[cthellis42]

Originally Posted by scooby_dooby

It's also very 'silly' to say that the $200 pricepoint is meaningless.

Consider that in the 4months prior to the PS2 pricecut it sold ~5 million units(~1million in the US), in the 4 months after the drop to $199 it sold ~10 millionunit (5million in the US). Still think it's meaningless? It then went on to sell nearly 10million from Sep-Dec that holiday season, smashing the previous years # of 5 million.

It's not meaningless. But it's more fair to say all price cuts are meaningful. Certainly all price cuts tend to be followed by a healthy surge in sales. What is not the case anymore is that "$199" has some mystical/magical property that guarantees healthy sales, makes you "win," and sells the bulk of your consoles. What will lowering your $400 console to $300 do? Sell more! $300 to $250...? Guess!

I'll grant that $199 is a more important price point than others, as it's had a longer and more recognized history among console users, so probably it will bump sales MORE than other price drops, but...

Last generation turned any such ideas about $199 on its' head.

[Sis]

Originally Posted by cthellis42

It's not meaningless. But it's more fair to say all price cuts are meaningful. Certainly all price cuts tend to be followed by a healthy surge in sales. What is not the case anymore is that "$199" has some mystical/magical property that guarantees healthy sales, makes you "win," and sells the bulk of your consoles. What will lowering your $400 console to $300 do? Sell more! $300 to $250...? Guess!

I'll grant that $199 is a more important price point than others, as it's had a longer and more recognized history among console users, so probably it will bump sales MORE than other price drops, but...

Last generation turned any such ideas about $199 on its' head.

I would only add that the skeptic in me wonders if it's not so much the new price as it is the marketing behind the new price.

But, rationally, it seems that there are categories of people that are willing to spend X numbers of dollars on an entertainment device and the trick is compartmentalizing these consumers into appropriate buckets such that every price drop includes the maximum number of consumers. Going below $200 is just shorthand for saying, "the majority of consumers".

[cthellis42]

Originally Posted by scooby_dooby

Those numbers are meaningless as the type of gamer I'm talking about is interested only in getting the best game library for as cheap as possible, which means they did not buy an XBOX last generation, but instead bought PS2.

So if you're going to do any numbers, do them on the PS2. How many of it's 100million units were sold below $200?

I already posted this in another thread.

Sony's sales pre-$199 (or equivalent) run over 40% in North America and Asia (mainly Japan, of course), and about 65% in Europe (though, as stated, it's harder to track).

Certainly the PS2 will sell more between now and the PS3 launch (and those sales totals are about two months off current), but I don't think it will knock those numbers down more than a few percent.

By the END of the entire PS2 generation it might reflect more like 20%, but that means we're talking over 242 million PS2 sales (90 NA/75 J/82+ E), which is rediculous.

[cthellis42]

Originally Posted by Sis

I would only add that the skeptic in me wonders if it's not so much the new price as it is the marketing behind the new price.

But, rationally, it seems that there are categories of people that are willing to spend X numbers of dollars on an entertainment device and the trick is compartmentalizing these consumers into appropriate buckets such that every price drop includes the maximum number of consumers. Going below $200 is just shorthand for saying, "the majority of consumers".

It's an important price point still, but I don't place nearly as much importance as I would have in the past, and if it DID have genuine effects all by its' lonesome, the Cube would have far surpassed the Xbox in North America, the PS2 wouldn't have sold nearly as much (or held the prices it did), etc.

People expect to pay a good $200 minimum for a good handheld anymore (I'm not talking just consoles here, but MP3 players, cell phones, PDAs...), and they usually derive far less enjoyment from them. (More convenience, of course. )

Price discrepencies will have more of an effect, in my book, but those can be overcome with smart advertising and obviously-recognized value, and--of course--that everpresent "mindshare." In NA, the Xbox succeeded over the Cube despite a $50-100 gap at all times and Nintendo's enormous track record in that market because of obvious extras (and games), while the PS2 basically commanded whatever-the-hell price it wanted and Microsoft was forced to follow due to lead-in, mindshare, etc. (and games...)

I mention games, because of course in the end this market is ALWAYS about them. The beginning is usually more about a game, price points, and obvious hardware advantages/disadvantages, but years in (and sometimes, after people already feel a generation has been "lost" or "won") it's about games en toto.

I feel it's more arguable that there's a "hard cap" not on the bottom end ("the race to $199") but at the top end. $500 certainly seems like a price point at which consumers are MUCH more apt to go and balk at purchases ("why, that's half a grand!"), which is why I figured Sony to aim for $399 starting systems and $499 "deluxe" systems, which would be mainly more compelling add-on bundles. People don't balk as much about those because they know what kind of follow-up purchases they're bound to make anyway...

The $499/$599 pill may be hard to swallow, especially with the competition very much underneath. Does Sony have enough HDTV substructure to lean on? Can they market the PS3 effectively between now and launch to let people know exactly what more they get? Will MS and Nintendo be able to capitalize on the price gap right out of the gates?

