Analyst report moots $500 PS3 launch price

An annual report into the games industry published by Wedbrush Morgan Securities has suggested that added media functions in PlayStation 3 could push its launch price up to $500, alienating many consumers in the process.

The 144-page report, titled The Definition of Insanity: Why The Next Console Cycle Will Start Off With A Whimper, was authored by industry analysts Michael Pachter and Edward Woo, and is a largely positive look at the future of the games industry which projects strong growth over the coming years in most sectors.

However, as the title suggests, it also sounds a number of warning notes regarding the coming hardware transition - perhaps the most surprising of which is the suggestion that Sony's PS3 could debut at such a high price point.

Pachter and Woo claim in the report that Sony will try to introduce the PS3 with significantly more functionality than current consoles, building on the model of the PSX device - which includes a digital video recorder (DVR), DVD burner and a number of other home media centre style functions.

The report suggests that by late 2006 - generally considered to be the earliest possible launch window for the PS3 - these features will cost roughly $250 to include in a system, leading to a $500 price tag for the next generation console.

"At this level, we believe that many consumers will be alienated," the report warns; and indeed, such a high price tag would definitely place Sony in a difficult position, especially as not all consumers will want the extra PSX-style functions.

However, it should be noted that Sony has made a number of comments, both on and off the record, in recent months which suggest that it could be planning a multi-tiered approach to the PS3 - with different versions of the hardware being launched to fulfil specific market needs.

It seems likely that the company will launch a "bare bones" PS3 which is designed as a games console with minimal media playback and network access features, with a more complex PSX style device incorporating media server functions, mass-storage and DVD or Blu-Ray disc burning capabilities being launched at a higher price point.

Interoperability between the devices could see many households buying multiple consoles - a "home server" PS3 which remains resident in the living room like any other piece of AV equipment, and standalone PS3s for bedrooms or lounge areas, which can access the media on the "home server" over a wireless LAN connection.

Price points for these devices are, of course, completely open to question; but it would be logical for Sony to launch the "bare bones" system at a traditional console launch price point of $250 to $300, while the "home server" system could be expected to arrive at anywhere between $500 and the PSX price point of $700.