Ars Technica rumor claims 399 40GB PS3 this year

[Rangers]

http://arstechnica.com/journals/thumbs.ars/2007/09/09/500-80gb-ps3-with-a-spiderman-3-blu-ray-pack-in-our-mole-lets-us-in-on-sonys-future-plans

Seems unlikely to me but, whatever. I suppose it is possible with Sony recently raising money and actually, I've been hinting a 399 PS3 for a while so I'm not sure why I'm contradicting myself :)

This reminds me of what the heck MS needs to do..drop the stupid Elite and go with 40GB premium! If Sony does this it will make MS pricing structure look pretty bad..but I think MS plans for a deeper cut died with 1 billion set away for repairs..they could have sold the next 10 million consoles for $100 cheaper for that money..which would have meant a $249 premium..

[liolio]

http://arstechnica.com/journals/thumbs.ars/2007/09/09/500-80gb-ps3-with-a-spiderman-3-blu-ray-pack-in-our-mole-lets-us-in-on-sonys-future-plans

Seems unlikely to me but, whatever. I suppose it is possible with Sony recently raising money and actually, I've been hinting a 399 PS3 for a while so I'm not sure why I'm contradicting myself :)

This reminds me of what the heck MS needs to do..drop the stupid Elite and go with 40GB premium! If Sony does this it will make MS pricing structure look pretty bad..but I think MS plans for a deeper cut died with 1 billion set away for repairs..they could have sold the next 10 million consoles for $100 cheaper for that money..which would have meant a $249 premium..

I agree on both point, I feel that MS is lagging behind its own pricing strategy (you're right the 1 billion... hurts).

And everybody (consumers, editors even square) ask Sony for a price drop.
But Sony lose ton of money at the price it sells ps3 in Japan (hopefully it doesn't sell that much) and else where.
The loss for the first quarters of ps3 exploitation are abysmal...

Shortly, I feel like everybody ask Sony to stretch even further their profitability plan (witch already seems a quiet long term plan) for the sake of brand recognition/BD push/etc.

Sony has real tough decisions to take..

[Qroach]

People at MS predicted a $399 PS3 by the end of the year with no backward compatibility support about 2 months back. They are expecting it.

[Rangers]

People at MS predicted a $399 PS3 by the end of the year with no backward compatibility support about 2 months back. They are expecting it.

True and I recall at the time everybody yelled at them for spreading "fud". The theory was they wanted people to be disappointed when Sony didn't actually do it.

[DJ12]

People at MS predicted a $399 PS3 by the end of the year with no backward compatibility support about 2 months back. They are expecting it.
And just were did you get the idea there would be no BC support?

[Arwin]

Yes, they just mean less PS2 chips, probably, or got confused by that concept (I mean the 80GB without the PS2 CPU has just been released). The cost of the PS2 chips in there was considered to be fairly considerable.

I've also predicted a 399 PS3 by the end of the year, but we'll see. A 40GB harddrive though? Seems a strange figure - I thought 80GB was basically becoming the cheapest HDD now.

[Rangers]

I think one caveat against this move is, all the angry customers that just bought 599 80GB PS3's it would create. Ask Apple about that..

[Shifty Geezer]

Indeed, unless Sony got a job lot of unused 40 GB HDDs on the cheap, it makes no sense!
As for angry customers, tough! Prices drop and console buys know this. They get angry, but what can they do? If they weren't willing to spend $600 on a console, they should wait for the price to drop. Pretty much all markets have price drops. You can buy a car this week only to have a special offer appear next week. And PC prices drop like nobody's business without causing a stink. As a consumer, it'd be nice if you weren't caught out by an unexpected price-drop, but at the end of the day, that's life. Nothing anyone will do about it.

["Nerve-Damage"]

I think one caveat against this move is, all the angry customers that just bought 599 80GB PS3's it would create. Ask Apple about that..

Not really.

PS3 is going on a full year now, so certain price cuts were expected. While Apple’s iPhone has been out less than 2 months. Apple iPhone early adopters just feel hurt (rightfully so?) because the immediate price cut was just out the blue.

[Carl B]

Well, doesn't make any more sense today than the rumor did when it cropped up before; certainly a 40GB 2.5" drive difference doesn't logically equate to a $100 cut, and definitely not when the 80GB drives are in fact cheaper to source.

Holidays are soon enough that we won't be waiting long though to see if this whole thing's real or not.

[Titanio]

Doesn't make sense. As per the common understanding of 'HDD economics', at least, a 40GB system shouldn't be any cheaper to make than a 80GB system. That's why the 60GB system was phased out too. If anything it might be more expensive to make at this point.

But, if I were conjuring up a rumour for the masses, it would make sense to differentiate a cheaper system with a smaller HDD, since MS and Sony have both to varying degrees differentiated their cheaper and more expensive systems by using varying storage capacities, even if it's one of the less relevant contributors to system cost, so the idea would appeal to less informed perception of HDD capacity and pricepoints.

[patsu]

Our mole has a great track record: both the Xbox 360 HDMI story and the wired Xbox 360 Rock Band controllers have since been confirmed.


I posted a response in GAF. A good Windows mole does not necessarily make a good Sony mole.

Without any supporting evidence, this looks like just another speculation similar to MS's earlier prediction. I doubt that the 40Gb PS3 rumor is true.

Instead of relaying the rumor, Ars should have challenged their source and ask him/her to explain why it is viable given the common belief that 40Gb HDD should be more expensive to make than 80Gb now. As a technical site, the least they could do is to conduct a quick survey of 40Gb HDD bulk rate (compared to 60Gb and 80Gb)

Why not simply drop the price of the 60Gb since it would have more volume than 40Gb due to existing orders. They also didn't mention the territory.

That would actually make an interesting article. Now it reads like another forum post. :(

[Shifty Geezer]

That's why the 60GB system was phased out too.Except it wasn't ;) The 80GB appears to have been introduced to offset the loss of full BC in NA. 60GB hasn't been phased out in the rest of the world on account of it no longer being the cheapest capacity HDD. That could be because they're using up stocks of HDD, maybe. Dunno. But the whole cheapest HDD solution never appears to hold water with consoles! For whatever reason, these companies choose to use less economically sensible storage solutions. Sony introducing a 40GB PS3, despite being nonsensical, is no more nonsensical in that respect than MS continuing with a 20GB HDD for XB360 when for presumably no more money on their part they could offer consumers a lot more storage and value.

[Heinrich4]

How the economy of little USDs on each HDD 40GB could make Sony sell console at US$399?

Sometimes i fell some articles aim to make certain pressure to manufacturers, therefore does not have much logic in this... at least for who has some knowledge of the hardware/videogames etc.

BOM of ps3:

http://img260.imageshack.us/my.php?image=untitled2fl4.jpg

http://img112.imageshack.us/my.php?image=untitledxj7.jpg

http://www.electronicproducts.com/whatsinside/viewteardown.asp?filename=Xbox%5F360%5Fweb%2Ehtml

[Shifty Geezer]

I think the idea is to introduce the hardware at a lower price, but still maintain a more profitable 'higher-end' version. The price to manufacture has already dropped considerably. It's quite possible PS3 is $200 per unit cheaper to make now then when it launched. By passing on those savings, Sony offer a lower entry point, but also take less profit than they do now. So by offering a cheapo 40GB version, some people who know no better will pay for $100 for only 20GB more storage. After all, if that's the major distinguishing number on the box, 50% (or 100%) more storage for only a 20% increase in price has to be worth it, right? ;)

[Gradthrawn]

I think the idea is to introduce the hardware at a lower price, but still maintain a more profitable 'higher-end' version. The price to manufacture has already dropped considerably. It's quite possible PS3 is $200 per unit cheaper to make now then when it launched. By passing on those savings, Sony offer a lower entry point, but also take less profit than they do now. So by offering a cheapo 40GB version, some people who know no better will pay for $100 for only 20GB more storage. After all, if that's the major distinguishing number on the box, 50% (or 100%) more storage for only a 20% increase in price has to be worth it, right? ;)

The WiFi and card reader modules could also be dropped. Assuming they're still modular, that is.

[Rangers]

Well, doesn't make any more sense today than the rumor did when it cropped up before; certainly a 40GB 2.5" drive difference doesn't logically equate to a $100 cut, and definitely not when the 80GB drives are in fact cheaper to source.

Umm of course 40GB drive is not $100 cheaper (if at all)..since when did cost have anything to do with companies creating an artificial value situation?

One assumes this would not be the only PS3 sku, and as such, some sort of value differentiator, however artificial, must be created.

This rumor does appear to be on tenuous ground. However if true, it'll be interesting to see microsoft's response.

[-tkf-]

But Sony lose ton of money at the price it sells ps3 in Japan (hopefully it doesn't sell that much) and else where.


Tons of money is speculation, noone really knows how much exactly. We only know that the PS3 is alot cheaper to produce know than it were when they launched it and there hasn´t been any real price drops.

[dobwal]

Except it wasn't ;) The 80GB appears to have been introduced to offset the loss of full BC in NA. 60GB hasn't been phased out in the rest of the world on account of it no longer being the cheapest capacity HDD. That could be because they're using up stocks of HDD, maybe. Dunno. But the whole cheapest HDD solution never appears to hold water with consoles! For whatever reason, these companies choose to use less economically sensible storage solutions. Sony introducing a 40GB PS3, despite being nonsensical, is no more nonsensical in that respect than MS continuing with a 20GB HDD for XB360 when for presumably no more money on their part they could offer consumers a lot more storage and value.

One could surmised that MS's continuing with a 20GB HDD is due to contractual obligations, pricing on the 20GB HDD is based on a certain volume.

A 40GB PS3 is another matter as it makes little sense to introduce $100 cheaper sku based primarily on a smaller HDD as going to 80 to 40Gb shouldn't save Sony anywhere near a $100 in manufacturing costs.

Maybe the $399.00 sku will come with no multi-card reader, no wifi and a wired controller and Sony will just eat the additional losses to increase marketshare?

[rekator]

One could surmised that MS's continuing with a 20GB HDD is due to contractual obligations, pricing on the 20GB HDD is based on a certain volume.

A 40GB PS3 is another matter as it makes little sense to introduce $100 cheaper sku based primarily on a smaller HDD as going to 80 to 40Gb shouldn't save Sony anywhere near a $100 in manufacturing costs.

Maybe the $399.00 sku will come with no multi-card reader, no wifi and a wired controller and Sony will just eat the additional losses to increase marketshare?

In fact this SKU replace the "Stealth" 20Go PS3…

[Rainbow Man]

The WiFi and card reader modules could also be dropped. Assuming they're still modular, that is.
Aren't they by nature USB devices? If so it should be a doddle, though question is how mcuh money could actually be saved this way. The source componenst must surely be quite cheap today.

Flash readers in particular come almost for free even bought retail these days..
Peace.

[Shifty Geezer]

A 40GB PS3 is another matter as it makes little sense to introduce $100 cheaper sku based primarily on a smaller HDD as going to 80 to 40Gb shouldn't save Sony anywhere near a $100 in manufacturing costs.You misunderstand. The lower cost SKU isn't about saving money and passing those savings onto the end user. It's about introducing a new price-point that's cheaper because of lots of price savings, but trying to maximize revenues by offering a more profitable SKU as well. For us who know, we look at the...60GB model and think 'Pah! That's not worth £100 more. I'll buy the cheaper model and get the same for my money.' For the ordinary buying public, they see two models with a large price differential, and assume that the price difference is because of the increased capacity in the larger SKU. Higher priced goods aren't always priced higher the amount that their BOM is higher. Indeed I dare say that's never the case. As the price goes up, often profit margins are pushed further too. You can, as it were, sell $300 of hardware for $500, and sell $400 of hardware for $700, and sell $500 of hardware for $1000.

If Sony introduce other changes, specifically dropping the Wifi, I think they'll suffer the consequences. Wifi is pretty popular, AFAIK; certainly in the UK. I know plenty of people who have Wifi networks, and no-one who had a wired network when they were the only option. I certainly won't get a PS3 without Wifi as I want it to remain portable, and don't want the hassle and expense of running Ethernet cables around the house.

Given price reductions in the BOM, I think a $400 price drop is possible, with the HDD as just a differentiating factor. Assuming this rumour floats, which I don't think it will. The price shavings from removing features just adds complication to the assembly process at little savings. Sounds like more effort than its worth to me.

[RobertR1]

This compliments the news about Sony selling a stake in their finances division to fund the gaming. It seems like they do not want to be left behind severely during this holiday season by the Wii and 360 so they're willing to take a bigger loss to gain marketshare.

Seeing that the BR/HD DVD battle isn't even close to being over now, they need to focus their attention on the gaming division.

[Farid]

People who argue BOM and economics tied to the actual manufacturing differences between the proposed hardware configurations are not factoring an important point: Sony's will to drop the entry price for their platform.

It's not important that the hypothetical 40GB SKU doesn't cost much less to produce for SCE, what they need right now is a low-priced SJU that seem to offer less "psychological value" than the higher-end SKU. And removing low-cost features (media card reader, for instance) is a good way to do so.

It would allow Sony to introduce a lower price PS3 that offers less value to the consumer, while keeping a more featured product that seems to offer more value while having a better net margin for Sony.

In any cases, SCEA, before SCEI and SCEE, needs a cheaper PS3 on shelves this holyday. And SCEA folks are definitely pushing for it. In other words, I wouldn't be surprised at all to see a $399 PS3 model on shelves this holiday season in the US.

[patsu]

So this is like the revival of 20Gb PS3 ? I guess we shall see.

What this means to me personally is to quickly trade in my trusty 20Gb PS3 for a 60Gb using BestBuy's extended warranty. :twisted:

[Tap In]

In any cases, SCEA, before SCEI and SCEE, needs a cheaper PS3 on shelves this holyday. And SCEA folks are definitely pushing for it. In other words, I wouldn't be surprised at all to see a $399 PS3 model on shelves this holiday season in the US.

agreed

this is the reason why it is not only plausible IMO, but necessary for survival in the marketplace.

[Heinrich4]

I think the idea is to introduce the hardware at a lower price, but still maintain a more profitable 'higher-end' version. The price to manufacture has already dropped considerably. It's quite possible PS3 is $200 per unit cheaper to make now then when it launched. By passing on those savings, Sony offer a lower entry point, but also take less profit than they do now. So by offering a cheapo 40GB version, some people who know no better will pay for $100 for only 20GB more storage. After all, if that's the major distinguishing number on the box, 50% (or 100%) more storage for only a 20% increase in price has to be worth it, right? ;)

I agree fully to your argument, but the fact the damages of US$250 for unit still would keep high as time of ps3 20GB/60GB BOM(BOM = US$850,sell ->US$ 500/600 = US$1billion+ dollars lost) ... and same in a hypothesis "version 40GB entry level/early adopters like" of only surrounds 20% of the total of manufactured consoles no?


I think that most logical would be to keep only model ps3 "euro like" 80GB without EE/ps2 "for full backwards" for all regions... even Japan... and "fighting' for reduce price as fast is possible or include more bundles -> more games+ controllers etc .

(for gamers would be wonderful if we have US$399 price soon with "features"(blu-ray drive HD,cell processor,wi-fi etc) of ps3 but this possibility before March of 2008 seems little real... but we cross fingers!)

[ihamoitc2005]

So this is like the revival of 20Gb PS3 ? I guess we shall see.

What this means to me personally is to quickly trade in my trusty 20Gb PS3 for a 60Gb using BestBuy's extended warranty. :twisted:

How do you do this?

Also, I do not think they can save $100 dollars with less hard-drive, memory card reader and wifi. But, maybe they will have new manufacturing that is cheaper for more expensive components.

[dobwal]

You misunderstand. The lower cost SKU isn't about saving money and passing those savings onto the end user. It's about introducing a new price-point that's cheaper because of lots of price savings, but trying to maximize revenues by offering a more profitable SKU as well. For us who know, we look at the...60GB model and think 'Pah! That's not worth £100 more. I'll buy the cheaper model and get the same for my money.' For the ordinary buying public, they see two models with a large price differential, and assume that the price difference is because of the increased capacity in the larger SKU. Higher priced goods aren't always priced higher the amount that their BOM is higher. Indeed I dare say that's never the case. As the price goes up, often profit margins are pushed further too. You can, as it were, sell $300 of hardware for $500, and sell $400 of hardware for $700, and sell $500 of hardware for $1000.

If Sony introduce other changes, specifically dropping the Wifi, I think they'll suffer the consequences. Wifi is pretty popular, AFAIK; certainly in the UK. I know plenty of people who have Wifi networks, and no-one who had a wired network when they were the only option. I certainly won't get a PS3 without Wifi as I want it to remain portable, and don't want the hassle and expense of running Ethernet cables around the house.

Given price reductions in the BOM, I think a $400 price drop is possible, with the HDD as just a differentiating factor. Assuming this rumour floats, which I don't think it will. The price shavings from removing features just adds complication to the assembly process at little savings. Sounds like more effort than its worth to me.

If Sony can afford the $400 price sku with a PS3 who primary difference is a just 40Gb HDD then they can afford to sell the 80Gb PS3 for $400 and then offer a higher priced sku with 120-200 Gb HDD and a few other goodies whos costs to Sony would be a fraction of the price premium a consumer would have to pay for it.

[liolio]

If Sony can afford the $400 price sku with a PS3 who primary difference is a just 40Gb HDD then they can afford to sell the 80Gb PS3 for $400 and then offer a higher priced sku with 120-200 Gb HDD and a few other goodies whos costs to Sony would be a fraction of the price premium a consumer would have to pay for it.
Yes but they can also produce very few 40GB SKU and claim that their entry price is 399$ for PR reasons ;)

[scooby_dooby]

agreed

this is the reason why it is not only plausible IMO, but necessary for survival in the marketplace.

Agreed as well.

This is exactly what Sony needs to do if they want to get back in this fight.

Not only do I think this is probable, I'd bet on it. (Not the 40gb part...just the $399 pricepoint)

[patsu]

How do you do this?

Also, I do not think they can save $100 dollars with less hard-drive, memory card reader and wifi. But, maybe they will have new manufacturing that is cheaper for more expensive components.

I bought the store warranty from BestBuy when I bought my 20Gb. It says I can exchange my PS3 anytime, but 20Gb is EOL... so I'm going to see if they will gimme a 60Gb instead. :)

Agreed as well.

This is exactly what Sony needs to do if they want to get back in this fight.

Not only do I think this is probable, I'd bet on it. (Not the 40gb part...just the $399 pricepoint)

I think most people doubt the 40Gb part. The US$399 move is highly anticipated.

[Archgamer]

In 1 year they shave off 200? The 80 gig going down 200 dollars after being introduce not to long ago will piss off early buyer.

I can see two scenarios. Plan a new model for 400 before Christmas. The existing 80 gig goes down to 500. Or bring the 80 gig to 500 until next spring and drop or introduce another model at 400 when the heavy hitters comes out. I say the ladder makes more sense.

[scooby_dooby]

The 80 gig going down 200 dollars after being introduce not to long ago will piss off early buyer.

So what?

This is the most ridiculous argument people make against pricedrops IMO. Why does teh company care if you piss off some small segment of people who already own your product?

I mean, I can see repeated, and frequent pricedrops over the longterm having a neagtive affect, but a couple pricedrops is not going to hurt them one bit, it would actually send sales skyrocketing. So what if a handful of PS3 owners grumble...they'll still buy GT5 and FF13 regardless ;)

[dobwal]

agreed

this is the reason why it is not only plausible IMO, but necessary for survival in the marketplace.

Survival for Sony isn't dependent on a $399.00 PS3 this holiday. The best price for the PS3 in Sony's eyes is the lowest price where the loss can at least be recovered through software and peripheral sales. Maybe Sony can even sell at a price point below that threshold if further cost reductions can be seen in a short period of time. But dropping price just to generate market share without taking account of bottom line is something the gaming division can't do since Stringer is harping on the the % of profits to revenue of Sony as a whole.

The playstation brand can survive even in a distant third place. The question isn't whether the playstation brand will survive but whether Sony will see a profit or a loss this generation and what can be done to push the PS brand toward profitability.

[NavNucST3]

In 1 year they shave off 200? The 80 gig going down 200 dollars after being introduce not to long ago will piss off early buyer.

I can see two scenarios. Plan a new model for 400 before Christmas. The existing 80 gig goes down to 500. Or bring the 80 gig to 500 until next spring and drop or introduce another model at 400 when the heavy hitters comes out. I say the ladder makes more sense.

Let me just say that my iPhone dropped in price by that same amount, in less than a year. But I agree with Scooby, so what. If I felt the value was there at X price, why should it matter to me if a day or a week later it is y price?

If there is a drop to $399, expect to see me post my PSN ID that very day! :wink:

[mrcorbo]

Let me just say that my iPhone dropped in price by that same amount, in less than a year. But I agree with Scooby, so what. If I felt the value was there at X price, why should it matter to me if a day or a week later it is y price?