Sony doesn't have an easy climb with this--but it is not an unassailable one. For now I can only answer with a big shrug.

[scooby_dooby]

Originally Posted by cthellis42

I already posted this in another thread.

Sony's sales pre-$199 (or equivalent) run over 40% in North America and Asia (mainly Japan, of course), and about 65% in Europe (though, as stated, it's harder to track).

Bogus.

Japan's first pricedrop was a 30% drop in Jun 2001, to date they had shipped 6million, which works out to about 25% of overall sales.

North america's first drop was a 30% drop in May 2002, they had sold 11.25million by then, worked out to ~25% of overall sales as well.

EU's first drop was a 30% cut in Sep 2001, to date they had sold 4.5million, works out to something like 12% of total sales.
http://en.wikipedia.org/wiki/PS2

So, in the various territories, 75-82% of the consoles were sold after the $199 or 'equivalent' pricepoint.
http://www.scei.co.jp/corporate/data/bizdataps2_e.html

[cthellis42]

Thanks for your correction on North America (I had mentally used 2003 instead of 2002 when flipping between pages), but your numbers are wrong for Japan and Europe.

"First price drop" does not mean "$199." The PS2 finally dropped to 19,800 yen in November 2003 (around $180). Previously it had been 25,000 (~$230).

In Europe, it first dropped to 199 Euro (~$232) and 170 UKP (~$277) in June 2003, which are the dates I was going by. Granted it's still more than $200, but Europe gets notoriously shafted on this kind of exchage, so that's the "rough equivalent" people go by.

Sales in Japan by 11 '03: roughly 15 million
Sales in Europe by 06 '03: roughly 16.5

It was indeed more like 27% in the US, but Japan and Europe are at those same large percentages, and the adjusted worldwide total is roughly 41%.

[scooby_dooby]

Originally Posted by cthellis42

"First price drop" does not mean "$199." The PS2 finally dropped to 19,800 yen in November 2003 (around $180). Previously it had been 25,000 (~$230).

Sony sets the respective prices and what they think is equivalent to $299 in North America based on the marketplace in the various regions.

Obviously we can't use hard currency conversion as not only are there many other factors such as hidden taxes and duty, but the mental threshold is also different depending on the economics of the region.

The prices after a 33% price drop in JPN and EU are what Sony considered equivalent to the $199 price in NA.

[cthellis42]

We can't always use hard currency conversions (and I'm not in my analysis, either), but we can't use percentages-of-launch-price either, as it doesn't take into consideration the amount of "soaking" companies are willing to do in certain markets (and the US is almost always the "least soaked" in that right), and it ignores the historic price points in respective markets that we're talking about here: that "nice price" a console will get to (or start at) and sit on for the longer period. The "sweet spot" that basically everyone says $199 still is.

You could make a case for that being more like 25,000 yen in Japan (the Cube's launch price, and one of the PS2 tiers--but only for 6 months and ~1.5 million units). The PS2 has held at 19,800 yen for 2.5 years, and was the longest-held price point for the PS1 in Japan. (Especially if you count the 25,000 point as the "forced bundle" it was [albeit not an objectionable one], which made the PS1 itself about that 20k tier.)

The US and Europe moved quicker through $199 and held at their $150-equivalents for longer. But regardless, the tiers of all the price drop times and amounts line up pretty square dollar-to-euro after the initial launch timetables go by and the high demands in particular markets normalize.

Europe is pretty messy to analyze, but I feel secure going through that. Anything more and you'll have to do a cross-comparison of living wages, cost-of-living, disposable income...

[pc999]

Originally Posted by RancidLunchmeat

I was agreeing with your sentiments.

Ok, thanks, my misinterpretation.

[scooby_dooby]

Originally Posted by cthellis42

We can't always use hard currency conversions (and I'm not in my analysis, either), but we can't use percentages-of-launch-price either, as it doesn't take into consideration the amount of "soaking" companies are willing to do in certain markets (and the US is almost always the "least soaked" in that right), and it ignores the historic price points in respective markets that we're talking about here: that "nice price" a console will get to (or start at) and sit on for the longer period. The "sweet spot" that basically everyone says $199 still is.

All you need to do is look at the jump in sales in the respective territories after these major cuts, and accept the fact that Sony made these price cuts for a reason(read: faltering demand), and it's pretty clear that at the time those pricepoints were the sweetspot. The sales of PS2 bear that out, as it sold like wildfire all throughout those years. EU required another pricecut the following year.

All it shows is how price sensitive the market really is, obviously Sony was not dropping the price because they were supply limited, they dropped it because they were experiencing lowered demand for their product.

