Sony’s next-generation PlayStation 3 video game console might not appear in key markets this year and could cost the company $900 per unit to produce initially, according to Merrill Lynch analysts quoted in the Financial Times on Sunday.

Sony has indicated a spring launch for its console in Japan and the industry is not expecting a North American launch until November, the FT said. But Hitoshi Kuriyama of Merrill Lynch in Japan said there are reports that the PS3 could be delayed by between six and 12 months.

Merrill Lynch analysts estimated that the initial bill of materials for the PS3 could approach $900, dropping down to $320 by three years after launch.

The Price Of Leadership

If it costs Sony $900 to make the PS3, how much of a loss do you think they are willing to take selling it to us? Even if the PS3 retails for $699.99, that’s still too much for a console here, and it’s too much of a bust for Sony, in terms of cost to manufacture each unit.

It seems Sony is between a rock and a hard place. If the PS3 is delayed, in hopes of dropping prices for components, Sony risks falling too far behind Microsoft and the Xbox 360. If they rush too early, they run the risk of losing a truck-load of cash on every system sold.

The Kitchen Sink, And Then Some

Part of the problem with the PS3 is the lofty goals Sony set for itself, most notably 1080p support and Blu-ray discs. They are trying to make this the “end all, be all” of consoles. The problem is that people aren’t going to be able to take advantage, for the most part, of all the bells and whistles Sony is adding. What’s more, game developers probably won’t be taking advantage of all the PS3 can potentially offer.

Do we really need 1080p support, when you can barely buy a TV that supports that resolution? Do we really need Blu-ray discs for games that work perfectly well on standard DVD discs? Are developers going to take advantage of the full power? Hardly. It seems Sony is pricing themselves out of the console market with the PS3.

The Dumbing Down Effect

Compare Sony with Nintendo, who announced that their upcoming next-gen system, the Revolution, won’t even support HDTV! I guess they feel their customer base is happy with S-Video and composite video. Hell, Nintendo should just add the RF-Adapter for us old school gamers and make everyone happy. Nintendo has it’s own problems, which will be fully addressed in the future.

Sony is in a position to deeply hurt the PS3′s chances of competing with the Xbox 360. It seems Microsoft found the perfect mix of technology, price, and gaming fun. Sony is determined to push the envelope of the technological side of the PS3, which may in turn hurt the fun side, and in doing so, hurt the overall sales and impact the PS3 has in the United States.

Stay tuned, this saga is surely not over. (…and don’t call me Shirley)