If there is a drop to $399, expect to see me post my PSN ID that very day! :wink:

I understand the logic of this and I would have to agree, but this is unlikely to be how this would be perceived by the buying public. This is why Apple had to make some effort to try to smooth things over ($100 in store credit). A 33% drop in price on a product that's this expensive just a couple of months after its introduction is a bit too extreme IMO.

Not to mention the other perception that could come out of a move like that, which is that Sony is desperate.

I think they would need a new SKU to get to $399.

[Scott_Arm]

I don't see how anyone could be mad if this price drop was made. You buy something if you feel it's worth the money. Early adopters always pay significantly more. Whether the price drops in a year or a few months, it doesn't really matter. There's no such thing as being "fair" to customers in the situation of price drops. Customers know the price will come down, and if they pay more than they feel the item is worth, that's there bad. They should wait until the unit hits the price they feel it's worth, because they know it'll get there eventually.

I still don't understand how they could sell the 40gig version so cheap. The cost Sony pays to build and market a 40gig system vs an 80gig system is minimal, and they'd lose far more money for each 40gig that they sold. I'd think the pricing would be set to encourage people to buy the 80gig

[22psi]

If true, day one purchase. I've been waiting for this.

[cthellis42]

I do see them rather wanting to get a $400 SKU out there, but I share earlier comments that ran along the lines of "40 fewer gigs, and that's IT for a $100 difference?" It doesn't make much sense to start splitting production again (though I guess they are still producing the 20GB in some markets, right?) and remove the wireless device or the memory card slots, etc. And if they don't do that, just what would really be the differentiation?

I guess the 80GB could remain still bundled with Motorstorm through the holidays and have, say, some extra perks (like credit that could go to your online account when you sign up for it, so you could pick up, say, $20 worth of games and somesuch. Good idea, that, as it's extra value AND gets more people signing up right away and seeing what's on PSN.) But without the hardware differences...

The difference between a 40GB and 80GB laptop drive in large bulk couldn't be THAT huge, so frankly I share the stance that they should just use the 80GB as the baseline and drop that, and retain a more expensive SKU with a stupid-huge drive (you can get 160's in a frickin' iPod, after all) and some cool bundling at the high end. In fact, I'd almost rather still see them at the $600 level with a ridiculously cool bundle rather than feeling they have to stepping-stone about. Toss a few of the sought-after holiday titles in, a good online game (Warhawk, say, which could be pre-installed, and would also get people used to using the SIXAXIS), and whatever other bling seems nice. ;) They can drop that one to $500 easily enough later on just by pulling out some of the bundle. While some hardware extras on the machine might be NICE, I think it makes more sense to keep the basic design the same for manufacturing simplicity and cost reduction, and make it up with ephemeral extras.

Also, throw a frickin' HDMI cable or something in there, 'kay? Sheesh...

[quest55720]

The concern IMO is not pissing off current customers with multiple price cuts in a short period of time. The concern for me would be people waiting for yet another price drop. If I see something drop in price a couple of times in a few months it would make me think twice about buying because the next price cut could be right around the corner. Also there is the danger if MS holds firm on price and outsells the PS3 dispite yet another price cut might be the dagger in the heart. If the PS3 with more features at a cheaper price elite vs 40gig unit could not outsell the 360 it would be a signal it is over for sony. I could see 3rd partys start to pull support left and right. Price is the last excuse sony has right now if it is not price then it is people just don't want a PS3.

[cthellis42]

Technically, that would only be the first real CUT... (Just they'd also be upgrading the console technically as well.)

After all, it launched with a $500 SKU, and that's the cheapest one we're at now, since the 20GB got surreptitiously dumped. (At least in some markets.) Granted you can still find a couple, but...

$400 is the only place they'd have to go to and stay for a while; it's just more important for them to get there BEFORE the holiday season than it would be to wait until later, I think. They need to lower the barrier of entry while people are in a purchasing mood, rather than wait for another dry spell like in May (when lots of summer price drops occur).

[NavNucST3]

I understand the logic of this and I would have to agree, but this is unlikely to be how this would be perceived by the buying public. This is why Apple had to make some effort to try to smooth things over ($100 in store credit). A 33% drop in price on a product that's this expensive just a couple of months after its introduction is a bit too extreme IMO.

Not to mention the other perception that could come out of a move like that, which is that Sony is desperate.

I think they would need a new SKU to get to $399.

Again, who cares, the gaming media, people in fora? I have a sneaking suspicion that this holiday season when parents walk into stores, that Sonys supposed desperation is irrelevant.

[dobwal]

I do see them rather wanting to get a $400 SKU out there, but I share earlier comments that ran along the lines of "40 fewer gigs, and that's IT for a $100 difference?" It doesn't make much sense to start splitting production again (though I guess they are still producing the 20GB in some markets, right?) and remove the wireless device or the memory card slots, etc. And if they don't do that, just what would really be the differentiation?

I guess the 80GB could remain still bundled with Motorstorm through the holidays and have, say, some extra perks (like credit that could go to your online account when you sign up for it, so you could pick up, say, $20 worth of games and somesuch. Good idea, that, as it's extra value AND gets more people signing up right away and seeing what's on PSN.) But without the hardware differences...

The difference between a 40GB and 80GB laptop drive in large bulk couldn't be THAT huge, so frankly I share the stance that they should just use the 80GB as the baseline and drop that, and retain a more expensive SKU with a stupid-huge drive (you can get 160's in a frickin' iPod, after all) and some cool bundling at the high end. In fact, I'd almost rather still see them at the $600 level with a ridiculously cool bundle rather than feeling they have to stepping-stone about. Toss a few of the sought-after holiday titles in, a good online game (Warhawk, say, which could be pre-installed, and would also get people used to using the SIXAXIS), and whatever other bling seems nice. ;) They can drop that one to $500 easily enough later on just by pulling out some of the bundle. While some hardware extras on the machine might be NICE, I think it makes more sense to keep the basic design the same for manufacturing simplicity and cost reduction, and make it up with ephemeral extras.

Also, throw a frickin' HDMI cable or something in there, 'kay? Sheesh...

Don't they still offer the 20Gb sku in japan. Maybe they simply upgrading the 20Gb to 40Gb like they upgraded the 60 Gb to 80 Gb and are re-releasing in the states for $399.00. This would make more sense then just releasing a PS3 with just 40 less Gbs.

[cthellis42]

Don't they still offer the 20Gb sku in japan. Maybe they simply upgrading the 20Gb to 40Gb like they upgraded the 60 Gb to 80 Gb and are re-releasing in the states for $399.00. This would make more sense then just releasing a PS3 with just 40 less Gbs.
Like I said, I think they do. Of course it's based on the old design which has the EE+GS, and since they're trying to phase that out to save costs...

Of course at that point what do they do? Is it better to keep that old design otherwise and just swap the motherboard and kick up the HD, or would it be better to unify the case production and all the chips and ports to just have it done the one way on ALL the SKU's? Personally, I think it's best to unify the hardware that takes specific production, as it makes everything easier to produce and support. There's not a lot more that I can see them wanting to mix in, so they could mainly take advantage of significant hard drive advancements in a premium model (they could even possibly shoot for a large capacity 7200, eh?) and other pack-in bonuses (extra controller, cords, games, promotions, etc.) to sell a higher-priced, more-profit SKU.

It would just seem odd to go from 20/60 to 40/80 at this point. Heck, even the cheapest-of-the-cheap laptops pretty much come with 60's as a bare minimum at this point.

[DieH@rd]

Yes, 20gb PS3 is still alive in Japan [for 318euro!].

http://www.amazon.co.jp/ソニー・コンピュータエンタテインメント-15762541-PLAYSTATION-3-20GB/dp/B000JJBO2K/ref=pd_bbs_sr_3/503-9050114-2183126?ie=UTF8&s=videogames&qid=1189531174&sr=8-3

[Dr Evil]

Yes, 20gb PS3 is still alive in Japan [for 318euro!].

http://www.amazon.co.jp/ソニー・コンピュータエンタテインメント-15762541-PLAYSTATION-3-20GB/dp/B000JJBO2K/ref=pd_bbs_sr_3/503-9050114-2183126?ie=UTF8&s=videogames&qid=1189531174&sr=8-3

Sony has sold about 1.2 million PS3 units in Japan and they had shipped over 1 million units to that market in the first part of January. I woulnd't be surprised if they phase out the 20GB model from the Japanese market also, once the chain is cleared.

318€... man that irritates me!

[DieH@rd]

318€... man that irritates me!

A friend of mine was in Tokiyo last month, and he saw 20gb models for 250€ in Akihabra... :???:

[TheChefO]

Question is, will a $400 ps3 be enough in this market?

Many many months ago, I think it would have been huge. This holiday though, it will be facing a Wii which is selling all it can make, and an xb360 which has a stellar lineup.

Not to mention the potential reaction of MS and N (well, maybe not N) to drop their price as well.

As I've said many times, a $200 xb core + this holiday lineup would be killer for MS. IMO, MS should have done this without being provoked by such a drastic move by Sony.

Whatever it takes to get these guys bringing their prices into the mainstream though. It's been well above accepted price points for way too long and I'll be glad to see Sony and MS get their act together this year.

I think a $400 ps3 will sell a heck of a lot better than a $500 one would, but, it still won't be enough IMO. Should be enough to secure 3rd party support, but not enough to overtake MS or N.

[Laa-Yosh]

Compared to how they're doing now, it'd do wonders.

[liolio]

I want to back up TheChefO 's opinion.

If sony has a system @399$ with a 40GB HDD and who actually is able to act as the best BD player of the market, M$ can't sell the 360 @349$

Shortly, if this rumour is true, the pro pack will be 299$ and the arcade pack 229$ this christmass.
And sadly for Sony this place M$ dangerously in the "mainstream" market price wise while 399$ is still quiet a lot.

In fact I almost think Sony should better shaved only 50$ so M$ can chose to not react/follow.

[Geoson]

Yeah, thats the thing, but thing is that PS3 will lose its crown for "cheapest BD player in the market" soon. BD players can be add as low as the price of a PS3 right now. However, I don't know about the quality.

[Cheezdoodles]

bla bla bla bla M$ bla bla bla

A tip: If you want to be taken seriously on this board, don't use M$ when trying to say Microsoft or MS.

[cthellis42]

Why would someone say M$ when talking about multiple sclerosis? Are some of those "not for profit" foundations really raking it in? :razz:

[Platon]

I want to back up TheChefO 's opinion.

If sony has a system @399$ with a 40GB HDD and who actually is able to act as the best BD player of the market, M$ can't sell the 360 @349$

Shortly, if this rumour is true, the pro pack will be 299$ and the arcade pack 229$ this christmass.
And sadly for Sony this place M$ dangerously in the "mainstream" market price wise while 399$ is still quiet a lot.

In fact I almost think Sony should better shaved only 50$ so M$ can chose to not react/follow.

I wonder though if MS would go for one more price drop before christmas. I think they will sell quite a lot as it is and might keep the price cut for a bit later when the slow selling part of the year starts. On the other hand I am of the opinion that MS should have aready been at the $199/299 price point by now...

[Rangers]

I want to back up TheChefO 's opinion.

If sony has a system @399$ with a 40GB HDD and who actually is able to act as the best BD player of the market, M$ can't sell the 360 @349$

Shortly, if this rumour is true, the pro pack will be 299$ and the arcade pack 229$ this christmass.
And sadly for Sony this place M$ dangerously in the "mainstream" market price wise while 399$ is still quiet a lot.

In fact I almost think Sony should better shaved only 50$ so M$ can chose to not react/follow.

Does the 360 really have to be cheaper than the PS3?

Where does it say, if they were priced the same, 360 wouldn't continue to sell more in America? We are seeing some of this already with the Elite sku, which probes PS3-like price heights. Someone who buys an Elite could have just as easily chosen a PS3. But maybe they wanted a 360 instead?

If gaming is about games, 360 could outsell PS3 at the same price or even higher. PS3's main value add is the Blu ray movies capability imo. Heck, that's the main reason I want a PS3, morseo than the games right now..

Now, of course it's much BETTER for MS if 360 is cheaper..this is only a theoretical thought experiment.

[liolio]

Ranger I agree with you, and anyway Sony has to make the first move.
MS can to react or not depending on market reaction.

And M$ I don't see what's wrong as I'm not bashing the company at all.
It's just a habit, maybe a bad habit, but I will use MS to make everybody happy.

[Arwin]

It will be interesting to see if the US market develops to become a market like Japan, where U.S. products are preferred no matter what. The original Xbox was already much stronger in the U.S. than anywhere else. And if publishers (including foreign ones like the Castlevania guy) start treating that market more and more as such, that would just strengthen the effect.

A bit like how over 50% of Swedish cars are in fact Swedish (Volvo and Saab), France is full of Citroens, Renaults, and Peugeots, etc.

It just makes the European market all the more important, I guess.

[liolio]

It will be interesting to see if the US market develops to become a market like Japan, where U.S. products are preferred no matter what. The original Xbox was already much stronger in the U.S. than anywhere else. And if publishers (including foreign ones like the Castlevania guy) start treating that market more and more as such, that would just strengthen the effect.

A bit like how over 50% of Swedish cars are in fact Swedish (Volvo and Saab), France is full of Citroens, Renaults, and Peugeots, etc.

It just makes the European market all the more important, I guess.

I guesss it's the same in every country, national company benefit from some kind of prestige, and people tendd to think if I can have the overall same experience why not go with a product made in my country ;)

And there's market where the situation is worse, for guitar especially everything that come from US is highly praised while cheap but good production from korea lag to gain recognision, Japan is in a slightly better situation.
Not that high end US made are bad (far from it actually) but people favor a low end US made to a high end korean guitar witch can be discussed for years... :lol:
Read comment on harmony-central made by american about american (you often know quickly) and it will be clear that console market is no exception.

These feeling may help MS in US and nintendo & Sony in Japan.

[one]

IIRC the CFO of Sony Corp said it'd be profitable in this fiscal year, it's enough to convince me that they won't drop the price for a while in the US after they did for the 60GB model in July. Anyway if they sell 80GB for $499 it's already a price cut of a sort. Retailers may sell the remainder of the 60GB version for $450.

Rather the price cut for PS2 is more imminent IMO, at least in the US market. In other words, a significant PS3 price cut will occur in the next fiscal year (Apr 2008 ~) when the PS2 sales show a clearer decline. EU and Japan will see PS3 price cut this year, though. 80GB PS3 for 499 Euro - 499 USD - 49800 yen, hopefully at Hirai's keynote for TGS.

[-tkf-]

I want to back up TheChefO 's opinion.

If sony has a system @399$ with a 40GB HDD and who actually is able to act as the best BD player of the market, M$ can't sell the 360 @349$

Shortly, if this rumour is true, the pro pack will be 299$ and the arcade pack 229$ this christmass.
And sadly for Sony this place M$ dangerously in the "mainstream" market price wise while 399$ is still quiet a lot.

In fact I almost think Sony should better shaved only 50$ so M$ can chose to not react/follow.

If Microsoft insists on having the cheapest Console it will always be closer to mainstream in any case :-)

[Arwin]

If Microsoft insists on having the cheapest Console it will always be closer to mainstream in any case :-)

I wonder how the mainstream would respond to paying $50 a year for online gaming.

Surely at some point this is going to count for something when comparing prices? If not, Sony better make sure the buying audience is aware of this kind of thing.

But it is of course entirely possible that they just assume that's how it is supposed to be and you have to do that on all consoles ... ?

I really don't know in this case.

[-tkf-]

I wonder how the mainstream would respond to paying $50 a year for online gaming.

Surely at some point this is going to count for something when comparing prices? If not, Sony better make sure the buying audience is aware of this kind of thing.

But it is of course entirely possible that they just assume that's how it is supposed to be and you have to do that on all consoles ... ?

I really don't know in this case.

Unless they strip the PS3 down to get @ $399 i think it will be very good value for money with the added extras. The other post about the controller chips doesn´t indicate it :-)

[liolio]

I wonder how the mainstream would respond to paying $50 a year for online gaming.

Surely at some point this is going to count for something when comparing prices? If not, Sony better make sure the buying audience is aware of this kind of thing.

But it is of course entirely possible that they just assume that's how it is supposed to be and you have to do that on all consoles ... ?

I really don't know in this case.

I think that a huge part of the mainstream gamers don't care that much for online gaming, silver live subscription could be enough to satisfy theirs needs (big If i know but I don't care that much of online playing I'm somewhat casual gamer myself) and they would be happy with free patches and demos.

Wii aims at even more casual players (or casual use no matter who play) but lake of online doesn't seem to hurt.

If I'm right a arcade at 229$ could really attract casual/mainstream gamers, and I guess it's MS bet with the arcade pack==> most people don't care that much about online.

[TheChefO]

Does the 360 really have to be cheaper than the PS3?
...

IMO at this point, they do.

"Playstation" is still a much stronger and broader brand. The race is still up for grabs and at this early juncture, MS still needs to better establish "XBOX" as not only a viable 2nd alternate to "Playstation", but as a viable first option.

They are doing a great job of filling out their library with great software, but there are still diehards out there who will need more convincing to flee from the Sony flock. A low price that they can afford will do the trick for some. Continuing to add to their game selection, quality and diversity would do it for others.

By chosing not to react to such an aggressive move by Sony could prove disasterous for MS. The only market MS even has a lead in (disregard Wii for a moment), is the US. They are not doing as well as they hoped and have already missed two sales targets (adjusted once and even missed that one).

Now isn't the time for MS to be complacent.

[TheChefO]

IIRC the CFO of Sony Corp said it'd be profitable in this fiscal year...

I'm no financial wizard and I don't know how they would measure their raising funds to support a price cut, but I'm pretty sure that such an action can be viewed as not "taking a loss" but merely transfering assets. Thus, they still make a profit while still allowing ~$3 billion for pricedrops.

I could be wrong but from what I've seen and heard, Sony will be able to drop the price of ps3 fairly rapidly based on how aggressive their BOM reductions are coming along. Only question is "when".

Consider the fact that December is essentially the cutoff for significant sales, and that places a deadline on "when".

I look at it as Sony needs to "borrow" a bit in the short term to capitalize on immediate Christmas sales by dropping the price of ps3 to ~$400 which will eventually be made up for by BOM reductions in the not too distant future.

I completely disagree with the assertion that Sony will not drop the price again this year and the recent news of them raising significant funds by selling off a portion of their company supports that theory. This combined with lackluster sales, even after a pricedrop/value-add, raises the probability.

[Shifty Geezer]

I guesss it's the same in every countryBut not the UK, who are so multinational in mindset that everything bought here is made elsewhere, and every home-grown product or company ends up being sold to foreign nationals anyway ;)

I think MS have to keep a lower price than PS3 because they launched lower, which set them up as an 'inferior' product. If you assume PS3 costs more because it's better, which is how the general populace tends to react to prices, then to be able to get a PS3 for a lower price than XB360 makes it that much more of a bargain. For gamers who follow the scene, it'll come down to choice of software, but then it always would for them anyhow. For the masses, I think they'll see a price competitive PlayStation as the better, uneducated choice.

[Rangers]

I guesss it's the same in every country,

Except America I guess, who buys the world's products without qualms..

Toyota is taking over a lot of the American car market for example, where GM probably sells nothing in Japan.

Interestingly though, China is a big revenue growth for GM, because the Chinese shun Japanese products but not American ones...but now I've gone really OT.

Edit: Haha, shifty kinda beat me to it..

I think we can agree protectionist attitudes are less common in the west, though perhaps still present.


I think MS have to keep a lower price than PS3 because they launched lower, which set them up as an 'inferior' product. If you assume PS3 costs more because it's better, which is how the general populace tends to react to prices, then to be able to get a PS3 for a lower price than XB360 makes it that much more of a bargain. For gamers who follow the scene, it'll come down to choice of software, but then it always would for them anyhow. For the masses, I think they'll see a price competitive PlayStation as the better, uneducated choice.

I somewhat agree..somewhat disagree...for example, if you want to play Halo, you have to buy an Xbox..and many would make that choice even if it as the same price as PS3.

The big thing PS3 has I think, is a Blu ray player which is very expensive as a stand alone..I think that makes it less of a straight up comparison with 360.

[one]

I'm no financial wizard and I don't know how they would measure their raising funds to support a price cut, but I'm pretty sure that such an action can be viewed as not "taking a loss" but merely transfering assets. Thus, they still make a profit while still allowing ~$3 billion for pricedrops.

I could be wrong but from what I've seen and heard, Sony will be able to drop the price of ps3 fairly rapidly based on how aggressive their BOM reductions are coming along. Only question is "when".

Consider the fact that December is essentially the cutoff for significant sales, and that places a deadline on "when".

I look at it as Sony needs to "borrow" a bit in the short term to capitalize on immediate Christmas sales by dropping the price of ps3 to ~$400 which will eventually be made up for by BOM reductions in the not too distant future.

I completely disagree with the assertion that Sony will not drop the price again this year and the recent news of them raising significant funds by selling off a portion of their company supports that theory. This combined with lackluster sales, even after a pricedrop/value-add, raises the probability.Sorry I checked again their FY2006 earnings conference in May and actually the CFO said the game business would be profitable in FY2008 while cost reduction of PS3 would occur throughout FY2007. In January he said they'd make a profit in FY2007, so the prospect is changing.

