[Pozer]

http://theinquirer.net/?article=24968

"...the PS3 can't be offered at a price that's targeted towards households"

I guess the BR drive, the GPU license, the XDR license, the move to 512MG, the billion dollar fab, has all made the ps3 expensive to manufacture. I personally would cut down on ports on the thing. Theres little need for 6 USB ports and 2 gigabit Ethernet ports.

Either way I only see this as a good thing for the x360, assuming its cheap(er) to manufacture. Of course this could all be a marketing ploy to make MS think the PS3 will ship at $399-$499 so MS launches the x360 at around $399 instead of $299 thereby selling less before a ps3 launch. Mind Games indeed.

[Gholbine]

Marketing.

They're waiting for Microsoft to fix a price for Xbox 360 before they annouce anything. Better he says "it'll be expensive" and surprise everyone with $299 than if he says "it'll be real cheap" and underwhelm people with $299...

I think they're just trying to coax Microsoft into making the Xbox 360 a little more expensive. Microsoft is probably smart enough to realize, though.

[Shifty Geezer]

From KK's comments PS3 sounds like it'll start high. If XB360 is the only 'affordable' platform the PS brand will likely lose a lot of headway. Hoenstly though, what's the point in creating a console that can't be afforded by people? KK's in the wrong industry. I get the impression he'd rather be in fine art :P

[3roxor]

Xbox360 will most definately be cheaper. Sony is taking more risks with their blu-ray.

[sytaylor]

Blu-ray is a revolution! It's going to flip the industry through 360... *ahem*

If X360 hits $249 then there is a good chance it might actually be affordable by humans in the UK, but I'd be willing to bet even then it would still be £199 at least. My guess is £279 or something daft like that. We always get ripped off.

[Farid]

Remember that the pricing of the machine will surely be different from a region to another.

In plain english, the US will get a correct price and Japan and Europe will get "100% rip-off" price. Add to that that Europe will surely get the machine last too.

[seismologist]

The good news is The graphics will need to be impressive enough to justify the price.

I'd pay $100 more for a considerable leap in quality over what we've been seeing from Xbox 360.

[london-boy]

Originally Posted by Vysez

Remember that the pricing of the machine will surely be different from a region to another.

In plain english, the US will get a correct price and Japan and Europe will get "100% rip-off" price. Add to that that Europe will surely get the machine last too.

Well, it's usually a 300% Special Rip-Off price, so things are getting better.

[McHuj]

I wonder how much Sony's recent profitability issues play into the price of the PS3. They've posted a second straight quarter at a loss overall, and the games division is losing money now too due to the PS3, I assume.

Sony's game unit, which makes the PlayStation 2 and PlayStation Portable gaming consoles, saw a 64 percent sales increase to 105.4 billion yen ($941.1 million). But the division also booked a 5.9 billion yen ($52.7 million) operating loss due to marketing and research expenses. That loss widened from 2.9 billion yen the previous year.

http://biz.yahoo.com/ap/050728/earns...sony.html?.v=4

The forcast for the rest of the year isn't that pretty either.

If Sony wanted to sell the PS3 at $299, I'm sure they could. But at what loss? They may not be willing to take a significant loss early in the product life this time around.

Its easier to take a loss in one division if the whole company is doing really well. but after two straigh quarters of losses for the whole company, I'm not sure how significant of a loss they are willing to take especially with the new CEO Stringer who wants to return them to profitability.

I really think MS forced their hand into an early release in mid 2006. Without MS, they could have milked the PS2 more, waited for better yields on the Cell (maybe even in 65nm), and established the PSP brand more.

[dukmahsik]

it's just marketing, ps3 will be 299.99 or whatever 360 is at in the US at least.

[Farid]

The good news is The graphics will need to be impressive enough to justify the price.

I think Sony will try to justify the price with the functionalities of the machine more than the graphics. Especially in Japan.

Also, I'm not convinced that Sony will release the PS3 at a clearly higher than the X360, in the US (If the X360 is priced at $299, that is).

