no idea how they came to it (unless you have inside information on how they did, adding components and ignoring supply contracts and whatever). We certainly shouldn't take it as gospel but really, it's the best idea we have right now. About $300 per unit cost doesn't really seem that crazy given the bleeding edge technology going into PSP. Can you give a better estimate?

 

[Mashing]

I agree that PS3 is a risk, but I still think that Nintendo is taking the biggest risk next-gen with the "paradigm shift" of Revolution. Nintendo will start to lose a lot of money if the Rev is a failure. Plus that PSP wont give Nintendo easy handheld money anymore .

That's why I think they want to become an anime production studio so they can create new revenue streams. They'll buy Bandai before too long on their road to this goal. As shortsighted as they seem, I'm sure they feel in the back of their mind if they want to keep their company alive they'll have to find new forms of revenue. You can be sure Sony and Microsoft or any other potential competitor don't have many aspiriations of entering that business (Sony, perhaps down the line).

 

[sonycowboy]

That's why I think they want to become an anime production studio so they can create new revenue streams. ... You can be sure Sony and Microsoft or any other potential competitor don't have many aspiriations of entering that business (Sony, perhaps down the line).

Actually...,

Sony has their own animation studio now. Ubisoft signed on to develop the games based of thier first two commercial movies.

 

[DCharlie]

"Compared to Microsoft and Nintendo's approaches, if Sony makes the slightest misstep, you could imagine it having dire consequences for thier corporation as a whole. I see that the reward is great, but the risk seems incredibly high. It just seems remarkable to me that they would bet the company (or at least, mountains of money), to do so much themselves (or at least pay for alot of it) as opposed to going to experts in each field."

... i've said something akin to this to you on several occassions, and each time you and a few others have rammed your shlongs down my throat for suggesting it!!!

What changed?!

 

[Rhindle]

It's a function of Sony's corporate culture. They have traditionally had an obsessiveness with independence and developing their own proprietary components and standards across all their product lines.

That approach sometimes made sense in the consumer electronics business, but they're beginning to understand that it is a loser in the long run in the PC/console business. Sony's internal R&D effort and fab capabilities can't possibly match those of the industry as a whole across all components. Kutaragi made some comments about it a few weeks ago. He understands the problem, but the old guard at Sony probably still does not.

 

[Kung Fu Jedi]

Perhaps it's just that the dramtic leaps that are necessary in each new generation simply demands that they put more on the line. If Sony played it safe, and released a PS3 that was more evolutinonary then revolutionary, they would probably make more of a profit on hardware, but the system would be under powered and outdated soon after release. In order to make a compelling system, with legs that can last five years or so, they have to take a risk on developing new technology that is going to expand the capabilitie so the the machine to something we haven't seen before.

BTW, I suspect this cycle will continue on into the future as technology improves, tastes of game players expand, and competition in this now HUGE industry grows. Sony knows that Microsoft has huge coffers and is willing to spend some cash to make even more cash in this industry.

 

[Mr_Furious]

Some could argue: "the greatest risks yield the greatest rewards."

 

[sonycowboy]

... i've said something akin to this to you on several occassions, and each time you and a few others have rammed your shlongs down my throat for suggesting it!!!

What changed?!

You've actually said something quite different. You've said that Sony is losing money on the PS2 and is hiding it in the Electronics division. I don't believe that based on the financials we've seen. I do think their approach is risky, but I think it paid of quite well for the PS2.
We'll see about the PS3.

 

[Sysgen]

Some could argue: "the greatest risks yield the greatest rewards."

Most definitely and one could argue that SONY's approach to the PS2 and it's PS userbase just gave MS even more ammunition to enter the industry to start with.

 

[Andrew2]

Sony Corp as a whole is looking to spend nearly $9 billion in R&D over the next 5 years(the PS3 seems to be included in that spending budget). This is excluding the $2 billion restructuring they're undergoing next year(Transformtion 60).

People,Sony spending big isn't a new thing as they're spend big on R&D before.

 

[DCharlie]

"You've actually said something quite different. You've said that Sony is losing money on the PS2 and is hiding it in the Electronics division. I don't believe that based on the financials we've seen. I do think their approach is risky, but I think it paid of quite well for the PS2."

some misunderstanding here, i said overal sony had not recouped the initial investment on the PS2 at the point in time (about a year and half ago) and that they were saying that they had , but had moved a lot of the outstadning costs into Electronics in order to make the games segment look better. The most recent weird result though was the flat income in the games segment where Ps2 sales had gone up, software sales had shrunk a little. That _was_ weird.

No doubt that the Ps2 strategy paid off, but as you mention, any 10 year product life with high inital costs and a long wait until profitablity is always going to open up the company to risk.

Sony Corp as a whole is looking to spend nearly $9 billion in R&D over the next 5 years(the PS3 seems to be included in that spending budget). This is excluding the $2 billion restructuring they're undergoing next year(Transformtion 60).

T60 has been underway for over 2 years now, and has cost them billions already without achieving any of the mile stones they set out to achieve. The final mile stone (a 10% profit return year) is set for next fiscal year and i can't see that happening.

$9 billion in RnD - okay, now i know there are other uses for these techs and that not all of it is paid by sony, but you have cell and bluray as two components. Yes, they will be used in other devices - sure - but the vast majority of return from these techs will come from the PS3, so it would seem only fair to include some of those costs in relation to PS3 initial investment. I recall seeing hideous figures for Bluray costs, Cell is reported to be quite cheap for what it is though, but i'm sure you are (in real terms) gonna be hitting around the close end of $10 billion for the PS3 at the end of the day.

 

[Fafalada]

They decide to design and manufacture their own CPU (Emotion Engine) and GPU (Graphics Sythesizer). That required big outlays of R&D, when at that point, they could have gone to AMD/Intel/Motorola for the CPU and Nvidia/ATI for the GPU. Companies whose business it was to do such things.

Actually they went to Toshiba&Mips for the CPU, so how is that "not" going to companies whose bussines it is to do such things as CPUs? (and they did something similar for PS1 too while we're at it).

GPUs being in house - well looking at GS, the R&D probably cost a lot less then first year of manufacture anyhow...