[Dr Evil]

It will be interesting to see if the US market develops to become a market like Japan, where U.S. products are preferred no matter what. The original Xbox was already much stronger in the U.S. than anywhere else.

I don't think the biggest deciding factor in either of those two countries is the origin of the product. The manufacturer has however easier time to build their product to answer the needs and desires of a market that is better known to them. Xbox is doing bad in Japan, because of multiple reasons, for starters it has a bad sounding name, it's game library is not best suited for Japanese tastes and so forth.

The game library of Xbox is however very well suited for the NA market, the Live marketplace and other services also offer much more interesting content in that region, in essence the product is better there than in other regions. I think it has very little to do with any sort of patriotism, for example The Wii and the DS are doing superb in NA, and also you used the car analogy, check out how Toyota and Honda are doing in United States... Car purchasing is the place where people are most conservative, if Americans buy lots of Japanese cars they'll sure as hell buy their game consoles, if the product is good.

Europe is somewhere in between, closer to US imo, but it's a very unique market and because of many countries it's challenging to operate here, tastes differ between countries, some countries are richer some poorer etc. In my opinion Sony has probably had a little bit more varied library and the brand is better/earlier known in Europe thus giving Sony some edge compared to MS. I also think that MS has done pretty good job in Europe and that they are slowly gaining foothold here. The reliability issue hurt them a lot here though.

[dobwal]

I'm no financial wizard and I don't know how they would measure their raising funds to support a price cut, but I'm pretty sure that such an action can be viewed as not "taking a loss" but merely transfering assets. Thus, they still make a profit while still allowing ~$3 billion for pricedrops.

I could be wrong but from what I've seen and heard, Sony will be able to drop the price of ps3 fairly rapidly based on how aggressive their BOM reductions are coming along. Only question is "when".

Consider the fact that December is essentially the cutoff for significant sales, and that places a deadline on "when".

I look at it as Sony needs to "borrow" a bit in the short term to capitalize on immediate Christmas sales by dropping the price of ps3 to ~$400 which will eventually be made up for by BOM reductions in the not too distant future.

I completely disagree with the assertion that Sony will not drop the price again this year and the recent news of them raising significant funds by selling off a portion of their company supports that theory. This combined with lackluster sales, even after a pricedrop/value-add, raises the probability.

Raising additional capital to fund a price drop won't hide the fact that they are taking on additional losses to sell at a lower price point.

One thing I have been pondering on is the profit model for the PS3 and how that is effecting their ability to price reduce the PS3.

People tend to hate MS's model in comparsion to the PS3, but nothing is "free" and cost associated with any "free" service or product shows up somewhere and someone has to eat it. I think that the PS3 profit model is negatively affecting Sony ability to reduce the price of the PS3 especially in comparsion to the PS2.

You basically needed to buy a memory card to really game on the PS2. Cost for a PS2 memory card was and is roughly 15-20 dollars and with 100+ million PS2s and high % of PS2 users buying a memory card, you looking at a revenue of ~1-2 billion with alot of it profit. The PS3 lacks that type of revenue stream and in fact as of now (if the PS3 is still sold at a loss) the HDD, which has replaced the memory as the main storage device represents a loss.

Looking at PSN, its doubtful that the revenue generated from download sales are able to sustain the cost of PSN just yet. The Wifi, multicard reader, BluRay drive and PSN represent a cost to Sony versus with MS those items for the most part represent a profit.

All these costs restrict Sony ability to price reduce which is further degraded by the fact that slower than anticpated sales hampers your ability to minimize BOM costs. Its hard to be aggresive when you go from moving 25 million units in two years and having to deal with limited supply to potentially go to a hopeful 13-15 million in 2 years where the limitation is demand.

Some may hate that MS charges an arm and a leg for some of its peripherals and services that Sony gives you for free. But MS's model gives a lot more flexibility in pricing strategy of its consoles because those services and peripherals aren't tied to manufacturing cost or the retail price of the console. I, like the rest of us, love Sony's intention in regards to their services and features in relation to percieved cost, but it seems like its hampering Sony's ability to provide the console itself at a price that would spur mainstream adoption.

[Acert93]

IIRC the CFO of Sony Corp said it'd be profitable in this fiscal year, it's enough to convince me that they won't drop the price for a while in the US after they did for the 60GB model in July. Anyway if they sell 80GB for $499 it's already a price cut of a sort.

Hmmm Not sure I would call that a price cut. SKU re-organization maybe. Value added SKU, yes. When the lowest price of entry stands firm I don't think it is reasonable to call them price cuts, but that is my opinion.

On the other side of the sword, when the 60GB SKUs disappear the PS3 from a point of entry perspective will be getting a price increase unless Sony introduces a new SKU, shifts value added SKUs around, or has a real price drop of sorts.

a significant PS3 price cut will occur in the next fiscal year (Apr 2008 ~) when the PS2 sales show a clearer decline. EU and Japan will see PS3 price cut this year, though.

If Sony waits until Spring 2008 to drop below the $500 mark in the US they can pretty much kiss their chances of being competitive (for market leadership) in the US market this generation good-bye.

And if they do they 10 year no-PS4 release, they Xbox3/Wii2 will clean up next gen and MS/Nintendo will have Xbox4/Wii3 ready to pounce on the PS4. But hey, crazier things could happen... like possibly sitting at $500 for 18 months. :???:

[Gradthrawn]

And if they do they 10 year no-PS4 release, they Xbox3/Wii2 will clean up next gen and MS/Nintendo will have Xbox4/Wii3 ready to pounce on the PS4. But hey, crazier things could happen... like possibly sitting at $500 for 18 months. :???:

I'm pretty sure their reference to a 10 year life-cycle in no way indicates when they plan to release the next Playstation. According to them, the PS1 enjoyed a 10 year life cycle, and technically, it did. Production wasn't stopped until recently, and it had plenty of games even after the PS2s release. I suspect they're aiming for the same thing with the PS2, and PS3. PS2 already being well on its way to a 10 year life cycle.

[TheChefO]

I'm pretty sure their reference to a 10 year life-cycle in no way indicates when they plan to release the next Playstation...

Exactly.

Not dishonest, but not exactly telling the whole story either.

In 5 years ps3/xb360 will be old news/after-thought just like ps2 is today. proof? Check release dates on ps2 games. Aside from the cash-in titles from EA, it's blank and been blank for most of the year aside from GoW2.

And this from the best selling console in history.

I don't think ps3/xb360 will be sniffing sales anywhere near ps2 levels.

So while they may be manufacturing some form of ps3 9 years from now, it will likely be to a completely different demographic than those who bought the console day one. Some may talk themselves into the concept that ps3 will last them for 10 years "so its a good investment", you're only fooling yourself though - unless you just finished playing Toshinden on your 10 year old ps.

[TheChefO]

Raising additional capital to fund a price drop won't hide the fact that they are taking on additional losses to sell at a lower price point.

One thing I have been pondering on is the profit model for the PS3 and how that is effecting their ability to price reduce the PS3.

People tend to hate MS's model in comparsion to the PS3, but nothing is "free" and cost associated with any "free" service or product shows up somewhere and someone has to eat it. I think that the PS3 profit model is negatively affecting Sony ability to reduce the price of the PS3 especially in comparsion to the PS2.

You basically needed to buy a memory card to really game on the PS2. Cost for a PS2 memory card was and is roughly 15-20 dollars and with 100+ million PS2s and high % of PS2 users buying a memory card, you looking at a revenue of ~1-2 billion with alot of it profit. The PS3 lacks that type of revenue stream and in fact as of now (if the PS3 is still sold at a loss) the HDD, which has replaced the memory as the main storage device represents a loss.

Looking at PSN, its doubtful that the revenue generated from download sales are able to sustain the cost of PSN just yet. The Wifi, multicard reader, BluRay drive and PSN represent a cost to Sony versus with MS those items for the most part represent a profit.

All these costs restrict Sony ability to price reduce which is further degraded by the fact that slower than anticpated sales hampers your ability to minimize BOM costs. Its hard to be aggresive when you go from moving 25 million units in two years and having to deal with limited supply to potentially go to a hopeful 13-15 million in 2 years where the limitation is demand.

Some may hate that MS charges an arm and a leg for some of its peripherals and services that Sony gives you for free. But MS's model gives a lot more flexibility in pricing strategy of its consoles because those services and peripherals aren't tied to manufacturing cost or the retail price of the console. I, like the rest of us, love Sony's intention in regards to their services and features in relation to percieved cost, but it seems like its hampering Sony's ability to provide the console itself at a price that would spur mainstream adoption.

interesting post - thanks!

[Acert93]

I'm pretty sure their reference to a 10 year life-cycle in no way indicates when they plan to release the next Playstation. According to them, the PS1 enjoyed a 10 year life cycle, and technically, it did. Production wasn't stopped until recently, and it had plenty of games even after the PS2s release. I suspect they're aiming for the same thing with the PS2, and PS3. PS2 already being well on its way to a 10 year life cycle.

Oh, I agree!

But, to tie this in with price drops and the PS3's high price, I will quote the man in charge (Kaz Hirai) (http://www.1up.com/do/newsStory?cId=3153264):

"I think that we are offering a very good value for the consumers. We look at our products having a 10-year life cycle, which we've proven with the PlayStation. Therefore, the PlayStation 3 is going to be a console that's going to be with you again for 10 years. We're not going to ask the consumers to suddenly buy another PlayStation console in five years time, and basically have their investment go by the wayside. So for all those reasons, I think at $599 we're offering a very good value to the consumers."

I have always agreed that the PS1 and PS2 were 10 year products. According to Sony, they look at all their gaming products that way, and in general that is true. And at E3 2005 many took that the wrong way IMO (10 year lifecycle from KK) as the context was their consoles do have 10 year lifespans--that overlap.

BUT Hirai, in defending the PS3's price, specifically invokes, "We're not going to ask the consumers to suddenly buy another PlayStation console in five years time".

Of course there is some nuances there. They are not going to ask consumers to do anything... just make options available ;) And why would the PS3 go by the wayside in 5 years? Like the PS1/PS2 it has a 10 year lifespan! So $599 is a good value for consumers: $599/10 = $59.90/year.

So if Sony is willing to sit at $499 for 18 months in the US, then maybe I have this all wrong and Sony will go the 10 year route the full monte. Let the Xbox 3/Wii 2 get the 4th 3D gen to themselves and take on the Xbox 4/Wii 3 with the PS4. The PS3 will still be around... right?

Facetiousness aside, if Sony sits at $499 through the holiday in the US they, IMO, are sending both consumers and publishers in the US a strong message: We don't plan on competing with MS/Nintendo for US marketshare this generation.

April 2008 is too late tp drop below $499 as market momentums will be irrevocably established.

[cthellis42]

The current price point is not a damn drop. I mean, it's a drop for the old 60GB SKU, but it's a price point they had at launch out here, and it didn't move those units (don't know why, considering the 20GB was a perfectly fine SKU, but I suppose if half the people out there don't know the PS3 and 360 are high-definition consoles... -_- ), so... it's not like they should be expecting it to move serious volume. We're at least technically ahead of Japan at this point (what with the 20/60 launching at rough equivalents of $440/$530), but still. They have some nice titles landing by the holidays, but the ones that will REALLY push units are basically all 2008 titles. GT5 Prologue will help (if it doesn't slip itself), but FFXIII, MGS4, and--heck--even Little Big Planet...? GTA4 isn't even a timed exclusive, so that's no help. GH3/Rock Band...? Heck, they're even competing with the PS2! (Maybe SOCOM...? I haven't heard much from that in a while, so I'm not sure what to make of it.)

Ergo... what else can they do to get a serious bump in relation to Nintendo and Microsoft? Basically, a real price drop going into the holidays (and as I said, I don't care of they whip up some "super premium SKU" to take advantage of those who'd be willing to pay more and were basically just waiting FOR the holidays...), and some effective marketing to go alongside it. (I still don't know why they haven't worked things out with the big box stores to have some of their HDTV displays showing movies running on a PS3. That would certainly get a lot of "what? It can do that?" questions answered to Joe and Jane Q. Consumer.)

[subrosian]

Hard drive cost doesn't scale upward significantly, dropping 40gb off the top and disabling backwards compatibility would be the business equivalent of scratching a dryer just to differentiate it for a Sears Scratch & Dent sale.

Even the wifi antennae can't cost enough to really justify a $200 decrease in price. I've heard this rumor on-and-off over the past few months, and I just don't buy it. It strikes me as the pipe dream of eager gamers, hoping against all odds for an inexpensive PS3.

[Shifty Geezer]

Looking at PSN, its doubtful that the revenue generated from download sales are able to sustain the cost of PSN just yet. The Wifi, multicard reader, BluRay drive and PSN represent a cost to Sony versus with MS those items for the most part represent a profit. Why do you think that? I don't know anything really about running these large servers, but if you look at something like Guild Wars, they run servers on a single investment and no running fees. I paid £30 or whatever it was 2 years ago and got a couple of hundred hours play. Certainly ArenaNet/NCSoft are finding they can make money out of such a business model, which to me suggests running an online service is cheap.

[Arwin]

Hard drive cost doesn't scale upward significantly, dropping 40gb off the top and disabling backwards compatibility would be the business equivalent of scratching a dryer just to differentiate it for a Sears Scratch & Dent sale.

Even the wifi antennae can't cost enough to really justify a $200 decrease in price. I've heard this rumor on-and-off over the past few months, and I just don't buy it. It strikes me as the pipe dream of eager gamers, hoping against all odds for an inexpensive PS3.

No, the harddrive indeed doesn't make sense, unless they had a cheap stack lying around or building them themselves or something weird like that. Not impossible, but unexpected to be sure.

By far the biggest savings should be in the BluRay player. I think the build cost of this thing was very high initially and is going down really fast. Same for the Cell processor, RSX, and even the HDMI port was $50 initially. Then there is stuff like the Wifi, memorycard readers, blutooth, and 1Gbit port that even if they weren't expensive to begin with, still have come down in price. Then there are also production costs, with cheaper lines opening in China and such as time progresses, and the lines can usually be optimised further as well at some point. As 65nm gets into the picture, cooling also becomes less expensive, though I don't know if/how they would capitalise on that.

Anyway, I can think of plenty of reasons why the cost of this thing goes down.

And as Shifty said, I don't think it's that hard to make money off the PSN. Certainly, the PSN games aren't selling half bad, and even small things like the mere fact that games can download patches allows you to save in other (testing) areas helps a great deal.

[Diamond.G]

Has anyone noticed the reshuffling of Sony's price/sku arrangement was about the same time Sony released/announced a cheaper standalone Blu-ray player? I think prices will drop in line with the players as not to really screw the other Blu-ray player manufacturers. Especially since it seems the PS3 is the only player that is going to be upgradable to/compliant with the final Blu-ray Profile 1.0 (and BD-Live) come Nov 1.

[-tkf-]

Has anyone noticed the reshuffling of Sony's price/sku arrangement was about the same time Sony released/announced a cheaper standalone Blu-ray player? I think prices will drop in line with the players as not to really screw the other Blu-ray player manufacturers. Especially since it seems the PS3 is the only player that is going to be upgradable to/compliant with the final Blu-ray Profile 1.0 (and BD-Live) come Nov 1.


Profile 1.1 not BD-LIVE
Profile 2.0 includes BD-LIVE

http://en.wikipedia.org/wiki/Blu-ray_Disc#Profiles

[Diamond.G]

Profile 1.1 not BD-LIVE
Profile 2.0 includes BD-LIVE

http://en.wikipedia.org/wiki/Blu-ray_Disc#Profiles

I know. I was saying the the PS3 looks to be most likely to support BD-Live as well as the full spec 1.0 (most commonly called 1.1).

[dobwal]

Why do you think that? I don't know anything really about running these large servers, but if you look at something like Guild Wars, they run servers on a single investment and no running fees. I paid £30 or whatever it was 2 years ago and got a couple of hundred hours play. Certainly ArenaNet/NCSoft are finding they can make money out of such a business model, which to me suggests running an online service is cheap.

Guild Wars is a much smaller scale with a more limited scope than PSN and has sustained itself through multiple episodic releases. You're talking 3 standalone titles and expansion pack over a period of 2 and half years.

Plus, Im not saying PSN will never make a profit. Im saying in its early stage the revenue generated by PSN is not covering all the on going investment and not just maintenance costs. Look at all the revenue streams PSN is planned to have versus whats its currently offering.

[cthellis42]

Hard drive cost doesn't scale upward significantly, dropping 40gb off the top and disabling backwards compatibility would be the business equivalent of scratching a dryer just to differentiate it for a Sears Scratch & Dent sale.

Even the wifi antennae can't cost enough to really justify a $200 decrease in price. I've heard this rumor on-and-off over the past few months, and I just don't buy it. It strikes me as the pipe dream of eager gamers, hoping against all odds for an inexpensive PS3.
If "hard drive size" and "WiFi antenna" are the only things you think are involved with the manufacturing costs in this case, then it strikes me as a pipe dream that you can provide useful analysis.

Plus, I don't think anyone here has said they HAVE knocked off $200 from the 60GB SKU... we've been saying they really NEED to get lower, and that going back a step from the current 80GB model may not make too much sense.

[Shifty Geezer]

Guild Wars is a much smaller scale with a more limited scope than PSN and has sustained itself through multiple episodic releases. You're talking 3 standalone titles and expansion pack over a period of 2 and half years.And PSN is supporting itself with lots of titles released all through the year. ;)
Plus, Im not saying PSN will never make a profit. Im saying in its early stage the revenue generated by PSN is not covering all the on going investment and not just maintenance costs. Look at all the revenue streams PSN is planned to have versus whats its currently offering.But are those costs being recuperated by charges levied on every PS3, or are those investment costs going to be recovered from the PSN service when it's fully fleshed out? At this point, I don't think PSN is costing PS3 buyers anything. It's perhaps eating into Sony's bank balance, but it'll turn that around (Sony hopes!), not least because the actual costs involved probably aren't that high.

[dobwal]

And PSN is supporting itself with lots of titles released all through the year. ;)

A Sony director of PSN operations has stated that the PSN may not always be free, which would leave one to believe that currently PSN represent a cost and isn't guaranteed to be viable profit generator for Sony.

http://www.gamersreports.com/news/5881/sony-says-psn-may-not-always-be-free/

But are those costs being recuperated by charges levied on every PS3, or are those investment costs going to be recovered from the PSN service when it's fully fleshed out? At this point, I don't think PSN is costing PS3 buyers anything. It's perhaps eating into Sony's bank balance, but it'll turn that around (Sony hopes!), not least because the actual costs involved probably aren't that high.

Just what I was saying. Whether or not PSN represents a loss or a profit for Sony at the moment, its performance financially plays a part in the pricing strategy of the PS3.

All revenue streams play a part in how a manufacturer initially prices their consoles and their price reduction strategy over time.

Its my opinion that currently PSN is in infant stage and represents a cost as the current PS3 userbase is not only trying to support the current form of the network but also the future forms of PSN.

[one]

A Sony director of PSN operations has stated that the PSN may not always be free, which would leave one to believe that currently PSN represent a cost and isn't guaranteed to be viable profit generator for Sony.

http://www.gamersreports.com/news/5881/sony-says-psn-may-not-always-be-free/That's just a standard "no comment" response, he is not in a position to confirm everything.

IMO download contents will be a secondary revenue source when advertisement revenues kick in. With the web browser, ad banners in Home can work just like any other ads in interweb.

BTW apparently financial analysts are almost certain of Hirai's announcement for a price drop at the TGS keynote, but I guess it'll be Japan only.

[Strange]

I think many here might have left out one possibility

the 40GB drops to $399
and the 80gb drops to $449

the Wifi and the 40 GB difference being a $50 difference...
well, I can cope with that.



Of course, pure speculation.

[Strange]

A Sony director of PSN operations has stated that the PSN may not always be free, which would leave one to believe that currently PSN represent a cost and isn't guaranteed to be viable profit generator for Sony.

http://www.gamersreports.com/news/5881/sony-says-psn-may-not-always-be-free/



Just what I was saying. Whether or not PSN represents a loss or a profit for Sony at the moment, its performance financially plays a part in the pricing strategy of the PS3.

All revenue streams play a part in how a manufacturer initially prices their consoles and their price reduction strategy over time.

Its my opinion that currently PSN is in infant stage and represents a cost as the current PS3 userbase is not only trying to support the current form of the network but also the future forms of PSN.


I would say that PS HOME will alleviate the PSN costs through advertising.
(and possibly through stocks... but that introduces a whole new financial level of issues and I don't want to go into the details...)

Plus they are integrating PS Home onto PSP and phones... It seems that Sony is taking a shot at part of the market that Google has been struggling to do: advertising via phone market.

[Kfyh]

Right now PSN does look very much like a marketing thing. It's filled with movie and game trailers and game demos. There was an interesting interview on web 2.0 and gaming on threespeech. Now i have no idea how Youtube or My Space are making money but they do seem to be sustainable.