On the other hand, I'm certain that Japan and good ol' europe will get the the classical treatment. High prices all the way!

[Shifty Geezer]

Originally Posted by McHuj

If Sony wanted to sell the PS3 at $299, I'm sure they could. But at what loss? They may not be willing to take a significant loss early in the product life this time around.

The thing with consoles is they're a long term investment. They need software sales, and Sony aren't going to get that if they don't sell the hardware. If they see XB360 as not eating into their market, than they can procrastinate with the hardware release and not lose so much money, still making on the PS2. But if XB360 is successful, and people want next-gen and don't care if that's supplied by MS or Sony, overpricing will damage Sony's long term profitability.

BTW : Who sets the price for PS3? KK or Stringer or someone else or consensus with the board? Could it be another option KK wants it pricey but others won't let it happen? What was KK saying about the price of PSP too?

[McHuj]

Originally Posted by Shifty Geezer

The thing with consoles is they're a long term investment. They need software sales, and Sony aren't going to get that if they don't sell the hardware. If they see XB360 as not eating into their market, than they can procrastinate with the hardware release and not lose so much money, still making on the PS2. But if XB360 is successful, and people want next-gen and don't care if that's supplied by MS or Sony, overpricing will damage Sony's long term profitability.

I agree with 100%. However, I do think Sony's current financial status may have an impact on both the long and short term strategies with respect to pricing of the PS3.

I would not want to be making those decisions right now.

Honestly, I believe they'll price the PS3 within $50 off the xbox360 in North America and Europe. Higher though in Japan because I don't think they feel threatened by MS. We'll see.

[pc999]

I think that a costly console will be a bad thng this next gen (more than in others gen), at least Nitendo realized it, meybe MS had to and force Sony, into a cheaper price/war price.

[Carl B]

Sony Computer Entertainment doubtless has final say on what the price of the PS3 gets launched at, so essentially Kutaragi and crew will call the shot. They have to view it as strategy for their own division afterall, and what's best for the division is best for the company.

In that light, I also feel they'll do what's best for the long-term; or whatever they feel is best for the long-term, since those may not be the same thing.

If that means launching the console with a significant hit per console, so be it. Better to take that extra couple hundred million in losses than possibly jeapordize your entire business plan.

That being said, I'm not sure Kutaragi's division is in such dire straights. I'm sure a higher launch price would still sell out of consoles, since launch supplies will probably be somewhat limited.

BUT, to close - that comment all the English speaking press are quoting was made by Kutaragi in a joking fashion - and got laughter from the audiece - apparently having come after a previous question regarding the dev kits. So honestly it just seems he was being cagey old Kutaragi, and jokingly alluding to dev kits rather than the PS3 when asked about pricing.

[Shifty Geezer]

Quote out of context huh? That said, as I said at PSPs launch, Sony could have charged more for that and still shifted units. If there's enough demand the first five million units can be sold at $300 or $500, in which case if the limiting factor is how many units you have available to sell, may as well charge the top end of what first adopters will pay. I guess the bigger concern is how quickly will the price drop into the mainstream price bracket? Perhaps that is entirely dependant on 65nm and Bluray development?

[Carl B]

I agree. Sony's blu-ray drive will obviously drop in cost significantly throughout the life of the console, probably 80% by the end of it - whereas Microsoft's DVD drive can only get a dollar or three cheaper. But it will certainly be the arrival of 65nm - for both companies - that will bring the biggest and earliest relief from manufacturing costs.

[BenQ]

Originally Posted by seismologist

I'd pay $100 more for a considerable leap in quality over what we've been seeing from Xbox 360.

I would too. Unfortunately, at this time, I have seen ZERO evidence that the PS3 can actually render graphics ANY better than the Xbox 360.

[Titanio]

The psychology of pricing is very complicated. As long as it's not sky-high, they'll be fine, for a while at least.

Being more expensive than the competition is not necessarily problematic on its own. In isolation, cheaper pricing may not help. The "cheap" approach didn't help Nintendo a whole bundle this generation. Striking a balance between "reassuring expense" and "affordability" would be key, and could work well for PS3, which already has the whole "premium" image locked down.

