This reminds me of the 3D0 so much when Trip Hawkins thought everyone would foot $700 for this new technology called "CD" and it failed miserablely.
You can replace 3D0 with PS3 in this article.
"It will cost too much. You can't sell a $700 game box.
Forget it. Major dumb idea. "It doesn't stand a ghost of a prayer of a chance of being cheap enough," says Glen Edens of Interval Research, the man who brought the mouse and GUI (icons, windows, and trashcans) out of Xerox PARC to Apple, and the man who wrote the business plans for Lisa and the Apple LaserWriter with Trip Hawkins.
"It's a noble effort," says Tom Kalinsky, CEO of Sega. "Some people will buy 3DO, and they'll have a wonderful experience. It's impressive. But it's a niche. We've done the research. It does not become a large market until you get below $500. At $300 it starts to get interesting. We make no money in hardware. It's a cut-throat price market. I hope Matsushita understands that."
The owner of another interactive company echoed Kalinsky: "It doesn't make sense. Hardware companies like Matsushita are used to making money on hardware. Here they will be competing against companies that don't care whether they sell their hardware at a profit or not. I don't think it will work."
"We know this market," says Bill White, Nintendo's director of marketing and corporate communications, "and it's not there at $700. Half of the players and 65 to 70 percent of the software buyers are under fifteen. They save up their allowance money and their birthday money. In 1991 we brought out Super Nintendo at $200. It hit the wall. In 1992 we brought the price down to $149, or with no software at $99, and sales took off like a rocket."
3DO Spinners
It's not a game box.
"If we wanted to do a game box," says Rick Tompane, 3DO's chief technology officer, "we could have done it like everyone else: charge $100 for the box, then $50...for the cartridges. We want to change the economics. A CD costs $1 to produce. You can retail it at $10 to $30 - which is in the interests of both the publisher and the consumer, who will be able to buy many more titles. It won't just be games. It will be audio CDs, photo CDs, video CDs, education titles, reference works, entertainment, games, simulations."
"That's the difference," says Hawkins, "between a medium, which this is, and a business like videogames. In videogames, the software is expensive, there are no returns, and the publisher is risk-averse. A medium is like the newspaper business, like television or magazines. The cost of manufacturing an individual unit of the software - the cost of printing an individual newspaper, say - is extremely low. The price to the consumer is trivial. This is not just a new machine, it's a new medium, so the economics are very different."
"Anytime you get a big jump in performance," Hawkins says, "a half million or so people will buy it, no matter what you do in terms of marketing and support. Look at the Atari ST - they did everything wrong, and they still sold half a million. When you add to that multiple, competing manufacturers, and good titles, you've got quite a market. Look at the Commodore 64. It was seen at the time as a game machine. In 1993 dollars, it cost well over $1,000. They sold 15 million of them."
"We know this market, too," says Hawkins, "because of our experience at Electronic Arts. And it's not all allowance money. Sure, the average age of a kid playing an 8-bit game is eleven. But the average for a 16-bit sports simulation is eighteen or nineteen. These are people with jobs. The average for our flight trainer is 38. These are people with careers."
Besides: "When the price drops below $500, which it will pretty quickly," says Tompane, "then it becomes much more of a live product."
http://www.wired.com/wired/archive/1.02/3do.html