A price cut is nice but I think Sony need games more than a price drop right now. Their last two big games, Heavenly Sword and Lair, are completely new IPs making them harder to market than, say, Mario, GTA or Halo. Of course more games are coming (I'm looking forward to R&C and GT5:P) and a price cut on top of that would be gravy.

[Titanio]

I'm still not sold on how a smaller capacity hard drive would enable such a dramatic drop - or any drop - but I saw this in an article, and thought of this thread, so..

Hon Hai precision to deliver PS3 consoles to Sony (http://www.emsnow.com/npps/story.cfm?id=29107&pg=story)

Insiders in the sector said that Sony has cut the selling price of PS3 consoles, and, at the mean time, planned to launch low-price models, with ASUSTeK Computer Inc. and Hon Hai Precision to supply the models.

Just don't read too much into it .. Articles like this can be very misleading.

[Acert93]

I agree with Farid. Even if a 40GB drive isn't cheaper, it is perception that is relevant. It is just like the 360 Core--MS makes more money on the Pro version, but the Core is there for accessibility and mindshare purposes. The only real difference is, with a cheaper PS3 SKU, it would sell better than the 360 Core because what makes the PS3 "Pro" better is to be quite frank, worthless to most gamers. At least to their core gaming experience.

[Arwin]

I agree with Farid. Even if a 40GB drive isn't cheaper, it is perception that is relevant. It is just like the 360 Core--MS makes more money on the Pro version, but the Core is there for accessibility and mindshare purposes. The only real difference is, with a cheaper PS3 SKU, it would sell better than the 360 Core because what makes the PS3 "Pro" better is to be quite frank, worthless to most gamers. At least to their core gaming experience.

I would almost go so far as to say that it is a given that the price of the HDD isn't an important factor (from 40-80 price is probably similar). And if we assume this to be the case, then as the PS3 so far has used the HDD size as an SKU identifier rather than a name, they could be introducting a 40GB version simply because that's the way they've been identifying their SKUs. But the real cost reduction will have nothing to do with the HDD size.

[cthellis42]

I think many here might have left out one possibility

the 40GB drops to $399
and the 80gb drops to $449
I don't think anyone's left it out, but a $50 difference at that cost level hardly seems worth the inconvenience of split SKU's, for only those minor differences.

[Scott_Arm]

I don't think anyone's left it out, but a $50 difference at that cost level hardly seems worth the inconvenience of split SKU's, for only those minor differences.

You see pricing like this all the time to encourage people to spend that extra $50 they might not normally have wanted to spend. If the price I want to pay is $400, but I can get "so much more" for an extra $50, maybe I'll spend over my budget. It's like soft drinks at the movie theater.

[cthellis42]

Yes, but they lose out by making it more expensive to manufacture, ship, potentially confuse customers, and irritate the box stores. (And potentially lose some sales when they can't keep the RIGHT kind of stock in... uh... stock.)

I'm asking how the extra $50 (which is actually a lot less, ones you factor other things out) would be better than simply offering the one SKU at $400, and/or a much more identified as "premium" premium SKU.

I can't see them wanting to offer the split SKU's in retail for that little a difference.

[rajeev84]

A simple strategy would be make say close to 1M 40GB SKUs for the 2007 XMAS alone, however, split this world wide. With the US getting the majority of say about 500k.

Sell it at $399 worldwide, with a free copy of Spiderman 3 BR (this costs Sony almost nothing...well a potential loss in DVD and BR says of Spidy 3, but in the long run it will work out better)

Also, sell the current 80GB SKU at $499 with a free game + Spiderman 3 BR.

$100 for a 40 more gigs and a free game, does seem like a great value.

Now, by realeasing a relatively small number of 500K $399 SKUs for xmas, what that does is create a perception that the PS3 is only $399!!! However, with the limited numbers these thigns will sell out within weeks.

A lot of people will then go the malls and stores with the intention of getting a PS3 for $399, only to be met with a $499 SKU. However, since Sony is throwing in an extra game + double HD space, the percieved value is the same, thus Sony makes the sale no matter.

Sony just needs to create the perception that the PS3 is cheaper....However, the numbers of the $399 SKU shouldn't be soo small that it gets bad press of being unavailable, and it also shouldn't be so mass produced that they lose out of too much sales from the $499 SKU.


I have a good friend who works at Nintendo, and she says they were hearing these $499 rumors weeks before it became big news on the net.

So apparently, this wasn't such a sudden decision. I won't be surprised if this price drop is annonced at TGS along with the realease of the KZ demo.

Perhaps Sony may wait of the Eve of the Halo 3 realease in order to kill some of its hype...who knows.

[Zaphod]

Now, by realeasing a relatively small number of 500K $399 SKUs for xmas, what that does is create a perception that the PS3 is only $399!!! However, with the limited numbers these thigns will sell out within weeks.

A lot of people will then go the malls and stores with the intention of getting a PS3 for $399, only to be met with a $499 SKU. However, since Sony is throwing in an extra game + double HD space, the percieved value is the same, thus Sony makes the sale no matter.Congrats. You just reinvented 'bait and switch (http://www.ftc.gov/bcp/guides/baitads-gd.htm)', a marketing tactic (some might say scam) that has backfired too many times to count in the history of sales. Besides the fact that advertising product while intending to stock a limited amount (thereby deliberately selling out the item advertised) is illegal most places, it is utterly, utterly stupid. But who knows, Sony might just be that desperate.

[Kfyh]

Didn't Sony do a similar thing with the 20gb SKU at launch. IIRC, the 20gb PS3s were almost the same price as the 20gb Xbox360, but there was hardly any stock of the 20gb PS3.

[Pete]

In Japan, maybe (the $325 20GB model, right?), though I don't know how limited the stock was (relative to actual sales). I don't remember than happening in the US, and I think Europe only got the 60GB model.

[one]

In Japan, maybe (the $325 20GB model, right?), though I don't know how limited the stock was (relative to actual sales). I don't remember than happening in the US, and I think Europe only got the 60GB model.In Japan, Xbox 360 Premium is 39,795 JPY (344 USD), the 20GB PS3 is 49,980 JPN (433 USD).

[Farid]

A $399 SKU would need to have less obvious value than the 80GB SKU (which should be $499. I don't see them going lower with this model, nor keeping it at the ridiculous price of $599). In other words, a $399 model would have a lower capacity HDD, no Wifi and surely no GS, thus no backward compatibility.

And as I, and others, said, this potential $399 model is just an "artificial" lower cost model, just like the 20GB model was, or just like the X360 Core (or now Arcade) is as Joshua pointed out. It exists just to lower the relative price point of the product, nothing else.

Even if Sony is just saving, say, $30 compared to the $599 model BOM, on this lower-end model a $399 retail price makes perfect sense. A few dollars saved on every produced item for a product expected to sell millions is worth the trouble, and for various marketing/PR and inventory related reasons Sony can't afford to remove the 80GB model from the market. Therefore, the only solution left is to (re)introduce a lower-end model.

By the way, Pete, the 20GB PS3 doesn't retail at $325 in Japan, it retails at ￥49,980 JPY ($430 tax included). Anyway, the U.S. value of the item is not important in the Japanese domestic market. For the Japanese consumer who want to buy a PS3, the 20GB model costs ￥49,980, the 60GB model ￥59,980, while the Wii costs ￥24,999. Now if you factor a quasi-total lack of games that cater to the Japanese crowd and the evolution of the market toward mobile and casual gaming, the situation of the poor performance of the console there is hardly surprising. In Japan Sony is in a dire need of not only a price cut but also of Japan-tailored game releases.

In the coming months, SCEA and SCEE can sell the console with the few titles they have, plus the western publishers third-party catalogue, as long as they get their price cut. SCEI, on the other hand, will need more Japanese games, any of them at this point, or at least big announcement (which should cater to the hardcore crowd. Won't sell the console gangbuster but should move a few units while waiting for more game releases), and a price cut as well obviously.

It's worth noting that SCEI, unlike SCEA, has the "advantage" of having the HD/technogical console gaming market locked in Japan, since the X360 is not a threat there. I chose to put advantage between quotes because it has yet to demonstrated that it's a worth having advantage in the current Japanese market where casual and mobile gaming reign supreme.

[Acert93]

Lucid as usual Farid. This sort of commentary needs to be in B3D news section though. It really doesn't get its due exposure on page 5, post #103. Total shame.

[Crossbar]

A $399 SKU would need to have less obvious value than the 80GB SKU (which should be $499. I don't see them going lower with this model, nor keeping it at the ridiculous price of $599). In other words, a $399 model would have a lower capacity HDD, no Wifi and surely no GS, thus no backward compatibility.

You are almost quoting Andre Vrignaud, Xbox Director of Technical Strategy.

...you're going to see the creation of a new, low-end SKU this holiday. It'll likely remove integrated WiFi, memory card reader, and most controversially, all backward compatibility. (Remember, there's still some back-compat hardware in even the new "software only" back compat SKUs; removing the remaining CPU is a significant cost savings.) You'll see a new WiFi dongle made available. And finally, this low-end SKU will likely come with a smaller 40 GB hard drive. The low-end price will be set at $399, with the higher-end 80 GB SKU dropping to $499.

http://kotaku.com/gaming/addicts/microsoft-bets-ngai-again-ps3-will-be-399-this-year-282303.php

I would be really surprised if Sony compromised the backward compatibility more than what they have done already, it has always seemed to be such an important feature to Sony. They surely have invested a lot of money in having the EE and the Rambus memory removed by adding software emulation and testing thorugh thousands of titles. I would be really surprised if all that work would get wasted by introducing a mass market model without backward compatibility.

[Pete]

Whoops! Sorry. I remembered the 20GB sold for a lot less than the 60GB. The new $500 top price point tricked me into dropping an extra $100 off the 20GB's launch price.

[AlphaWolf]

than what they have done already, it has always seemed to be such an important feature to Sony. They surely have invested a lot of money in having the EE and the Rambus memory removed by adding software emulation and testing thorugh thousands of titles. I would be really surprised if all that work would get wasted by introducing a mass market model without backward compatibility.

To a lot of buyers the backward compatibility has exactly a value of 0. I don't see a problem with an SKU without it, provided there is a substantial savings. I wouldn't pay $100 for the ability to play my ps2 titles on a new console. (I personally probably wouldn't pay $5, usually when I'm done with a game, I'm done with it forever.)

[expletive]

...you're going to see the creation of a new, low-end SKU this holiday. It'll likely remove integrated WiFi, memory card reader, and most controversially, all backward compatibility. (Remember, there's still some back-compat hardware in even the new "software only" back compat SKUs; removing the remaining CPU is a significant cost savings.) You'll see a new WiFi dongle made available. And finally, this low-end SKU will likely come with a smaller 40 GB hard drive. The low-end price will be set at $399, with the higher-end 80 GB SKU dropping to $499.

If true, the fact that Sony is coming to the same conclusion that MS did, except 2 years later, tells you all you need to know about how this gen has gone for them (so far).

[Crossbar]

To a lot of buyers the backward compatibility has exactly a value of 0. I don't see a problem with an SKU without it, provided there is a substantial savings. I wouldn't pay $100 for the ability to play my ps2 titles on a new console. (I personally probably wouldn't pay $5, usually when I'm done with a game, I'm done with it forever.)

Yeah, there are all sorts of gamers, I personally thinks it is kind of neat to have the option to slide in an old good game at times and not having to keep an stack of old consoles.

Anyways, another thing making removing BC unlikely is the fact that Sony is selling old PSX games on PSN, I think they want to offer them to as many as possible.

I think that catalogue could be expanded as time goes to also include PS2 games, 4-5 years from now. Very easy money even if Sony sells them at bargain prices.

[jonabbey]

Yeah, there are all sorts of gamers, I personally thinks it is kind of neat to have the option to slide in an old good game at times and not having to keep an stack of old consoles.

Anyways, another thing making removing BC unlikely is the fact that Sony is selling old PSX games on PSN, I think they want to offer them to as many as possible.

PSX backwards compatibility is done entirely through software emulation, without any of the original PS1 graphics or processing hardware, so the question is moot for the moment.

I think that catalogue could be expanded as time goes to also include PS2 games, 4-5 years from now. Very easy money even if Sony sells them at bargain prices.

Well, that would be nice, but any advantage in releasing PS2 games for download that far out would make no difference for this generation.

I am not willing to give such creedence to a Microsofty's guess work. I imagine rather we'd see the GS functions pulled into a revised RSX chip. If you look at the traces on the newer PS3 main board, the GS looks very much like it would most naturally be integrated with RSX.

Presumably they'd achieve a noteworthy amount of savings from just doing that.

What really surprises me is that Sony never started labeling PS2 releases as 'PS2/PS3' releases, or at least added 'Works on PS3!' stickers. I have to wonder how many people fully appreciate the level of backwards compatibility that the PS3 has with PS2 software.

[Crossbar]

PSX backwards compatibility is done entirely through software emulation, without any of the original PS1 graphics or processing hardware, so the question is moot for the moment.
True, but it is still backward compatibility we are talking about. I think removing backward compatibility for PS2 games and keeping it for PSX games will be very awkward to explain to the consumers. I don´t find it likely.

Well, that would be nice, but any advantage in releasing PS2 games for download that far out would make no difference for this generation.
I am not sure I understand your point. If Sony can have an income in the future by keeping the backward compatibility it must certainly have some effect on Sonys business strategy.

... I imagine rather we'd see the GS functions pulled into a revised RSX chip. If you look at the traces on the newer PS3 main board, the GS looks very much like it would most naturally be integrated with RSX.

Presumably they'd achieve a noteworthy amount of savings from just doing that.
I do also think that scenario seems likely. At 45 nm, they may even be able to convert the 4 MB EDRAM to SRAM and save money by sticking to a simple standard CMOS process for the RSX if Sony finds the EDRAM process too expensive as some reports have indicated. The extra die space at 45 nm may not add much to the cost in comparison to the cost of some esoteric EDRAM process and it is easy to add cheap redundancy to memory logic so it would probably have little effect on the yield as well.

I would also not be surprised if Sony at some point gave PS3 developers some kind of access to that 4 MB buffer. I think it could give the RSX a nice boost since many people seem to think the RSX is somewhat bandwidth limited. From what is visible on the PCB of the PS3 the current RSX - GS connection could have at least a data path of 64 bits. Depending on how fast they clock that proprietary bus they could achieve a pretty good bandwidth, perhaps 10 - 20 GB/s. Having another bus would allow the RSX to have more work in progress in parallel, perhaps we will see some kind of tiling a la Xenos later on. :smile:

[-tkf-]

If true, the fact that Sony is coming to the same conclusion that MS did, except 2 years later, tells you all you need to know about how this gen has gone for them (so far).

The same conclusion?

I don´t think that we will see ANY PS3 without harddrives. Sony will maintain the same basic Gaming platform across all Sku´s anything else would be stupid.

[cthellis42]

Backward compatibility even with emulation-only seems to be just fine. You can already check the difference between the 60GB and 80GB SKU's (http://www.us.playstation.com/Support/CompatibleStatus), and the number of "fatal" differences seem to be low. (You find a lot more things which have, like, graphical or audio bugs introduced, and primarily in FMV sequences. At least judging by some of the most popular titles.)

Back-compat isn't 100% to begin with, and it looks like the move to emulation only subtracts another 10% or so, so it doesn't appear to be as huge a concern as we think. (And it just as able to be coded around as with the 60GB version, I would imagine.)

At any rate, it doesn't appear that any title needs to be "coded in specifically to work" even with the new emulation-only SKU, but rather some titles need to be "bug fixed," and may be on the back burner.

[Crossbar]

Backward compatibility even with emulation-only seems to be just fine. You can already check the difference between the 60GB and 80GB SKU's (http://www.us.playstation.com/Support/CompatibleStatus), and the number of "fatal" differences seem to be low. (You find a lot more things which have, like, graphical or audio bugs introduced, and primarily in FMV sequences. At least judging by some of the most popular titles.)

Back-compat isn't 100% to begin with, and it looks like the move to emulation only subtracts another 10% or so, so it doesn't appear to be as huge a concern as we think. (And it just as able to be coded around as with the 60GB version, I would imagine.)

At any rate, it doesn't appear that any title needs to be "coded in specifically to work" even with the new emulation-only SKU, but rather some titles need to be "bug fixed," and may be on the back burner.

"Emulation only" is not the correct term for the current 80 GB or 60 GB PAL SKU, they still have a"GS" chip. Only the "EE" part is emulated.

[cthellis42]

Oh? I thought they'd stopped fabbing the GS separately ages ago, since the EE+GS has been the hardware replacement since the first redesign after they got it out there, wasn't it? Why would they go back halfway and start up new lines instead of biting the bullet and trying emulation only? I guess the embedded DRAM makes the GS harder to emulate...

[Crossbar]

Why would they go back halfway and start up new lines instead of biting the bullet and trying emulation only? I guess the embedded DRAM makes the GS harder to emulate...
Yes, that seems to be the case and that is probably the reason to why the backward compatibility still works so well.

[nAo]

They surely have invested a lot of money in having the EE and the Rambus memory removed by adding software emulation and testing thorugh thousands of titles. I would be really surprised if all that work would get wasted by introducing a mass market model without backward compatibility.
Maybe they found a way to emulate GS as well..

[SugarCoat]

To a lot of buyers the backward compatibility has exactly a value of 0. I don't see a problem with an SKU without it, provided there is a substantial savings. I wouldn't pay $100 for the ability to play my ps2 titles on a new console. (I personally probably wouldn't pay $5, usually when I'm done with a game, I'm done with it forever.)

I wouldnt go so far as to say that, im sure more mature gamers, who also value keeping their entertainment areas neat, really enjoy being able to count on backward compatability. PC gamers install old games all the time to play them again without a second thought. There are many people who also grew up with Atari and Nintendo and often like to replay the classics. If anything i'd bet its the exact opposite, and people do notice because its something they've been taking for granted. Add to that games are still coming out for the PS2 all the time and i think its more of a problem then you think. Many people dont see a graphics leap as the start of a new gaming era and the abrupt end of the one they were just in.

[AlphaWolf]

I wouldnt go so far as to say that, im sure more mature gamers, who also value keeping their entertainment areas neat, really enjoy being able to count on backward compatability. PC gamers install old games all the time to play them again without a second thought. There are many people who also grew up with Atari and Nintendo and often like to replay the classics. If anything i'd bet its the exact opposite, and people do notice because its something they've been taking for granted. Add to that games are still coming out for the PS2 all the time and i think its more of a problem then you think. Many people dont see a graphics leap as the start of a new gaming era and the abrupt end of the one they were just in.

The people who don't see the graphics leap, probably haven't seen the need to buy a new console at all. The biggest reason to have backward compatibility imo is so that when you release your shiny new $500 piece of hardware, you can actually claim that it can play more than 5 games. Once you're through that initial adoption phase, i don't see that big of an issue with it (lack of backwards compatibility), but perhaps Sony isn't there just yet.

[Fafalada]

Maybe they found a way to emulate GS as well..
To expand on conspiracy theories, they already have compatibility sections called "60GB and 80GB" up on the SCE site. A new SKU with emulated GS would need its own section, and what better way to differentiate it then "40GB" - instead of some stupid model serial number like "45665634Falcon4135435Xenon" :razz:

That said, I think that 'maybe' is not even necessary - the only real question is how high compatibility they will be getting with it.

[Crossbar]

To expand on conspiracy theories, they already have compatibility sections called "60GB and 80GB" up on the SCE site.

The European Playstation site don´t have that, since we only have one SKU with "EE" emulation. You may be right in the assumption that the size of the hard drive is a very convenient way to identify the different versions and that may be the reason why we haven´t seen the 80 GB version in Europe yet.

Here are some more contributions to the conspiracy theories:

I think Sony saved a lot of money by not releasing a PAL version of the PS3 with the "EE+GS" chip not only from BOM point of view but also from the cost of SW point of view. They didn´t have to verify all PAL titles for backwards compatibility, instead they only needed to verify the NTSC versions and right after the release last fall those resources were reassigned to verify the PAL PS3 version with "EE" emulation and after the PAL release they were re-assigned once more the new NTSC version.

Another benefit is that it will give Sony one less PAL SKU to maintain firmware updates for.

Here´s a question to the devs with insight into PS2 development. Could it possibly be more work getting the "EE" emulation up to snuff on the NTSC version compared to the PAL version because they usually run at a higher frame rate of 60 Hz compare to 50 Hz? Could that also be one of the reason why the PAL countries got "EE" emulation first?

Some more conspiracy theories.
I think it would make sense if the RSX and the "GS" chip got merged some time in the future at a smaller process. I think that is also likely to happen to the Xenos mother and daughter dice. We will never see the Cell and RSX merged like the "EE+GS" chip because they run at very different speeds and the Cell may end up to be a mass produced and used in other consumer products as well.
Merging chips is a very efficient mean to cost reduction when possible. The die size of the GS at 90 nm can be estimated to about 40 mm2 from the available die shots of the "EE+GS". The RSX at 90 nm is about 240 mm2. As they are running at pretty similar speeds they seem to be likely candidates to be merged maybe at the 45 nm process perhaps earlier.