Basically, within certain boundaries, cheaper isn't always better, and more expensive isn't always worst from the perspective of the market. It all has to be part of a larger proposal, made up of many different components.

[ShootMyMonkey]

For a company like Sony who pulls in somewhere in the low 11-figure revenues per year, there's only so low they can afford to go as compared to a Microsoft who probably pulls in 11-figure revenues in one quarter. MS could almost afford to give away 360 for free... did I say "almost"?

Although, Sony might make some more money back with first-party titles since they simply whip them out quicker. Still, a God of War 2 will probably still not pull in the bucks that a Halo3 would.

[BenQ]

Originally Posted by Titanio

The psychology of pricing is very complicated. As long as it's not sky-high, they'll be fine, for a while at least.

Being more expensive than the competition is not necessarily problematic on its own. In isolation, cheaper pricing may not help. The "cheap" approach didn't help Nintendo a whole bundle this generation. Striking a balance between "reassuring expense" and "affordability" would be key, and could work well for PS3, which already has the whole "premium" image locked down.

Basically, within certain boundaries, cheaper isn't always better, and more expensive isn't always worst from the perspective of the market. It all has to be part of a larger proposal, made up of many different components.

I agree. Being more expensive than your competition does NOT spell Doom. The GC reached rediculiously cheap prices this gen, and yet it sold less hardware than the other more expensive consoles.

But there is a line where it could be TOO much. At a certian point a LARGE percentage of the population wil simply have to say "Nope. I can't afford it, that's just too much." I think $399 is about as high as they could go before they hit that line IMO, and even at $399, many will have to simply say "I'll get it, but I can't afford that much right now."

If M$ can hit that sweet spot of $299 ( or even $349 ), it will only have a positive impact on sales.

[Carl B]

Originally Posted by ShootMyMonkey

For a company like Sony who pulls in somewhere in the low 11-figure revenues per year, there's only so low they can afford to go as compared to a Microsoft who probably pulls in 11-figure revenues in one quarter. MS could almost afford to give away 360 for free... did I say "almost"?

Although, Sony might make some more money back with first-party titles since they simply whip them out quicker. Still, a God of War 2 will probably still not pull in the bucks that a Halo3 would.

Well, in actuality Sony has close to twice in yearly revenues what Microsoft does ($67 billion to MS's $40 billion). It's Microsoft's margins which allow them to carry such a clear profit lead over Sony, on the order of ten-to-one.

Here's some financials:

Sony

Microsoft

[BenQ]

Originally Posted by xbdestroya

Well, in actuality Sony has close to twice in yearly revenues what Microsoft does ($67 billion to MS's $40 billion). It's Microsoft's margins which allow them to carry such a clear profit lead over Sony, on the order of ten-to-one.

Here's some financials:

Sony

Microsoft

Sony is not in good shape as of late. Have you seen their newest forecast? They had to slash their FULL YEAR profit outlook by a WHOPPING 90%!

TOKYO - In the latest sign of trouble for Sony Corp (NYSE:SNE - news)., the electronics and entertainment company slashed its full-year profit outlook Thursday by nearly 90 percent and said it slumped to a first-quarter loss because of falling prices and a big charges for reviving its ailing consumer products business.

Sony now expects net income of 10 billion yen, or $89.3 million, for the fiscal year ending March 31, 2006, compared with an April forecast of 80 billion yen, or $714 million. Sales will be 7.25 trillion yen, 3 percent lower than its April outlook, the Tokyo-based company said in a statement.

Sony blamed the downgraded outlook on bigger than expected restructuring costs, falling electronics prices and sliding television sales. The revision underlines the company's difficult struggle in fighting off growing competition in consumer goods from cheaper Asian manufacturers such as Samsung Electronics Co., while falling behind other rivals in hit products like the iPod from Apple Computer Inc.