I might add that I find it unlikely that they could emulate the GS purely in software and I would certainly be truelly shocked if Sony presented such a solution later this fall after they have gone through all the hassle to achieve and verify the current level of backward compatibility.

[betan]

The people who don't see the graphics leap, probably haven't seen the need to buy a new console at all. The biggest reason to have backward compatibility imo is so that when you release your shiny new $500 piece of hardware, you can actually claim that it can play more than 5 games. Once you're through that initial adoption phase, i don't see that big of an issue with it (lack of backwards compatibility), but perhaps Sony isn't there just yet.

Believe it or not, some people actually care about backward compatibility for games that they missed or kept.

I, for one, wouldn't buy PS3 if it wasn't the best "PS2 game player" out there.

The European Playstation site don´t have that, since we only have one SKU with "EE" emulation. You may be right in the assumption that the size of the hard drive is a very convenient way to identify the different versions and that may be the reason why we haven´t seen the 80 GB version in Europe yet.

I doubt Europe will ever see the US/Korean 80 GB with the same motherboard.

[AlphaWolf]

Believe it or not, some people actually care about backward compatibility for games that they missed or kept.

I, for one, wouldn't buy PS3 if it wasn't the best "PS2 game player" out there.

I don't doubt it. The existence of a cheaper SKU that lacks that ability would in no way punish you. If you want the feature, you would buy the more expensive model that still has it.

[betan]

I don't doubt it. The existence of a cheaper SKU that lacks that ability would in no way punish you. If you want the feature, you would buy the more expensive model that still has it.

That's a different issue than importance of backwards compatibility which you said making up for having only five HD games available.

The option would be nice, but everything so far points out that Sony don't want to maintain two different motherboards as its not necessarily cheaper. The only time we will see a motherboard without GS is when full software emulation is close to completion.

[Rangers]

Some sort of games radar tidbit..however unspecific

Insider whispers in the past week have suggested that Sony is planning to announce a new $400, 40GB model PS3 that will release in time for Christmas (in the US, at least). Now, on the day before the PlayStation maker's Tokyo Game Show conference, GamesRadar has learnt that a cheaper model is indeed on the way, although it will have a reduced feature list compared to the 60 and 80GB models

http://www.gamesradar.com/gb/ps3/game/news/article.jsp?sectionId=1006&articleId=20070919135221218085&releaseId=20060314115917309058

We'll know soon enough.

BTW, it will be strange if Sony ends up de facto embracing the MS multi-sku concept. Whatever they're allegedly cutting from the 40GB, it would have to be a lot to make the 80GB seem attractive at $100 more.

If it's just the useless BC for example, I dont think anyone will care about that loss (heh, I'm not a fan of BC in consoles, or more accuratly the sacrificies and attention paid to it).

OT: Here's what I'm seeing about multi-sku's..your price conscious consumer will be attracted to the low end model, but lets say you're rich, you're a basketball player for the Boston Celtics and money means nothing to you :), you shouldn't be "forced" to buy the low end model because that's the only one available. Thinking Elite sku here. It's a strategy to increase average selling price. While not theoretically, hurting yourself in any way, as the price conscious are still nabbed by that low sku. You are essentially catering to what different people want.

That's the theory. I'm still not necessarily a proponent, though.

Also I think MS will need to respond..cool more price cut fireworks and shenanigans will be fun.

[scooby_dooby]

It seems very unlikely to me they'll announce a pricedrop months before it's going to be available.

If they announce this pricedrop at TGS, it's gonna have to be on teh shelves right away. Since we haven't had any leaks from BestBuy or other retailers about the new SKU, I'm gonna go ahead an predict no PS3 pricedrop during TGS.

I believe them when they say it's coming, but I wouldn't expect an announcement any time soon.

[TheChefO]

It seems very unlikely to me they'll announce a pricedrop months before it's going to be available.

If they announce this pricedrop at TGS, it's gonna have to be on teh shelves right away. Since we haven't had any leaks from BestBuy or other retailers about the new SKU, I'm gonna go ahead an predict no PS3 pricedrop during TGS.

I believe them when they say it's coming, but I wouldn't expect an announcement any time soon.

Well, it could be a Japanese exclusive launch for now, being TGS and all. They are having a tough time against N and they really need to make their presence known in Japan and EU (mindshare) as they still have a shot at those markets. A cheaper sku would do wonders for them in Japan, but we might not see it leaked before it happens.

I wouldn't hold my breath on this sku coming anytime soon though. Then again, never underestimate Sony's engineering/manufacturing.

[Laa-Yosh]

Christmas would be too late, it has to be on the streets at least from the begining of November...

[scooby_dooby]

Christmas would be too late, it has to be on the streets at least from the begining of November...

Definately, which means sometime in the next 5 weeks...

TGS would be ideal, it's just strange we haven't had any rumours from the retailers about it...

[pipo]

Definately, which means sometime in the next 5 weeks...

TGS would be ideal, it's just strange we haven't had any rumours from the retailers about it...

As has been widely anticipated, Sony has failed to confirm a PlayStation 3 price cut for 2007 during its Tokyo Game Show keynote speech this morning, with worldwide boss Kaz Hirai saying only that such a move is a "possibility" for the future.

There will be "no surprise in this regard this year," said Hirai, referring to last year's TGS PS3 price announcement.

http://www.gamesindustry.biz/content_page.php?aid=28828

[one]

So how does the "source" at Ars Technica respond to it?

[Shifty Geezer]

They didn't give a date to the rumour, did they? Thus they have until Dec 31st for this rumour to happen. If Sony think they can bag sales now on software alone, it'd make financial sense to continue selling high and drop the price in a month's time.

[TheChefO]

drop the price in a month's time.

Seemingly, they aren't really dropping the price. More along the lines of (re)introducing a new, cheaper sku.

[Ben-Nice]

The PS3 will get trampled by Wii and X360 if they don't do a price drop before Christmas IMO. I don't know if they would ever catch up in sales.

[TheChefO]

I don't know if they would ever catch up in sales.

In the US that's already a done deal I think. In other regions, it seems they are selling quite well at more than double the price of their competition.

Perhaps the best course of action is no pricedrop and just wait for BOM reductions, and aim for breaking even (financially) next quarter.

[Carl B]

Well, I've been of the opinion that a drop to $400 would just be too extreme, and not justified on the BOM side by a 40GB drive alone. So... the non-announcement at TGS was in line with my own thoughts on the matter. That said, the story's never closed on these things until it's closed, so if they did lower the price sometime in the next weeks, my mind certainly wouldn't implode. But... it's just always seemed too disconnected from their goals of returning SCE to profitability.

[Ben-Nice]

In the US that's already a done deal I think. In other regions, it seems they are selling quite well at more than double the price of their competition.



Possibly. But there is no doubt that a $399 PS3 would increase sales. If they know they likely won't catch up in the US why wouldn't they price drop in UK and other territories were it's seems to be doing better ?

[Carl B]

Possibly. But there is no doubt that a $399 PS3 would increase sales. If they know they likely won't catch up in the US why wouldn't they price drop in UK and other territories were it's seems to be doing better ?

The reason why would be because each of those sales would equate to $100 extra loss per unit; 1 million additional sales, $100 million additional loss to absorb. 2 million would be $200 million. Not saying what's right or wrong or what the various decision chains for Sony are - as we clearly can't know - but in terms of why, that would be the why.

[Rangers]

In the US that's already a done deal I think. In other regions, it seems they are selling quite well at more than double the price of their competition.


Not really. PS3 sales in Japan got a decent bump with the golf game, but lately have been trending down again.

Europe I suspect is trending like the USA, just a ways behind on the curve. I have indications 360 is warming up even in mainland Europe.

Selling 40-80,000 a month in Japan does give them a nice worldwide advantage on 360, though.

[scooby_dooby]

Well, I've been of the opinion that a drop to $400 would just be too extreme, and not justified on the BOM side by a 40GB drive alone. So... the non-announcement at TGS was in line with my own thoughts on the matter. That said, the story's never closed on these things until it's closed, so if they did lower the price sometime in the next weeks, my mind certainly wouldn't implode. But... it's just always seemed too disconnected from their goals of returning SCE to profitability.

So, are you of the opinion sony should just cede North America at this point, accepting a spot behind MS?

Or, do you think they still have a chance of competing in NA without any cuts this year?

If it's the latter I'd be interested in your forecast. It seems to me that without a cut by Sony this holiday, MS will open up their lead to around 7-8million units in NA by next spring, and at that point, Sony can forget about coming back from behind.

They are also putting their BR investment in serious jeopardy here, if they become a distant 3rd in the US, hd-dvd has a much stronger chance of winning the format war. This throws ALL their investment into BR out the window. (How many millions(billion?) are we talking there?)

I think 200-300million extra in losses this holiday, to keep it close, might be worth it.

[dobwal]

The reason why would be because each of those sales would equate to $100 extra loss per unit; 1 million additional sales, $100 million additional loss to absorb. 2 million would be $200 million. Not saying what's right or wrong or what the various decision chains for Sony are - as we clearly can't know - but in terms of why, that would be the why.

Actually the loss would be larger because the $100 revenue loss would be incurred by all units sold.

If Sony would sell 1.5 million in Nov and Dec at $499.00 (PS3 sold at cost) versus 2.5 million at $399.00 (PS3 sold at $100.00 loss) then at the $499.00 price point you would generate $748.5 million in revenue with no loss versus $399.00 you would generate $997.5 million in revenue with 250 million in losses.

Its like selling 1.5 million units at $499.00 then basically giving 500K PS3 away for free under these hypothetical circumstances.

The $499.00 price point would immediately generate returns with the first game purchased while the $399.00 price point would require that revenue generated through game sales and peripherals would have to eat through $250 million before any real profit generation. $250 million is the equivalent of licensing fees of ~20-30 million PS3 games.

[Evildeus]

That depends on econmies of scale. And don't forget that selling more hardware also means selling more sofware, ie, where the profit is.

[Heinrich4]

I think the price in europe is too high (early US$800/850) despite bundles etc(2 controllers 1 or 2 games) does not sells like North American(40k per week),they need pay more attention, because this region tradicionally for sony sells almost same numbers consoles as NA.

(each console with BOM = US$650 estimates in august...sells price is too high in ps3 euroland maybe hold/maintaim /finances lower prices in USA and japan)

[dobwal]

That depends on econmies of scale. And don't forget that selling more hardware also means selling more sofware, ie, where the profit is.

But whats the point of selling extra hardware when you incur a loss that can't be made up through software sales?

[Evildeus]

But whats the point of selling extra hardware when you incur a loss that can't be made up through software sales?
There's 2 points at least:
- The potential impact of buyer on friends
- The fact that the futur flow of software sells may reduce greatly the losses

If fact that is a tread of between present lost and future profit. Moreover, do we know when the smaller process will be use to produce the PS3? Do we know what is the actual loss/profit on PS3?

Sony is already selling PS3 at less than 399$ in japan, isn't it?

[scooby_dooby]

But whats the point of selling extra hardware when you incur a loss that can't be made up through software sales?

What's the point in investing hundreds of millions of dollars in an HD format, only to allow it to die because of a prohibitive price?

I think when you look at the long term implications of a pricecut, it means much more than simple an extra 1.5million units in the field. It keeps them competetive in the NA marketplace, which gives them a lifeline where they can maintain publisher support while they continue to reduce manufacturing costs.

I see this as a major turning point in the North American market, it really would keep sony in the game. So in the end, a pricedrop now could potentially lead to an extra 5-10million in (profitable) sales , and hundreds of millions of extra software units sold for Sony. Not to mention, much higher penetration for BR.

[one]

Sony is already selling PS3 at less than 399$ in japan, isn't it?No.
http://forum.beyond3d.com/showpost.php?p=1065292&postcount=102

[Rangers]

No.
http://forum.beyond3d.com/showpost.php?p=1065292&postcount=102

They still have 20GB PS3 in Japan? I thought it was discontinued?

How much is the 60GB and 80GB PS3 over there?

[one]

They still have 20GB PS3 in Japan? I thought it was discontinued?

How much is the 60GB and 80GB PS3 over there?20GB is not officially discontinued in Japan, 80GB is currently only available in the US and Korea.

60GB PS3 is 10,000 yen ($87) more expensive than the 20GB.

[Dr Evil]

No.
http://forum.beyond3d.com/showpost.php?p=1065292&postcount=102

That's right and like Arwin said in some other thread, it's not accurate to use foreign currency in other markets. PS3 is very cheap in japan though compared to other regions. E.g. in Japan the launch price of PS3 was only 25% higher than the PS2 launch price, whereas in the US PS3 launch price was 66% higher. Europe is about on par with Japan on this metric, but I think we still got the short stick. 639€ for the starter pack is lowest I've seen.

[TheChefO]

What's the point in investing hundreds of millions of dollars in an HD format, only to allow it to die because of a prohibitive price?

I think Sony is realizing they can't kill HD-DVD as easy as they figured and with recent actions on that front, they may never kill it (China, Dreamworks, Paramount).

With that very jagged pill to swallow, I wouldn't want to incur any more losses than I had to if I were them. I'd try to salvage what I could of the established PS brand and ease into BOM reductions when they come (seemingly early next year).

I still think I'd throw a mail-in-rebate for December to get some late buzz and jump the gun a bit on BOM reductions allowing some momentum to build into spring where they have a strong lineup.

They certainly have the stock available to flood the channel with such a plan if need be. :wink:

[Carl B]

So, are you of the opinion sony should just cede North America at this point, accepting a spot behind MS?

Or, do you think they still have a chance of competing in NA without any cuts this year?

Scooby I'm not saying what Sony should or should not do - I'm simply stating why they would not have cut prices. I'm not making a judgement on whether it's intelligent or not; truly, how can I know anyway without access to all the information? And beyond that I'm simply stating that a $100 price cut further premised on a 40GB hard drive never made sense to me to begin with - me I'd just drop the 80GB to $399 if I were going to bother with that.

Now, they may still introduce a 40GB SKU at $399 - expect the unexpected! But I made my feelings on it known on the first page of the thread.

Actually the loss would be larger because the $100 revenue loss would be incurred by all units sold...

I think you're reading too much into what I said; I was just using even million figures for ease of the example. Obviously I agree that a $100 cut would enlarge the losses of all unit sales going forward. :)

That depends on econmies of scale. And don't forget that selling more hardware also means selling more sofware, ie, where the profit is.

Things aren't so cut and dry though; if they were, in that world it would make sense to price a console at $100 no matter the loss. Yet neither Sony or MS is onboard for that, and thus in between selling your hardware at virtually no cost to the consumer, and selling your hardware for a profit, we have many shades of grey with lots that goes into the decision/pricing process.

[TheChefO]

But whats the point of selling extra hardware when you incur a loss that can't be made up through software sales?

Very good point and there is a line that can't be crossed in this regard.

Just throwing a number in here to illustrate the point but:

Selling ps3 at a $300/unit loss generating 10million units in sales would net them 3 billion in losses.

$3 billion dollars...

To make this up would take:
300 million BR disc sales at $10 profit per movie
or
150 million PS3 games sold at $20 profit per game

Such a number is quite extreme ($300 loss per unit), but if I'm not mistaken, they have already been taking substantial losses on the division.

Also keep in mind, this is only for 10 million units.

I think for any console company to really push their box into mainstream, they have to at least be breaking even on the hardware.

Who knows where this line is for Sony, but I'm sure they have one in mind and are also mindful of the likely userbase discrepency between this console and their previous ones, thus, software sales or profit per console via software/accessories will add up to a lot less for ps3 than ps1 or ps2 did.

[dobwal]

What's the point in investing hundreds of millions of dollars in an HD format, only to allow it to die because of a prohibitive price?

I think when you look at the long term implications of a pricecut, it means much more than simple an extra 1.5million units in the field. It keeps them competetive in the NA marketplace, which gives them a lifeline where they can maintain publisher support while they continue to reduce manufacturing costs.

I see this as a major turning point in the North American market, it really would keep sony in the game. So in the end, a pricedrop now could potentially lead to an extra 5-10million in (profitable) sales , and hundreds of millions of extra software units sold for Sony. Not to mention, much higher penetration for BR.

The point is overall revenue cost > revenue isn't worth market leadership or a dominant HD format.

The purpose of gaining marketshare or establishing a dominant format is too maximize profits and revenue.

Marketshare leader or dominant format means nothing in and of themselves.

[Mythos]

Very good point and there is a line that can't be crossed in this regard.

Just throwing a number in here to illustrate the point but:

Selling ps3 at a $300/unit loss generating 10million units in sales would net them 3 billion in losses.

$3 billion dollars...

To make this up would take:
300 million BR disc sales at $10 profit per movie
or
150 million PS3 games sold at $20 profit per game

Such a number is quite extreme ($300 loss per unit), but if I'm not mistaken, they have already been taking substantial losses on the division.

Also keep in mind, this is only for 10 million units.

I think for any console company to really push their box into mainstream, they have to at least be breaking even on the hardware.

Who knows where this line is for Sony, but I'm sure they have one in mind and are also mindful of the likely userbase discrepency between this console and their previous ones, thus, software sales or profit per console via software/accessories will add up to a lot less for ps3 than ps1 or ps2 did.

Before we jump to conclusions...the price cuts are in line with the PS3 efficiencies and their expecting to break even on hardware soon.

[Shifty Geezer]

Can you link to that info please?

[Mythos]

Can you link to that info please?

"Speaking to the New York Times, Yuhara said the company plans to ensure that the division is no longer making a loss by the financial year ending March 2008. He went on to add that "such factors, including price cuts to some extent, are factored in" Sony's strategy for breaking even."

Source: http://www.gamesindustry.biz/content_page.php?aid=22507

[dobwal]

Can you link to that info please?

I concur. Given that there is little public info on manufacturing cost of the PS3. All we're left with is jumping to conclusions, we just spend our time here debating on how we arrived at those conclusions.

[scooby_dooby]

The point is overall revenue cost > revenue isn't worth market leadership or a dominant HD format.

The purpose of gaining marketshare or establishing a dominant format is too maximize profits and revenue.

Marketshare leader or dominant format means nothing in and of themselves.

Obviously. But you have to look at Sony's strategy so far, they've launched an extremely high priced machine, which they've sold at a loss, and are investing in 20-30million ultra high bidget games, and have also invested a ton of money into developing BR as the HD format of the future.

So imo, Sony's strategy so hinges on them being one of the market leaders, as well as BR beign the established HD format.

That's the only way they'll ever recoup the huge amount of investment they've made in the BR format, and the PS3 itself.

It seems that by not dropping the price this holiday(i still think they will), they are failing to follow through on their own strategy. Like, they are not taking that one last step which allow all their previous efforts to bear fruit.

Now, perhaps Sony has already accepted their fate as 3rd place console, are confident BR will survive on it's own merits, and are re-focusing on profitability, it's possible, but it also seems rather risky, and inconsistent with the entire design and goals of the PS3.

[Carl B]

Well you say risky, but really it would be the more conservative of the two approaches... and indeed seems in line with Stringer's style. These 20-30 million dollar games I don't think will sell extremely well this year with or without price-cut; their luster has been tarnished. And is there anyway for Sony *not* to end up 3rd place by years end in NA, even with a price cut? (I know you mean globally by gen's end... but for the point I'm making the above stands)

You're essentially saying "double or nothing," and indicating that Sony can't afford not to. But... rather, for whatever tangible rewards it might bring, is it worth it to toss good money after bad? Every extra billion down the hole is a billion it's going to take years of profitability to recoup. IMO there's no point in attempting the price cut right now in the face of 360's software onslaught this Fall; some might say sales territory must be defended, but I would say the price is too high. Accept defeat for the season in NA and marshal the resources for next year.

Again this is all musing out loud; they may still cut afterall and it might be the better move whatever else I'm talking about. But I think Sony will be more cautious moving forward, because their plans have come unraveled in a number of ways this year, and I think that's left them somewhat stunned from an action perspective.

[dobwal]

"Speaking to the New York Times, Yuhara said the company plans to ensure that the division is no longer making a loss by the financial year ending March 2008. He went on to add that "such factors, including price cuts to some extent, are factored in" Sony's strategy for breaking even."

Source: http://www.gamesindustry.biz/content_page.php?aid=22507

You do know that statement was made in the beginning of January or maybe late December (as that article is from 1/2/07) before the true global demand of the PS3 could even be somewhat measured?

[TheChefO]

Well you say risky, but really it would be the more conservative of the two approaches... and indeed seems in line with Stringer's style. These 20-30 million dollar games I don't think will sell extremely well this year with or without price-cut; their luster has been tarnished. And is there anyway for Sony *not* to end up 3rd place by years end in NA, even with a price cut? (I know you mean globally by gen's end... but for the point I'm making the above stands)

You're essentially saying "double or nothing," and indicating that Sony can't afford not to. But... rather, for whatever tangible rewards it might bring, is it worth it to toss good money after bad? Every extra billion down the hole is a billion it's going to take years of profitability to recoup. IMO there's no point in attempting the price cut right now in the face of 360's software onslaught this Fall; some might say sales territory must be defended, but I would say the price is too high. Accept defeat for the season in NA and marshal the resources for next year.