In March, the company appointed Howard Stringer chairman, the first foreigner to head a major Japanese electronics firm, and charged him with the task to improving results at Sony's faltering core electronics business. Stringer is a dual British-American citizen and former executive at CBS Inc.

Sony said the company posted a net loss of 7.3 billion yen ($65.2 million) in the three months ended June 30, compared with a profit of 23.3 billion yen a year earlier. Sales dropped 3.3 percent to 1.56 trillion yen ($13.9 billion), from 1.61 trillion yen.

Results for the fiscal first quarter were slammed by a 15.9 billion yen ($142 million) restructuring charge, of which 15.5 billion yen was dedicated to reviving the electronics units.

Electronics sales declined 1.4 percent to 1.12 trillion yen ($10 billion) in the period. Falling unit prices for such goods as liquid crystal display televisions were responsible for the division chalking up a 35.3 billion yen ($315 million) operating loss, the company said.

Sony's game unit, which makes the
PlayStation 2 and PlayStation Portable gaming consoles, saw a 64 percent sales increase to 105.4 billion yen ($941.1 million). But the division also booked a 5.9 billion yen ($52.7 million) operating loss due to marketing and research expenses. That loss widened from 2.9 billion yen the previous year.

Shipments of the PSP, which went on sale late last year in Japan and earlier this year in the United States, totaled 2.09 million worldwide, while PS2 sales rose nearly fivefold to 3.53 million units.

In the motion picture segment, Sony reported a 3.5 percent rise in operating profit to 4.1 billion yen ($36.6 million) on a 2.6 percent decline in sales. Profits were bumped up by distribution fees from the library of titles associated with U.S. film and television studio Metro-Goldwyn-Mayer.

Stringer, who ran Sony's entertainment operations before assuming the corporate helm, oversaw the April acquisition of MGM for about $2.94 billion cash, and assumed debt of about $1.9 billion.

Home video releases of "Hitch," "Are We There Yet?," and "Boogeyman" helped offset lower box office revenues in the United States and the release of fewer films, Sony said.

Sony's shares, which have risen slightly this year but are still worth about half of what they were four years ago, gained 0.26 percent to 3,850 yen Thursday on the Tokyo Stock Exchange. The company released earnings after the market closed.

Sony is in the worst possible shape for a pricing war with M$.

[london-boy]

Yes, Sony and MS's profits will always be very different simply because one is a hardware company, whose every manufactured product carries a cost (e.g. Plasma TVs, Sony spends a lot to manufacture them so their profit will be affected on each unit sold), and the other is a software company who rips millions of people off by overcharging products with virtually no cost per unit and sometimes demanding multiple licensing fees even from the same copy of their software (e.g. Office XP, MS spends money to develop it, then there is virtually no cost involved in selling the product itself, or the cost - mainly for packaging - is negligible compared to price we pay to license it - one office will have to buy a license for each and every PC used, even if the office itself uses the same copy of Office to install on all PCs - and that's a lot of profit right there).

Sony might have higher revenues than MS, but their costs will always be higher than MS, therefore their profit will always be affected.

[Shifty Geezer]

Originally Posted by BenQ

If M$ can hit that sweet spot of $299 ( or even $349 ), it will only have a positive impact on sales.

This is less of an impact at launch as demand invariable outstrips price, especially this upcoming gen of consoles I think. At $300 MS will sell all they can make for say the first year. That would probably also be true at $350-400. Those that really want XB360 will get it, even if it means doing a bit of overtime. Like, if people will spend n hundred bucks on a golf club, or whatver they're hobby is, they'll finance it.

The key price is after launch and you're manufacturing's well tuned and you can pump truckloads of the kits out. Then you have to make sure price isn't too high that you'r not selling shipped stock, but not too low that you're losing profits (at least, that's corporatye thinking, not gamer thinking).

Indeed, in terms of marketting getting PS3 out there at $500 means when the price drop comes, everyone goes 'wahay I can afford this 'luxury' item. I mean, imagine how many people would buy a Ferrari F350 if it got a price drop to 15k!