Again this is all musing out loud; they may still cut afterall and it might be the better move whatever else I'm talking about. But I think Sony will be more cautious moving forward, because their plans have come unraveled in a number of ways this year, and I think that's left them somewhat stunned from an action perspective.

I think both sides have merit.

I can understand their actions if they decided to go either way.

The selfish side of me says "be aggressive on the price so I can pick one up next year for $300", but like you said, I think they may just pack it in for this battle and save it for the next.

IMO, this would probably be the smarter move. They will have the advantage with ps4 arch and cutting their ties financially will enable them to better capitalize on their situation and advantage.

Going gung-ho at this point would probably be a bad move as they don't have the software to support such an aggressive move now anyway. Essentially, they'de be losing money for a lost cause and may provoke MS into aggressive price cuts themselves. Doing so would push xb360 into the mainstream price braket, and with a solid software lineup to boot, may hurt a lot worse.

It sounds odd, but by being conservative and ceding this years sales, they give themselves a chance to better compete later.

Either way I'd understand, but I think I agree with xbd here.

[dobwal]

Obviously. But you have to look at Sony's strategy so far, they've launched an extremely high priced machine, which they've sold at a loss, and are investing in 20-30million ultra high bidget games, and have also invested a ton of money into developing BR as the HD format of the future.

So imo, Sony's strategy so hinges on them being one of the market leaders, as well as BR beign the established HD format.

That's the only way they'll ever recoup the huge amount of investment they've made in the BR format, and the PS3 itself.

If the only way market leadership can be obtained is through huge unrecoverable losses then its likely that Sony will try to find other profit and cost models to either find a profitable place in the market or a place in the market place that minimize the losses due to its investment in BluRay and other costly technology.

Look at the Xbox. Due to the decisions made early in its life, it was doomed to be unprofitable. Additional price cuts would have done nothing but exacerbated the losses incurred.

Now look at the GC, totally opposite result with almost the same market share. Decisions were made to keep the hardware cheap and it allow them to be competitive with the xbox with cheaper price points. Cheap hardware and software sales dominated by first and second party titles allowed Nintendo to be nowhere near a 4 billion dollar loss.

It seems that by not dropping the price this holiday(i still think they will), they are failing to follow through on their own strategy. Like, they are not taking that one last step which allow all their previous efforts to bear fruit.

Now, perhaps Sony has already accepted their fate as 3rd place console, are confident BR will survive on it's own merits, and are re-focusing on profitability, it's possible, but it also seems rather risky, and inconsistent with the entire design and goals of the PS3.

If the initial strategy for the PS3 is failing do you expect them to not change it.

Or like, they are taking that one last step that would make profitability impossible.

[scooby_dooby]

Or like, they are taking that one last step that would make profitability impossible.

:roll:

How is another $300-400 million going to make profitability 'impossible' when they've already invested billions?


If the initial strategy for the PS3 is failing do you expect them to not change it.



No. Not a mere 10 months into it, before they've even reached a mainstream pricepoint.

[TheChefO]

:roll:

How is another $300-400 million going to make profitability 'impossible' when they've already invested billions?



No. Not a mere 10 months into it, before they've even reached a mainstream pricepoint.

I think more information would have to be known about their current BOM and predicted timeline for reductions.

If what we heard a while ago was true and Sony is looking to shave $200 off the BOM this Winter, then I think they can afford to jump the gun a bit and either drop price or do a mail in rebate in Dec.

It would minimize the losses to a million units (roughly) and help them build momentum for spring and their eventual BOM reductions.

[Laa-Yosh]

You do know that statement was made in the beginning of January or maybe late December (as that article is from 1/2/07) before the true global demand of the PS3 could even be somewhat measured?

Not to mention that it does not mean breaking even on the hardware, but on hardware and software sales and microtransaction revenues altogether...

[dobwal]

:roll:

How is another $300-400 million going to make profitability 'impossible' when they've already invested billions?

How did MS's forced price cut to $199.00 six months into its life harm the revenue generated by the Xbox.

Price cutting pressure is going to exist going forward. Just because you price cut now does not mean you have the luxury of foregoing a price cutting round 4-6 months down the line.

If the Xbox could have sold at the pace that it did in the US while holding off price cutting to $199.00 till the following spring and following the same price cutting strategy thereafter an extra 600 million would have been generated from hardware sales in the US. Thats from just sales of 14-15 million units.

No. Not a mere 10 months into it, before they've even reached a mainstream pricepoint.

So if you had a product that was producing results way below what you forecasted you would continue to follow the strategy thats based off that failed forecast model?

[scooby_dooby]

How did MS's forced price cut to $199.00 six months into its life harm the revenue generated by the Xbox.

Doesn't answer my question at all. But I know you were exagerating, so we can just leave it at that.

If the Xbox could have sold at the pace that it did in the US while holding off price cutting to $199.00 till the following spring and following the same price cutting strategy thereafter an extra 600 million would have been generated from hardware sales in the US. Thats from just sales of 14-15 million units.

Except that would've been impossible. Sales were anemic before the pricedrop, a mere 78k the previous month IIRC. Postponing the pricedrop for en entire year would've done nothing but relegate the 360 to an even smaller niche player than it ended up being, and probably cause it to be a total failure in both marketshare AND profitability.

It probably would've also severely impacted the success of their Halo franchise, negatively impacting sales for Halo 2, and the tremendous brand value they posess today with Halo 3.

Regardless, I think comparisons between Xbox1 and PS3 are so fundamentally flawed their not even worth discussing.

So if you had a product that was producing results way below what you forecasted you would continue to follow the strategy thats based off that failed forecast model?

I don't know if Sony's original intent was to be at $400 by Holiday 07, so this may not have been their original plan. But I know they need to do it now if they want to remain competetive in NA.

[patsu]

I did not follow the whole thread but I thought Sony didn't announce any price cut in TGS because it is a Japan event. The price there has already been lowered, and they needed to round out the package with more games.

I believe we will hear more from the US team around October. Afterall, the new VP of product marketing is just on-board recently.

[Xpuntar]

That's right and like Arwin said in some other thread, it's not accurate to use foreign currency in other markets. PS3 is very cheap in japan though compared to other regions. E.g. in Japan the launch price of PS3 was only 25% higher than the PS2 launch price, whereas in the US PS3 launch price was 66% higher. Europe is about on par with Japan on this metric, but I think we still got the short stick. 639€ for the starter pack is lowest I've seen.

That 25% higher price of PS3 compared to PS2 launch price is just to relative and not good indication of any kind.

Back in the day of PS2 coming in to EU € was not that strong to $ as it stands today. Yesterday (20.9.2007) € just beat "1,4 mark" against $. Yeah, €1 = $1,4. An to most Europeans € is not compared to $ like most "marketing geniuses thinks" on 1:1 ratio! :mad:

Just think how much more we (Europeans) pay for the same entertainment device! And mind you! USA already got a price cut.

For USA = $499
For EU = €599 ~ $838

Sony need to adjust the price in EU not beacuse "to price cut" but because of extremely strong €.

[dobwal]

Except that would've been impossible. Sales were anemic before the pricedrop, a mere 78k the previous month IIRC. Postponing the pricedrop for en entire year would've done nothing but relegate the 360 to an even smaller niche player than it ended up being, and probably cause it to be a total failure in both marketshare AND profitability.

It probably would've also severely impacted the success of their Halo franchise, negatively impacting sales for Halo 2, and the tremendous brand value they posess today with Halo 3.

Regardless, I think comparisons between Xbox1 and PS3 are so fundamentally flawed their not even worth discussing.

I wasn't making a direct comparsion. Yes maintaining the $299 price point was impossible because in reality the price cut was instituted just to maintain weak sales. I was stating hypothetically and desribing the affect of price cutting can have beyond just a few months.

Furthermore, the PS3 is currently selling at the same rate as the Xbox1 at this current time and sales for this holiday are bound to be greater than it was last year due to the supply issues last year and a $499.00 sku. The PS3 is in much better position than the xbox1, it isn't necessary to try to trim off 1/3 of its price in under a year.

If the PS3 cuts now and come spring MS and Nintendo institute another round of price cuts, there will be pressure for Sony to follow suit or risk sales slightly above the current pace. Furthermore, if it doesn't cut then what does Sony do wait till the holiday season again and get caught in a strategy of cutting at non optimal times or wait till the following spring and hold onto a price point for 17-19 months.

There is no point in being competitive if you forced to maintain price points that software and peripheral sales can't make up.

There comes a time where maintaining market presence, learning from your mistakes and gearing up for the next generation is more pertinent to the health of your company then simply wasting money trying to become market leader under less than ideal circumstances.

Nintendo is an perfect example and with the PSP and the continued sales of the PS2, the gaming division of Sony doesn't have to be market leader to be viable. But they can lose viability and become a long term cost to the company if they choose a path to maximize sales at the expense of huge losses.

I don't know if Sony's original intent was to be at $400 by Holiday 07, so this may not have been their original plan. But I know they need to do it now if they want to remain competetive in NA.

MS could have been more aggressive with the price cutting of the xbox1 and been more competitve but they didn't because there were other pressures that forced them not to. Sony has already express a desire to break even at the end of March 2008 and pressure from up top might make it impossible to incur additional losses from a $399.00 price point.

[quest55720]

If I was sony I would hold off on price cuts till next year. With the the rumble axis and home not coming till next march with the big heavy hitter MGS4. I think a lot of people are just going to wait now. Outside blue ray fans or hardcore PS fans why would anyone buy a PS3 now when you can wait till march and get one with a better controller and game line up for most likely less money. If a price cut does not work right now I could see sony losing all the rest of thier non japan exclusives.

A price cut also forces MS into one. Sony would basically push MS close to a mass market price with an incredible fall line up. A price cut in march 08 with its heavy hitters would IMO build some momentum.

Hell I hope sony does lower the price and MS follows suit. The more HD consoles sold the better.

[Mythos]

You do know that statement was made in the beginning of January or maybe late December (as that article is from 1/2/07) before the true global demand of the PS3 could even be somewhat measured?

6 months later with another exec. constitent with the PS3 goals....

"During a conference call Sony executive VP Nobuyuki Oneda said the firm may be able to break even on PS3 hardware this fiscal year, which ends in March 2008."

Source: http://www.next-gen.biz/index.php?option=com_content&task=view&id=6573&Itemid=2

[Archgamer]

If I was sony I would hold off on price cuts till next year. With the the rumble axis and home not coming till next march with the big heavy hitter MGS4. I think a lot of people are just going to wait now. Outside blue ray fans or hardcore PS fans why would anyone buy a PS3 now when you can wait till march and get one with a better controller and game line up for most likely less money. If a price cut does not work right now I could see sony losing all the rest of thier non japan exclusives.

A price cut also forces MS into one. Sony would basically push MS close to a mass market price with an incredible fall line up. A price cut in march 08 with its heavy hitters would IMO build some momentum.

Hell I hope sony does lower the price and MS follows suit. The more HD consoles sold the better.

Sony cannot go into the holiday season with a 600 price tag. It just won't work. And I believe that the 500 model is running out sooner than expected. Drop the price before Christmas. They need a 400 model. So what if MS follows suit. They are always going to have the price advantage anyway. MS gets a holiday boost so Sony should do the same even though we are expecting MS to get more sales out of it.

[quest55720]

Sony cannot go into the holiday season with a 600 price tag. It just won't work. And I believe that the 500 model is running out sooner than expected. Drop the price before Christmas. They need a 400 model. So what if MS follows suit. They are always going to have the price advantage anyway. MS gets a holiday boost so Sony should do the same even though we are expecting MS to get more sales out of it.

They have sold around 300k since the price cut I am sure there are is atleast enough for the next few months. Just drop the 599 to 499 when the 60 gig units get low. Hell a little shortage might get demand up some. I don't see no point in sony losing a ton of money when they don't have the line up to back it up. If home, rumble axis and MGS4 were going to hit this christmass then yes a price cut now would help. If the price cut fails now they will most likely need another one in march with its heavy hitters. 3 price cuts in 1 year is just insane and I don't think they could afford it. All they have to do is ride out this christmass and relaunch next year with the rumble axis and home. A new system in march with rumble axis included is going to be much better recieved. MS is going to get the majority of the high end sales this christmass no matter what. There is no point in flushing money down the toilet to lose a battle they can't win right now. A relaunch is there best bet and they can't do that till march 08 with MGS4,home,GTA4, rumble axis and proably GT5 prolog.

[Rangers]

They have sold around 300k since the price cut

Add in another 160,000 in Japan and probably 150,000-200,000 in Europe in those two months.

Throw in some float and three weeks of September as well. And you could see, it might be close to a mil.

[AlphaWolf]

I think Sony has to do something in NA just to keep developer faith over the holiday. If they just 'ride it out' they might start losing support from NA developers. What they can afford to do, I'm not sure. It comes down to they need to give up some profit to prevent falling further back; whether they do that through advertising, bundling, and/or price cut.

[quest55720]

I think Sony has to do something in NA just to keep developer faith over the holiday. If they just 'ride it out' they might start losing support from NA developers. What they can afford to do, I'm not sure. It comes down to they need to give up some profit to prevent falling further back; whether they do that through advertising, bundling, and/or price cut.

I agree they need to do something. I like the bundle option I think put motorstorm, HS and Resistance 2 6 axis controllers + spider man 3 blue ray for 499. That way sony could minimize losses and compete with MS holiday bundle. I just think it is foolish to do 2 price cuts to close to each other. It lowers the product in the eyes of the consumer. People are not stupid they see 2 rapid price cuts they know a product is in trouble. That and it can make them wait for yet another price drop since 2 happened so fast already.

They have already done the desperate price cut with no games and it worked ok. I think a price cut in march 08 with all the good stuff coming out that month would be a relaunch and maybe build some momentum towards fall 08. I just don't think sony can afford a price cut in November and march 08. I think the price cut would be much more effective in march 08.

[Carl B]

6 months later with another exec. constitent with the PS3 goals....

"During a conference call Sony executive VP Nobuyuki Oneda said the firm may be able to break even on PS3 hardware this fiscal year, which ends in March 2008."

Source: http://www.next-gen.biz/index.php?option=com_content&task=view&id=6573&Itemid=2

This is the most recent right here:

http://www.beyond3d.com/content/news/375

That's three months ago, and yes - he's targeting hardware profitability. But profitability is the target, and in my mind that means for now $500 is the likely floor. With 65nm components all-around and OPU cost reductions... well, I'm not going to say that $400 might not be profitable at that point either, but just so long as we're all agreed that the profitability itself is the goal.

If they drop the SKU to $400 I won't disparage the move; neither will I if they don't. There's obviously cases to be made for each. But for myself and predictions, I'm just thinking the 80GB SKU with Motorstorm tossed and down to $499 will be the next move we see.

@Alpha: Truth is, I don't see how they could lose any more NA dev support than is already the case. What's not tied up in exclusivity agreements (a la Unreal Tournament) is already relegated to port status more or less. For those reasons, I'm pro 2008 retrenchment mindset.

@Quest: I know it's a minor quibble, but Blu-ray, not blue ray. :razz:

[Crossbar]

I just think it is foolish to do 2 price cuts to close to each other. It lowers the product in the eyes of the consumer. People are not stupid they see 2 rapid price cuts they know a product is in trouble. That and it can make them wait for yet another price drop since 2 happened so fast already.

If they introduce a new SKU at a lower price, it´s not just a price cut.

And would you really be surprised if the price of the 80 GB SKU is moved to $500 when he 60 GB model run out of stock? Not really, yeah?

Anyway, I am not paying to much attention to this $400 rumor, I think there will be some better offers coming up for christmas, but $400 sounds really cheap to me.

The rumors may just be FUD from one of their competitors.

If you look at the sources there seems to be certain connections.

http://arstechnica.com/journals/thumbs.ars/2007/09/09/500-80gb-ps3-with-a-spiderman-3-blu-ray-pack-in-our-mole-lets-us-in-on-sonys-future-plans
http://kotaku.com/gaming/addicts/microsoft-bets-ngai-again-ps3-will-be-399-this-year-282303.php

[dobwal]

6 months later with another exec. constitent with the PS3 goals....

"During a conference call Sony executive VP Nobuyuki Oneda said the firm may be able to break even on PS3 hardware this fiscal year, which ends in March 2008."

Source: http://www.next-gen.biz/index.php?option=com_content&task=view&id=6573&Itemid=2

That interview is laced on a bunch of "maybe"s that dependent on cost reductions on the RSX, Cell and BluRay that may or may not happen in fiscal 08. A margin of zero is dependent on a uncertain price point but its unlikely its a $399.00 price point as that would more than likely mean that the $599.00 80Gb PS3 is already breaking even.

The article seems to pull out of thin air that the Sony loses $200.00 for every PS3 sold, which means it cost Sony $700 for the 60Gb sku and $800 dollars for the 80Gb, which seems unlikely because 20 extra gigs and a pack in game shouldn't cost a $100.00 for Sony.

[Evildeus]

No.
http://forum.beyond3d.com/showpost.php?p=1065292&postcount=102
I would say yes...
http://forum.beyond3d.com/showpost.php?p=1062737&postcount=48

[Evildeus]

Things aren't so cut and dry though; if they were, in that world it would make sense to price a console at $100 no matter the loss. Yet neither Sony or MS is onboard for that, and thus in between selling your hardware at virtually no cost to the consumer, and selling your hardware for a profit, we have many shades of grey with lots that goes into the decision/pricing process.
That would suppose that present loss can be overrule by future profits. It's an arbitration...

[one]

I would say yes...
http://forum.beyond3d.com/showpost.php?p=1062737&postcount=48

Sony is already selling PS3 at less than 399$ in japan, isn't it?It's not Sony, but some retailers. Most stores are selling it at around the retail price.

[scooby_dooby]

There comes a time where maintaining market presence, learning from your mistakes and gearing up for the next generation is more pertinent to the health of your company then simply wasting money trying to become market leader under less than ideal circumstances.

Well that's the fundamental difference I guess. I think Sony can still stay in this, and doesn't need to 'focus on next generation' already.

MS left them a huge window with their inability to pricedrop, and then a mere $50 after 2 years. But, I guess it remains to be seen if Sony is in a position to capitalize, MS may have rightly guessed that they are not.

[Joe DeFuria]

Scooby,

Sony doesn't need to be in either first or second place (in terms of installed base) in N.A. to "stay in it."

You mention MS's "inability" to price-drop. It's not inability IMO...it's lack of need.

I'll reiterate something Carl B has said: we simply don't know enough about BOM, anticipated manufacturing ability, profit projections on games, attach rate etc. to make decent guesses as to what either Sony or MS "should" do in terms of price drops.

It's obvious to me that if Sony believed that the pros of a price-drop outweighed the cons, they would do it.

[TheChefO]

But, I guess it remains to be seen if Sony is in a position to capitalize, MS may have rightly guessed that they are not.

I think that is their biggest problem right now.

Sony doesn't have the software this year to really capitalize on aggressive pricing.

Next year will be a different story.

Problem I have with that strategy is, I think next year may be too late.

[patsu]

I'll reiterate something Carl B has said: we simply don't know enough about BOM, anticipated manufacturing ability, profit projections on games, attach rate etc. to make decent guesses as to what either Sony or MS "should" do in terms of price drops.


This is why I tend to stay out of company strategy vs threads these days.


It's obvious to me that if Sony believed that the pros of a price-drop outweighed the cons, they would do it.

Yes... plus Sony delegate decisions to regional HQs. The gamers in different regions may see/value things differently. The signals we see on the web may also be for different regions (e.g, TGS).


Sony doesn't have the software this year to really capitalize on aggressive pricing.

Next year will be a different story.

Problem I have with that strategy is, I think next year may be too late.


For hardcore gamers, if they don't do a good job, they will lose even more momentum in the short term. They may get some back when enough exclusive A* titles accumulate _and_ price becomes attractive. In parallel, I think they are investing resources heavily on casual gamers and non-gamers. Some of the cards are still not on the table.

For now, I don't think a price drop is good enough to generate a sustaining momentum. Without addressing some fundamental marketing issues, a price drop will help for a few weeks and then dip again. Sony knows this and are in the middle of plugging the holes.

Once their proposition for general entertainment are ready, we should see their first assault (together with price drop). For now, they seem to be content with addressing hardcore gamers and Blu-ray enthusiasts without losing too much money.

Anyway, have fun guessing. I'm outta here.

[Dr Evil]

It's obvious to me that if Sony believed that the pros of a price-drop outweighed the cons, they would do it.

Of course and they could very well be right not to cut it. I personally think they need more good games out there before the price cut does anything major. However what Sony believes does not automatically equal Best scenario for them. They thought that PS3 would fly off the shelves with it's current price tag and games library. Obviously they were mistaken. They can make other mistakes too. Naturally their position to make these decisions is superior to anybody else, but sometimes being close to something can hinder the ability to see the big picture.

[scooby_dooby]

Scooby,

Sony doesn't need to be in either first or second place (in terms of installed base) in N.A. to "stay in it."

They risk ending up a distant 3rd place, thus losing western publisher support, and cascading to other markets, having a negative effect worldwide.

I think the PS brand loyalty is remarkebly strong, but if publishers start making too many 360 exclusives, eventually the market will shift.

A relatively small investment now, would *maybe* stop that from happening. Of course it's risky, but I'm convinced that at $400 legions of PS2 fans will jump ship to PS3, their lineup is not that weak right now.

You mention MS's "inability" to price-drop. It's not inability IMO...it's lack of need.

I don't think so. According takahashi MS planned to be on 65nm by now, and have already cost reduced. Obviously their failure to to that, combined with the RROD problem has limited their ability to drop the price.

It a little of both I'm sure, Sony is not exactly pressuring them, but the Wii certainly is.

'll reiterate something Carl B has said: we simply don't know enough about BOM, anticipated manufacturing ability, profit projections on games, attach rate etc. to make decent guesses as to what either Sony or MS "should" do in terms of price drops.

I'm just looking at it from a market perspective. There's no doubt in my mind Sony 'should' or needs to drop price, the question is whether they can afford to.

It's obvious to me that if Sony believed that the pros of a price-drop outweighed the cons, they would do it.

Sony has made a ton of mistakes already this generation, so this doesn't hold alot of weight.

[dobwal]

MS left them a huge window with their inability to pricedrop, and then a mere $50 after 2 years. But, I guess it remains to be seen if Sony is in a position to capitalize, MS may have rightly guessed that they are not.

MS's conservative price cutting strategy shouldn't be construed as an inability to price cut. MS's has already learned that trying to keep pace just off price with a competitor with a more popular console with better price cutting flexibility can lead to a situation where you have unrecoverable revenue costs. Furthermore, with Sony having a higher price thats leading to lower sales, MS can sit in between Sony and Nintendo and find a comfortable place that leads to profit.

MS sales had been stable for the last two years at its original price point. Its a benefit of releasing a year early and I think that MS recognized that advantage. It gave MS the ability to price cut real early in the life cycle of the Wii/PS3 if sales dropped due to their arrival or the ability to sit at one price point for a relatively long period if the PS3/Wii waited to cut until the traditional time of spring and sales remain competitive.

[scooby_dooby]

MS's conservative price cutting strategy shouldn't be construed as an inability to price cut. MS's has already learned that trying to keep pace just off price with a competitor with a more popular console with better price cutting flexibility can lead to a situation where you have unrecoverable revenue costs. Furthermore, with Sony having a higher price thats leading to lower sales, MS can sit in between Sony and Nintendo and find a comfortable place that leads to profit.

MS is the market leader, thus they should be learning from Sony and what Sony did with the PS2. i.e. Aggressive pricedrops, putting the pressure on the competition, and maintaining ultra-high sales.

I have no doubt that in 2001, both you and Joe would be arguing that Sony should maintain their $299 pricepoint to increase revenues. There was certainly no pressure, or any need for them to drop price at that point, yet they did.

And, in hindsight, it led to the most dominant platform in console history, and a huge revenue stream which is still going strong today.

[ihamoitc2005]

MS is the market leader, thus they should be learning from Sony and what Sony did with the PS2. i.e. Aggressive pricedrops, putting the pressure on the competition, and maintaining ultra-high sales.

I have no doubt that in 2001, both you and Joe would be arguing that Sony should maintain their $299 pricepoint to increase revenues. There was certainly no pressure, or any need for them to drop price at that point, yet they did.

And, in hindsight, it led to the most dominant platform in console history, and a huge revenue stream which is still going strong today.

Price drop does not generate demand. This is why GameCube price drops failed. They dropped price hoping to increase demand but unless there is demand at higher price there will be no demand at lower price. PS2 price dropped worked because there was demand at higher price and they knew that that this was like the iceberg where you can see the top but the bottom is much bigger.

For luxury goods like video game machine unless there is demand at high prices there will be no demand at low prices.

[scooby_dooby]

There's certainly a ton of demand for the PS3...just not at $500/600.

[dobwal]

They risk ending up a distant 3rd place, thus losing western publisher support, and cascading to other markets, having a negative effect worldwide.

Sony is not liable to lose any more support than they already have. Sony is bound to have way more support than the GC or the Xbox1. They were the defacto console coming into this generation so a lot of projects were alloted to the PS3. The Xbox and GC didn't have that luxury as PS2 was the predecessor of the PS1 and was shown to be wildly popular from its outset.

PS3 lost a lot of exclusives but those were replaced by multi platform version of those games. If you look at the number of exclusives that the 360 has planned the majority are either first/second party, from devs that were strong xbox1 supporters or second tier games from devs that are still putting their biggest franchises exclusively on the PS3.

Even if the Wii ends up with the majority share of the market, its doesn't provide the most pub friendly enviroment. Nintendo's first and second party will dominate the landscape and the majority of hardcore gamers will still have a 360 and or PS3, the hardcore gamers are still the core group of buyers who drive sales of high budgeted titles.

[dobwal]

Price drop does not generate demand. This is why GameCube price drops failed. They dropped price hoping to increase demand but unless there is demand at higher price there will be no demand at lower price. PS2 price dropped worked because there was demand at higher price and they knew that that this was like the iceberg where you can see the top but the bottom is much bigger.

For luxury goods like video game machine unless there is demand at high prices there will be no demand at low prices.

Price drop do generate demand. However, competitors often follow suit and cut prices and the same time, which makes price cutting a tool for keeping sales stable at or above previous sales but not enough to overtake a competitor.

The PS2 wouldn't sale 100+ million console over 6-7 period if Sony had stuck to a $299.00 price point through out that period.

[Carl B]

There's certainly a ton of demand for the PS3...just not at $500/600.

Is there though? I'm not feeling the love right now in NA for the PS3. There's a fan base for sure, but it's not very 'mobilized,' and I think that has more to do with the titles atm than the price.

This was Kaz's own answer when asked about it:

"Price is a very important aspect, but at the same time the urgent matter is to what extent we can further enrich the software titles," he said.

And I have to reason to think otherwise myself. I'll say ironically, the press is only wrapped up in the 'failure' of a price cut because they bought so whole-heartedly into the $399 rumor to begin with. Anyway we all know what each other feels on this and the reasons why, so... I'll ask this secondary question instead:

Kaz reiterated his goal for 11 million consoles shipped to retail by year-end. Now, what I'm wondering is, what do people here think they'll actually succeed in shipping?

[dobwal]

MS is the market leader, thus they should be learning from Sony and what Sony did with the PS2. i.e. Aggressive pricedrops, putting the pressure on the competition, and maintaining ultra-high sales.

I have no doubt that in 2001, both you and Joe would be arguing that Sony should maintain their $299 pricepoint to increase revenues. There was certainly no pressure, or any need for them to drop price at that point, yet they did.

And, in hindsight, it led to the most dominant platform in console history, and a huge revenue stream which is still going strong today.

PS2 popularity was not interrupted by the the release of the GC and the Xbox. MS saw Wii's popularity out of the gate wasn't something that could be combat with just a simple price cut. Remember you have a the previous generation where the third place player was the cheapest and the xbox was the same price as the PS2 and both were more powerful, but it did little to combat the sales of the PS2.

Plus there is nothing aggressive about the PS2 price cutting strategy as it took something like 18-19 months before a price cut was seen in the US.

[TheChefO]

I have no doubt that in 2001, both you and Joe would be arguing that Sony should maintain their $299 pricepoint to increase revenues. There was certainly no pressure, or any need for them to drop price at that point, yet they did.

And, in hindsight, it led to the most dominant platform in console history, and a huge revenue stream which is still going strong today.

Agreed.

MS could have made this a very lopsided victory (sans Wii).

It seems they are content with maintaining "comfortable" sales and "decent" profit margins in the near and distant future...

[scooby_dooby]

Plus there is nothing aggressive about the PS2 price cutting strategy as it took something like 18-19 months before a price cut was seen in the US.

A 33% cut after 18 months is not aggressive? When you're drastically outselling your competition??

Surely, at the time, you would've argued that Sony was not in need of a pricedrop, and should concentrate on profitability, no?

It certainly was aggressive, much moreso than the 13% pricecut implemented by MS after 18-19 months.

[Johnny Awesome]

I actually think Sony is forced to play it conservatively here. They have to stay at $500 or above this year and hope that the likes of MGS4, GT5, and FFXIII along with a $400 price point and Blu-Ray can save them. If not they have to remain profitable for the whole generation and cutting price won't do that for them.

[Tap In]

A 33% cut after 18 months is not aggressive? When you're drastically outselling your competition??

Surely, at the time, you would've argued that Sony was not in need of a pricedrop, and should concentrate on profitability, no?

It certainly was aggressive, much moreso than the 13% pricecut implemented by MS after 18-19 months.


while I agree with you in principle that MS should be more aggressive in their price strategy, let's not forget that PS2 did not have a competitor in the price range above them.

MS has got to be careful to not get too far away from Sony price-wise (downwardly) as to not give the false impression that it is any lesser of a value/machine (which is why there is even an Elite IMO). People are conditioned to think price equals value.

it is a delicate balance.

[TrungGap]

Is there though? I'm not feeling the love right now in NA for the PS3.

I agree...In the mind of perspective buyers(gamers), the PS3 has a lot of potential, but just not right now. So there's no need to get one right now.

I think most people here had said something about the Sony PR guy, talking about how the games have yet to unlock the power of the PS3, was the stupidest comment by any PR guy. As seller of anything, you want people to act today, as nobody can predict the future. That's why when you go to a car dealer, they offer you a deal, but only if you act today.

So Sony needs more than a price cut right now. They need games now, which they don't have...so they need to be creative here. Do a Christmas bundle. Dig up some holiday Sony Classic movies and holiday limited edition of MotorStorm or something. It's time they offer something cheesy and gimmicky to get everyone in the spending mood.

Of course, they can sweeten the deal with a price cut, because I really tempted with PS3 just for Ratchet and Clank. ;)

[dobwal]

I have no doubt that in 2001, both you and Joe would be arguing that Sony should maintain their $299 pricepoint to increase revenues. There was certainly no pressure, or any need for them to drop price at that point, yet they did.

Thats doubtful. Look at the scenarios.

PS2
18-19 months before first price drop
7-10 million consoles in the US alone and 12-15 million worldwide
US sales leader in overall sales as well as month to month (300-400K)
leader in software and peripheral sales.
Target for next fiscal year 25 million units

PS3
10-12 months
2 million in the US and 5 million worldwide
behind to all competitors in overall US sales as well as month to month (100-150K)
behind competitor in software and peripheral sales.

Xbox 360
18-19 months
5-6 million in the US and 10 million worldwide.
US sales leader in overall sales but not month to month (150-180K)
back and forth with the Wii for leadership in software and peripheral monthly sales. Huge amount of stuffing the channel going on. Forecast for shipments for the next 6 months: >2 million. RROD problems that undermining actual cost incurred through hardware sales by creating high cost through warranty replacements.

Who by far has the most leverage when it comes to a price cut without little or no affect on their bottom line.

[Joe DeFuria]

I have no doubt that in 2001, both you and Joe would be arguing that Sony should maintain their $299 pricepoint to increase revenues.

And you would be wrong.

For some reason, you just seem to ignore that the absolute price is not the only thing that stimulates demand. It's the value proposition (what you get for the money) combined with the absolute price.

Relative to the competition, PS1 had lots of perceived value to offer vs. its competition. (Software library for starters). PS3 right now? Not so much.

Sony has made a ton of mistakes already this generation....

I agree there. Principally, I think Sony was overall too aggressive (technology wise) with PS3. Ultimately, leading to a much higher cost of the console (without much value-add for gaming), and more importantly gave MS the early opportunity to ship much earlier and gain a foot-hold.

And sometimes, Scooby, you can't make-up for your past mistakes this generation. What you can do is learn from your mistakes, while keeping things afloat as reasonably as you can.

I'm not saying this is definitely the case here with PS3, but it clearly might be.

A lot...I mean a LOT of the future of PS3 is going to hinge on the 2008 software line-up. (Stating the obvious I know...)

[scooby_dooby]

Who by far has the most leverage when it comes to a price cut without little or no affect on their bottom line.

Impossible to say without know the BOM for the consoles at that point in time.

What we can say those points do make clear, is that the PS2 was the one console LEAST in need of a priceut. The one with the largest cushion, and the least amount of pressure, was actually the one that was most aggressive.

We know that strategy worked, and paid off in spades.

We have no idea how MS's middle of the road approach will play out.

So I would argue history favours my proposed strategy much moreso than yours.

Other than Nintendo, how many console manufacturers have managed to make a good profit in 2nd place, and survive generation to generation?

[Heinrich4]

The Sales of x360 reachs big jump,how many (%..) Elite participate this(more effective to resist 3rls)?

[Joe DeFuria]

We know that strategy worked, and paid off in spades.

No, we do not.

For all we know, Scooby, is that if they didn't drop the price, Sony STILL would have completely dominated that generation...just with much larger profits.

For all we know, Sony knew this, but was sacrificing some profits to try and force MS out of the cosole space (by forcing MS losses to be astronomical and not enter the next generation race). That didn't happen either.

Based on your logic, XBox-1 should have been "super aggressive" in price (even more than they were), and that could have turned the tide?

Price + Value Proposition = Demand.

If the value prop is not there...dropping the price will ultimately have little effect.

[AlphaWolf]

xbox360 went 21-22 months before a price drop, not 18-19. Price drop was in August 2007, release was in November of 2005.

[TheChefO]

Price + Value Proposition = Demand.

If the value prop is not there...dropping the price will ultimately have little effect.

I think that's his point WRT MS.

The value prop IS there ATM, thus, demand would be through the roof had they been more aggressive with their pricing.

OTOH, PS3 isn't in such a position, yet.

[TheChefO]

For all we know, Sony knew this, but was sacrificing some profits to try and force MS out of the cosole space (by forcing MS losses to be astronomical and not enter the next generation race).

The roles were reversed this Spring, and MS took their foot off the gas.

Who knows how it would have ended, but I can say with confidence that MS would have clearly outpaced ps3 with a $100 price cut across the board this spring and secured the gen. Even with a pricecut response from Sony, momentum was on MS' side at the time and the software library was (and is) building. The only thing that would have made it worse for Sony would have been having GTA4 on the shelf this year too in combination with Halo3 and a $200 core sitting on the shelf for Christmas shoppers.

It would have been an interesting battle to see though.

[dobwal]

Impossible to say without know the BOM for the consoles at that point in time.

What we can say those points do make clear, is that the PS2 was the one console LEAST in need of a priceut. The one with the largest cushion, and the least amount of pressure, was actually the one that was most aggressive.

We know that strategy worked, and paid off in spades.

We have no idea how MS's middle of the road approach will play out.

So I would argue history favours my proposed strategy much moreso than yours.

Other than Nintendo, how many console manufacturers have managed to make a good profit in 2nd place, and survive generation to generation?


Actually the Xbox as well as the GC took more aggressive stance toward price cutting by starting their price cutting cycle 6 months into their life cycle. Their price cutting did little to impede the sales of the PS2 and did no more than stabilize their sales around 150K monthly each year.

You do know that the PS2's $199.00 price cut came during profitable quarter for Sony's gaming division and not a loss something that wasn't possible for the 360 last spring?

Actually the price cut came in the middle in a profitable quarter and Sony gaming had seen profits for the last 3 quarter before the PS2 had a price cut.

[Joe DeFuria]

Who knows how it would have ended, but I can say with confidence that MS would have clearly outpaced ps3 with a $100 price cut across the board this spring and secured the gen.

I'll simply have to disagree. Yes, they would have gotten more sales, but enough to secure this gen? I can't say that.

And what is so special about $100? Why shouldn't it be $150, $200...or why isnn't $50 enough to secure this gen for that matter?

IMO, no matter how many MS sells this season, we really have to wait for Sony to make its first major move (and then see the effects) to determine if MS will have "secured" this gen. I'm assuming Sony's "move" will be in the spring, with a "re-launch" of sorts: highly anticipated titles, Home + price-cut (plus whatever else we may not know about).

It would have been an interesting battle to see though.

Certainly agree there! :)

[Heinrich4]

I have the impression Sony really believes whith only sell games will be enough to make ps3 as console videogame(...) a good competitor (against wii,x360 at US$ 250/350) with high prices.

(theses a big ,big mistake .. like PSX/tivo console like times ...they need a better price now! )

[Mythos]

That interview is laced on a bunch of "maybe"s that dependent on cost reductions on the RSX, Cell and BluRay that may or may not happen in fiscal 08. A margin of zero is dependent on a uncertain price point but its unlikely its a $399.00 price point as that would more than likely mean that the $599.00 80Gb PS3 is already breaking even.

The article seems to pull out of thin air that the Sony loses $200.00 for every PS3 sold, which means it cost Sony $700 for the 60Gb sku and $800 dollars for the 80Gb, which seems unlikely because 20 extra gigs and a pack in game shouldn't cost a $100.00 for Sony.

Well Sony is at 65NM Manufactoring and also software emulation for back words compat...so their is some cost reductions in place...

You seem to be pulling out of thin air how the PS3 is losing the $200. per unit.....

[Carl B]

You seem to be pulling out of thin air how the PS3 is losing the $200. per unit.....

It's not him that was pulling $200 out of thin air, it was the article you referenced. If you read the last sentence in the quote of his you provided, you'll see that.

[Mythos]

It's not him that was pulling $200 out of thin air, it was the article you referenced. If you read the last sentence in the quote of his you provided, you'll see that.

Yup. the reference is that he was holding to $200 dollars per unit lose without where that number is coming from...editorial...What Sony is losing per unit is an unknown.

[dobwal]

Well Sony is at 65NM Manufactoring and also software emulation for back words compat...so their is some cost reductions in place...

You seem to be pulling out of thin air how the PS3 is losing the $200. per unit.....

Retail PS3es at the moment have no 65nm Cell or RSX only that 65nm production of the Cell has started at IBM. Plus there is no guarantee that those 65nm units will show up before March 08 as the article keep stating that cost price down related to those components "may" occur not "will" occur before the fiscal year is out.

No Im not. Im assuming the PS3 is losing <$200.00 per unit, whether thats $1 or $199.00.

[TheChefO]

And what is so special about $100?

Getting to the $199 price bracket with great software is key to sales. Especially going into the holidays.

Check ps2 sales after price drop to see what I mean.
They had a solid games lineup and an affordable price. End result was 20+ million units moved that year.

I'm not saying MS would have repeated the exact performance, but I imagine they'd be moving a bit more than the 1.x million they've done so far. :wink:

I think 10m is a fairly conservative projected number to have expected.

[scooby_dooby]

Actually the Xbox as well as the GC took more aggressive stance toward price cutting by starting their price cutting cycle 6 months into their life cycle. Their price cutting did little to impede the sales of the PS2 and did no more than stabilize their sales around 150K monthly each year.

That's not aggressive, it's reactive. They had no choice, due to pressure put on them by Sony.

You do know that the PS2's $199.00 price cut came during profitable quarter for Sony's gaming division and not a loss something that wasn't possible for the 360 last spring?

Actually the price cut came in the middle in a profitable quarter and Sony gaming had seen profits for the last 3 quarter before the PS2 had a price cut.How many unprofitable quarters did sony have from 2001-2003? And haven't ALL previous Xbox pricedrops, including Xbox1, come during a negative quarter for the games division? Sortof apples and oranges.

If MS waited until a profitable quarter, they'd be sitting there until sometime in 2008...

[Joe DeFuria]

Getting to the $199 price bracket with great software is key to sales. Especially going into the holidays.

Not necessarily.

There is definitely a "magic price" where a console will take off. Just because with last generation's consoles that price may be $200, doesn't mean that's the case with this generation.

Inflation, and value proposition can increase the "magic price."

It will be interesting to see what a $249-$279 "Arcade" 360 sku does this season, if we do see it.

[TheChefO]

Not necessarily.

There is definitely a "magic price" where a console will take off. Just because with last generation's consoles that price may be $200, doesn't mean that's the case with this generation.

Inflation, and value proposition can increase the "magic price."

It will be interesting to see what a $249-$279 "Arcade" 360 sku does this season, if we do see it.

Indeed it isn't a magic price. But it is the price point which sold the most ps2 units and if I'm not mistaken, the same was true of ps2.

Where that point will be in the future is anyones guess, but I can gaurantee you, the same product for less money will always sell more.

[scooby_dooby]

Based on your logic, XBox-1 should have been "super aggressive" in price (even more than they were), and that could have turned the tide?

Price + Value Proposition = Demand.

If the value prop is not there...dropping the price will ultimately have little effect.

First, I think the percieved value proposition between PS3, and Xbox1 when it launched are an order of magnitude different.

Second, I never argued that being 'super aggressive' is always the way to go.
My calls for MS to drop price last spring, a 25% cut, 18 months after launch is not 'super aggressive', similar pricecuts have been seen throughout the industry for decades. MS's current strategy would certainly be defined as a conservative approach.
In the case of Xbox1, a lower price than PS2 woudl not have done much, as demand was not there, so an aggressive price strategy would not have worked in that situation either.Now, in the case of PS3 we have something totally different. We have a system that is prohibatively priced, where there is significant demand, but just not at the current price of $500-600.

We also have the Xbox360, proving they can move 6million units in the US at the $400 pricepoint, with a smaller pre-existing userbase, less functionality(bluray), and widespread reliability issues.

I don't think it's unreasonable to guess that the PS3 would sell very well at $400 this holiday, I think ~1.5 would be possible in Nov/Dec. 360 did it last year at $400, on probably a lesser library than PS3 has now.

I don't really understand the complete lack of faith in sales. Just because a product doesn't sell at some ridiculous price, doesn't mean it won't start moving once you bring down to something reasonable.

Anyways, I guess I've argued this enough, I'm obviously in the minority here... and in second thought, Sony probably is not in that much risk of losing major western support anyways.

[Joe DeFuria]

Where that point will be in the future is anyones guess, but I can gaurantee you, the same product for less money will always sell more.

Agreed...it also always meas less profit per sale. :)

One thing MS (or any console maker) needs to be wary of is reaching a mainstream price without having the mainstream software to support it. If you are not selling the cosole itself for a profit, you don't want someone to "impulse buy" the thing, play a few hours with it (one or two games), and then find out there is not the "kind" of software available to suit their tastes.

With "Arcade" (live) games and a wider variety of quality software just coming out this season, MS is positioning itself well, but I personally feel that next X-mas ('08) will be the perfect time for the 360 to hit "mainstream" pricing. Hopefully by then the 360 will have earned a bit more of a reputation as a competitor to Wii for the "casual" gamer in terms of content, and the costs to manufacture will be close enough to minimize risks of losses for casuals that may be of the "low attach rate" type.

[TheChefO]

I don't think it's unreasonable to guess that the PS3 would sell very well at $400 this holiday, I think ~1.5 would be possible in Nov/Dec. 360 did it last year at $400, on probably a lesser library than PS3 has now.

True, but I think the timing is different and consequently the market is different.

Had Sony launched at $400 (even $400-500 with limited availability of the $400 unit) I think they would be seeing a very different outlook at this point.

I think too much time has gone by with too little reason for many gamers to wait for Sony and mentally, many are saying to themselves, "Wii or xb360?".

It's partly price and partly games. Sony droped the ball on both from a leadership perspective.

[dobwal]

That's not aggressive, it's reactive. They had no choice, due to pressure put on them by Sony.
"aggressive" and "reactive" dont have opposite meanings, you can both reactive and aggressive at the same time

Sony cut is not "aggressive" as it came 18-19 months after introduction. It also came after 3.5 quarters of profits. Sony's price cut was done out of desire to spread further into the market. The purpose is to move as much hardware as possible to maximize software sales, so any manufacturer is going to have price reduction strategy plan that going to be there regardless of competition and there is no point at sitting at $299 for 3 holiday season, when you seeing cost reductions.

MS didn't have the luxury of almost a year of profit from its gaming division or the demand level of the PS2

How many unprofitable quarters did sony have from 2001-2003? And haven't ALL previous Xbox pricedrops, including Xbox1, come during a negative quarter for the games division? Sortof apples and oranges.

If MS waited until a profitable quarter, they'd be sitting there until sometime in 2008...

Definite 1 maybe 2, while MS in relation has about 6 with 6 more quarter to go. Irregardless of apples and oranges, Sony was in a very comfortable position to make a price cut given the PS2 time already on the market and the financial performance of the gaming division over the previous 3 quarters.

MS pricecut is on the eve of its first possible profitable quarter during the life of the 360.

[Joe DeFuria]

I think the percieved value proposition between PS3, and Xbox1 when it launched are an order of magnitude different.

Not sure why you are comparing perceived value of PS3 to XBox1? It's the relative perceived value of "PS2 vs. XBox1" and "PS3 to XBox360" that matter.



My calls for MS to drop price last spring, a 25% cut, 18 months after launch is not 'super aggressive', similar pricecuts have been seen throughout the industry for decades. MS's current strategy would certainly be defined as a conservative approach.As someone else mentioned, a 25% cut at a time when you are not currently the highest price console does seem super aggressive to me.

Now, in the case of PS3 we have something totally different. We have a system that is prohibatively priced, where there is significant demand, but just not at the current price of $500-600.

I still cannot see how you can insist that there "is" significant demand "just not at $500-$600." All we know is that there is not significant demand at current prices...we have nothing other than guesses as to what demand would be at any specific lower price. All guesswork.

I recall lots of folks saying that 360 would not see any significant price jump for a "measly" $50 price cut. How did that guess work out?

Now, to be clear the demand for 360 is likely due to a multitude of factors...which include the price drop, but not the price drop entirely. (Likely, price drop plus newly released software (BioShock/Madde), and expectations of upcoming software...Halo3).

My point (again), is that price PLUS perceived value = demand. 360 got a jolt from two directions this summer: "small" price cut, plus "pretty big" value prop increased (new software) combined to drive up sales. It's questionable how much more sales would have increased from a larger price cut.

We also have the Xbox360, proving they can move 6million units in the US at the $400 pricepoint, with a smaller pre-existing userbase, less functionality(bluray), and widespread reliability issues.

1) Personally, I think the "pre-existing user base" is widely overblown as a factor. The user-base flocks from console to console as conditions warrant. See pretty much all previous generation consoles. ;)

2) Blu-Ray...how much "value" do gamers give to blu-ray as a feature? Hard to say, particularly when at this time the format war looks to be pretty even and even tilting toward HD-DVD.

You seem to argue that it's a "given" that at an identical price point, consumers would see PS3 as the more valuable console over the 360. I don't think we can assume that.

I don't really understand the complete lack of faith in sales. Just because something doesn't sell at some ridiculous price, doesn't mean it won't start moving once you bring down to something reasonable.

On the contrary, I don't really understand the position that price is really the only thing hindering PS3 sales...

[scooby_dooby]

Sony cut is not "aggressive" as it came 18-19 months after introduction. It also came after 3.5 quarters of profits. Sony's price cut was done out of desire to spread further into the market.

Not gonna argue with you over semantics. It was clearly a much more aggressive pricing strategy than MS's current one..


MS pricecut is on the eve of its first possible profitable quarter during the life of the 360.

Ya..one the 'eve', as they just wrote off 1billion in future expenses ;)

[scooby_dooby]

On the contrary, I don't really understand the position that price is really the only thing hindering PS3 sales...

Name me a console that was ever succesful at $500.

Not sure why you are comparing perceived value of PS3 to XBox1? It's the relative perceived value of "PS2 vs. XBox1" and "PS3 to XBox360" that matter.Because you raised the Xbox1 as an example of something with low percieved value. And then, put words in my mouth by saying I would advocate the same strategy for Xbox1. I'm pointing out that's not the case. I feel the PS3 does have high value, wheras Xbox1 did not.

I still cannot see how you can insist that there "is" significant demand "just not at $500-$600." All we know is that there is not significant demand at current prices...we have nothing other than guesses as to what demand would be at any specific lower price. All guesswork.
Ya, just guesswork. Just like your guesses that it would not sell.

We know a few more things than that as well, we know no console has ever sold at such a high price, we know that the 360 has sold succesfully at $400, and we know the vast majority of gamers from last generation, predominantly ps2 owners, have not yet purchased a console.

Personally, I think the "pre-existing user base" is widely overblown as a factor. The user-base flocks from console to console as conditions warrant. See pretty much all previous generation consoles. :wink:

I think it's overblown, as evidenced by the PS3's sales, but it's still more significant than you're giving it credit for.

[dobwal]

Not gonna argue with you over semantics. It was clearly a much more aggressive pricing strategy than MS's current one..

Ya..one the 'eve', as they just wrote off 1billion in future expenses ;)

I guess our definition of "aggressive" is different. You seem take account timing of the ps2 price drop in relation to the GC and xbox time on the market.

I take account time, financial performance as well as overall shipped and sales through numbers.

[Joe DeFuria]

Name me a console that was ever succesful at $500.

Did I say that a console would be successful if it remains at $500 forever? I know there are consoles that were not "sucessful" even when they reached $199 price points.

So what's your point?

Because you raised the Xbox1 as an example of something with low percieved value.

At launch...relative to PS2.

I feel the PS3 does have high value, wheras Xbox1 did not.

I feel the PS3 does NOT have very high value relative to the xbox 360.

We know a few more things than that as well, we know no console has ever sold at such a high price, we know that the 360 has sold succesfully at $400...

Interesting...what console has ever been successful at $400 before? I guess there is one now...

The PS3 COULD have been successful at $500...if the platform delivered more value for the price.

Again...to drive the point home: "success" (demand) = combination of price and perceived value

and we know the vast majority of gamers from last generation, predominantly ps2 owners, have not yet purchased a console.

And the vast majority wont until the combination of price and value meets their needs...from whatever vendor delivers it to them.

I think it's overblown, as evidenced by the PS3's sales, but it's still more significant than you're giving it credit for.

The impact of prior generation user base is not overblown simply based on current PS3 sales...its based on console sale and leadership hand changing ever since the Atari 2600 days.

[Joe DeFuria]

Ya, just guesswork. Just like your guesses that it would not sell.

One more thing...I did not say that PS3 would not sell or even sell "successfully" (significantly more volume) at $400. It might.

I'm saying that "selling successfully" at $400 may ultimately do Sony more harm than good, which apparently is exactly what Sony has calculated and is the reason why they are not going that route at that time.

[Heinrich4]

The most part of Joe says im agree but i have to increase 2 points:

1 - Ps2 japan was release at 03/04/2000 =~ US$380 (with memory card include)/~= 100/110 yens per dolar= 39800 launch price at this time and sold something like 980 thousand consoles in less 3 days...(certainly MS see this and focused price at similar levels price release x360 same in time release)...so ps2 in launch date is the first console at near US$400 levels with success;

2 - Another point is there probably many ps2 consummers(more tham going to x360 and wii...) in "stand by"/ waiting some day for new price redution at levels 300/400 dolars to purchase... and this who knows maybe can drained sales of ps3 to.


(sony needs today 2 things: more games "AAA" like and price sub US$499...in march/08 maybe is too late )

[Cheezdoodles]

Again...to drive the point home: "success" (demand) = combination of price and perceived value


Success for console manufacturers:

Success = having a higher than 0 NPV after the project its discounted on whatever internal rates they have predicted.

Edit: Which is why MS is struggling to continue to the Xbox franchise unless they start showing some results soon. Stockholders = not happy

[avaya]

Sucess for console manufacturers:

Sucess = having a higher than 0 NPV after the project its discounted on whatever internal rates they have predicted.

They use payback over NPV. They are silly.

[Cheezdoodles]

They use payback over NPV. They are silly.

Who does?

Ms and Sony? Are they retarded?

And if they do, they need to fire their finance divisions, they are obviously not qualified for the job. Going by payback only when deciding on projects is.... well.... dumb.

[Joe DeFuria]

Success = having a higher than 0 NPV after the project its discounted on whatever internal rates they have predicted.

I agree 100%. That's why I put "success" in quotes in my previous post...because Scooby seems to put a great emphasis on getting as large an installed base today to bring about "success."

I'm only trying to point out to him that increasing demand by lowering the price has a cost associated with it. So even if there is a significant demand increase via a large price drop...this doesn't mean it's in Sony's best interests to do so.

[scooby_dooby]

I'm only trying to point out to him that increasing demand by lowering the price has a cost associated with it. So even if there is a significant demand increase via a large price drop...this doesn't mean it's in Sony's best interests to do so.

Seriously Joe, get over yourself.

Just because I don't agree with your opinion doesn't mean I don't understand and agree with these basic concept's, such as costs associated with a pricedrop, or the definition of value :roll:

You don't need to constantly repeat yourself as if you're telling me something I don't know. I'm aware of all those things, it doesn't change my position that Sony will be much more succesfull in the long run, if they invest the extra 300-400million required for a pricedrop this holiday. I'm not the only one here who feels 2008 may be too late.

And for the second time, I'm over with this debate, it's simply going in circles.

[Joe DeFuria]

Seriously Scooby, we wouldn't be going in circles if any of your posts actually demonstrated that you do get the "basic concepts" such as a value proposition.

I mena, you asked me questions about when was a console "ever" successful at $500? Asking me that question certainly doesn't convey to me that you understand the value concept.

Comparing the "value" of PS3 to XBox 1? Same thing.

Now personally, I think you do understand the concepts, but for some other reason (stubborness?) refuse to simply acknowledge them.

Leave the thread or stick around...don't care. I'm only still up because the Yankees came back late in the 9th and are in extra innings. :)

[RancidLunchmeat]

Oh, come on people.

The only REAL question that exists at this point is HOW FAR BEHIND Sony expected their sales to be in relation to the 360.

Despite all the fanfare, everybody has already discounted the Wii as insignificant, regardless of their sales.

Their software adoption ratio has only further cemented the fact that whatever hardware sales the Wii gets are irrelevant in the larger "Console Wars" picture.

I think it's OBVIOUS that Sony expected their sales to fall behind the 360's for the first two years, and possibly through the third year as well.

The real question at hand is whether or not they expected to fall behind THIS MUCH.

I really do enjoy the quite obvious FANBOY statements from all parties involved, as you see people clamoring to state that Microsoft didn't LOWER THEIR PRICE quickly enough or in great enough DEGREE while you see Sony fanboys stating the same factor on the other side of the coin.

People keep bashing MS for not lowering the price more than they did for this holiday season and people keep basihng Sony for not doing essentially the same thing.

How difficult is it to REALLY understand that both MS and SONY had pre-laid plans that are dictating their pricing strategy and that both are TOO EARLY in their lives in order to adjust?

I would say that MS is "pushing" their pricing strategy at the moment and getting MORE out of their inventory than they previously believed was possible because of Sony's miscues.

I would also say that Sony is pretty much RIGHT WHERE THEY EXPECTED TO BE in terms of sales at their current price point, with a slight hesitation towards the fact that the 360 seems to be gaining ground that they didn't expect.

So, to summarize what "the Suits" think of all this.. I'd say that the 360 is VERY PLEASED with their current sales rate and it's higher than they expected so it's putting OFF a price cut.

I'd also say that the PS3 is selling ACCORDING to their expectations, but that they are disappointed by the adoption of the 360 which might indicate a problem for the PS2-PS3 transfer rate.

It seems to me that the FANBOY CONSUMERS keep wishing and hoping for price drops from both the 360 and the PS3 that aren't needed or dictated by the sales statistics we have available.

It's as if everybody assumes that the first console to hit $199 automatically wins, and that is a FOOLHARDY assumption considering that both of these consoles cost a tremendous amount of money to produce!

Yes, the snowball effect most certainly DOES seem to favor MS and the 360 at this point, but Sony would have clearly known that was the case EVEN BEFORE LAUNCH unless they were run by a complete set of idiots.

Both MS and Sony launched at HIGH price points and so far both MS and Sony have REFUSED to drop the price point significantly despite what the "Internet Idiots" declare are necessary in order to "win".

Maybe you should all re-evaluate what it is you expect from this generation in terms of sales, because it doesn't seem like anybody seems to understand the same 1) Price Point, 2) Life Span, 3) Added value of these consoles when you are making these evaluations.

I can't believe that on THIS FORUM on THIS WEBSITE we're having this level of conversation.

Seriously, people.

[Tap In]

I would also say that Sony is pretty much RIGHT WHERE THEY EXPECTED TO BE in terms of sales at their current price point, with a slight hesitation towards the fact that the 360 seems to be gaining ground that they didn't expect.



some good points in there but the one faactor that I believe you underestimated is Sony's expectation in Japan.

Sure, I agree in NA and Europe they are not too surprised. I think they are floored by their near shut out by Nintendo in Japan.

That is leaving a mark IMO. Although with an already lower price there I think it does not even factor into this discussion which is mostly leaning toward NA and the rest of the world with regard to price drop. I think they expected Japan to keep them in it longer WW.

[avaya]

Who does?

Ms and Sony? Are they retarded?

And if they do, they need to fire their finance divisions, they are obviously not qualified for the job. Going by payback only when deciding on projects is.... well.... dumb.

Most companies do. It's easier to explain to all executives. It's changing but they prefer the simplest method first. A lot of the time payback is more useful because they have commitments they have to meet within the projects time period which will need a certain sum of real world cash flows ready on time.

These days the trend is to use NPV, Payback and Real Options if possible.

[Joe DeFuria]

People keep bashing MS for not lowering the price more than they did for this holiday season and people keep basihng Sony for not doing essentially the same thing.

I think you're confused...it seems to be the same party bashing both MS and Sony for not lowering the price more. ;) Personally, I don't have an issue with either Sony or MS price strategy.

Basically, they're both doing pretty much the best they can given their respective hardware and decisions that have been made long ago, and how events have unfolded the past couple years. That's been pretty much my point this whole time.

[woundingchaney]

I would also say that Sony is pretty much RIGHT WHERE THEY EXPECTED TO BE in terms of sales at their current price point, with a slight hesitation towards the fact that the 360 seems to be gaining ground that they didn't expect.

I personally find this hard to believe. I doubt Sony expected such low momentum sales at their price point throughout their sales so far this gen. While I dont doubt that Sony did expect to push less hardware due to their high price points I cant see them expecting such consumer purchasing reluctance (in any of the 3 territories).

[one]

360 got a jolt from two directions this summer: "small" price cut, plus "pretty big" value prop increased (new software) combined to drive up sales. Add the HDMI model update to that.

[quest55720]

Oh, come on people.

The only REAL question that exists at this point is HOW FAR BEHIND Sony expected their sales to be in relation to the 360.

Despite all the fanfare, everybody has already discounted the Wii as insignificant, regardless of their sales.

Their software adoption ratio has only further cemented the fact that whatever hardware sales the Wii gets are irrelevant in the larger "Console Wars" picture.

I think it's OBVIOUS that Sony expected their sales to fall behind the 360's for the first two years, and possibly through the third year as well.



No chance in hell sony expected such poor sales from the PS3. Do we need to go back the famous quotes of being able to sell 5 million units with out any games. Or that people will get a second job to buy a PS3. I am sure that sony higher ups are pretty in total shock over the monthly sales figures. They are not just in 3rd place but they are getting it handed to them on pretty much every front. They are not only losing money on the hardware but bleeding money by having to invest into home, PSN and dedicated servers. They are getting 0 money back on those since they are free. It is basically desperation tactics trying to do anything to stimulate sales.

If 2008 is not the banner year were the PS3 makes a comeback I am sure a lot of heads will roll in the gaming division.

[one]

Do we need to go back the famous quotes of being able to sell 5 million units with out any games.They didn't say "5 million units". :wink:

[Shifty Geezer]

It is basically desperation tactics trying to do anything to stimulate sales.
Desperation tactics would be dropping $200 minimum off the pricetag. Everything is cautious, careful tactics, trying to make a comeback without losing more money.

[Acert93]

They didn't say "5 million units". :wink:

That is exactly what SCEE CEO David Reeves communicated (http://www.computerandvideogames.com/article.php?id=140302) to CVG in May 2006.

Anyway. Despite Sony's pledge to reach a broad audience with PS3 during its launch window, Reeves admitted that appealing direct to the hardcore games playing fraternity will quickly become vital for the company in the next-gen console war.

"Without being too arrogant about it, I don't think we worry too much about building up the hype in the first six months, but where the rubber hits the road is going to be when all those hardcore gamers have bought PS3", said Reeves. "They have also bought Xbox 360 and they have probably bought Nintendo Wii as well."

However, Reeves maintained that shifting PS3s in the early days won't be a problem, such is the strength of the PlayStation brand: "We have built up a certain brand equity over time since the launch of PlayStation in 1995 and PS2 in 2000 that the first five million are going to buy it, whatever it is, even it didn't have games."

"[T]the first five million are going to buy it [PS3], whatever it is, even it didn't have games."

Ok, ok, Reeves didn't use the word "units" but neither was quest quoting him verbatim. Yet they clearly state they expected to sell the first 5M quickly and that the essential challenge would come after launch. So what is your issue again?

Nearly a year later and they still are struggling in the 5M range. So much for the 5M theory (a tbh, I along with many others thought Sony would sell their first 6M units that were to ship by March 2007 without issue based on the Sony brand--exactly what Sony themselves are saying in that quote. Looking at the 360 demand out of the gates at $400 and how it only tapered off after April when supplies came in, it was absolutely logical that the MUCH more popular PlayStation brand, strong in all 3 territories and the last 2 gens champ, could charge a 25-50% premium and best that demand easily.)

[Joe DeFuria]

Add the HDMI model update to that.

Yes, when I mentioned increased value prop, the HDMI is a part of that. Some other things in addition to software, lower price, and more features that IMO impacted the value prop:

1) The Elite SKU iteself is seen as increased value to many. (Whether it's the color, larger hard drive, or both.) The same may happen with the "Arcade" SKU.

2) Live: The increase in functionality of the Live service since launch has increasingly raised the vlaue of the 360 since launch.

3) Warranty: even though this is a reaction to something that has decreased value (real or perceived return rate), this moved bumped up the value this summer.