This argument is fairly pointless from my POV though, because while disagree with you and DO think that the $199 pricepoint is extremely important(at least in NA), I also think that PS3 will catch up to 360 much faster than most people are predicting, so in the end it won't really have a large effect. If anything, Sony has shown an extremely good ability at reading the pulse of the consumer, and hitting the right pricepoints at the right time. That's why I'm banking on the $499/599 skus being a strategic move rather than a necessity.

With that said, I think MS could throw a very interesting wrench in their plans if they drop their SKU's to $199/299 this holiday, especially if they bundle a wireless controller and make the HDD $60, voila the Core package is now desireable. IF MS did that, and could keep up with demand, damn they would gobble up marketshare like crazy: Welcome to next-gen gaming, only $260 and you're good to go.

Mckmass, you could even buy your GF that $300 Xmas present

[RancidLunchmeat]

Originally Posted by scooby_dooby

All you need to do is look at the jump in sales in the respective territories after these major cuts, and accept the fact that Sony made these price cuts for a reason(read: faltering demand), and it's pretty clear that at the time those pricepoints were the sweetspot. The sales of PS2 bear that out, as it sold like wildfire all throughout those years. EU required another pricecut the following year.

All it shows is how price sensitive the market really is, obviously Sony was not dropping the price because they were supply limited, they dropped it because they were experiencing lowered demand for their product.

I really don't understand how difficult this is, yet I don't have all the statistics and information readily available to me to demonstrate it.

Yet, all we need to know are the month sales figures for the PS2 over its lifespan, and the dates of the price reductions.

If sales were faltering prior to the price drops we can conclude that the price reductions were made as a reaction to decreased demand. If the sales figures increase after the price reductions, we can conclude that demand for the product as now increased as a result of it's new price point.

I would bet that all of the PS2 price reductions were preceeded by decreasing sales and followed by increasing sales... until they hit the next 'threshold level' that forced another price reduction and resulted in another increase in sales until they hit the next threshold.

[cthellis42]

Originally Posted by scooby_dooby

This argument is fairly pointless from my POV though, because while disagree with you and DO think that the $199 pricepoint is extremely important(at least in NA), I also think that PS3 will catch up to 360 much faster than most people are predicting, so in the end it won't really have a large effect. If anything, Sony has shown an extremely good ability at reading the pulse of the consumer, and hitting the right pricepoints at the right time. That's why I'm banking on the $499/599 skus being a strategic move rather than a necessity.

I agree that they know how to read the market well, but "strategic" how? You seem to agree that the discrepency and higher price point will hurt them at first, but if they're planning on lowering fast (say, within six months. A year wouldn't be precisely "fast") then I think they should take the trade-off and just suck up some more losses (which will be trivial compared to the lifespan of the unit) and not take the harsh criticism and initial turn-offs now.

I guess by that you mean "judging demand to the fine line that they know people will grab all available units and lower to be much more competitive once things ramp up." I'm not sure even THAT will help, as overselling at $399/$499 creates a lot more demand and "virtual demand" that they can tap into for extra mindshare boosts and sales in the future.



(Gods, you people are going to make me do a quarterly breakdown, aren't you? @_@ )

[scooby_dooby]

Originally Posted by cthellis42

I agree that they know how to read the market well, but "strategic" how? You seem to agree that the discrepency and higher price point will hurt them at first, but if they're planning on lowering fast (say, within six months. A year wouldn't be precisely "fast") then I think they should take the trade-off and just suck up some more losses (which will be trivial compared to the lifespan of the unit) and not take the harsh criticism and initial turn-offs now.

I guess by that you mean "judging demand to the fine line that they know people will grab all available units and lower to be much more competitive once things ramp up." I'm not sure even THAT will help, as overselling at $399/$499 creates a lot more demand and "virtual demand" that they can tap into for extra mindshare boosts and sales in the future.

(Gods, you people are going to make me do a quarterly breakdown, aren't you? @_@ )

Strategic...like $600,000,000 strategic.

[cthellis42]

I'm asking what you think their overall strategy is with it. "Maximizing profits," while a strategy, interacts poorer against competition that isn't (or can afford to lose more). "Pushing the limits of consumer demand," while also a strategy, has similar blowback. "Holy crap this thing is expensive and we NEED to charge $500 minimum!" is not quite what I'd call a "strategy," no matter how close we think it is to the truth.

Personally, even if they lose more from the initial waves by charging $100 less per SKU, that amounts to... what? They say expectations are 6 million units by March 2007? $600 million less revenue hurts, but spread out over five quarters... not nearly as much. And in the long run...? Not so much. (For instance, if the PS2 had launched at $199 and all other numbers stayed the same, they would still have made 87% of their current totals in North America. The exact numbers are inaccurate, of course, since I can only go by "sales times retail price" and assume the ratios are "close enough" in regards to Sony's personal profit. At any rate, the PS3's percentage would be even less than that 13% difference, as the price points start much higher.)


...and what would they get for it?
- A base unit that is arguably better [certainly marketably better ] feature-for-feature than the same-priced (and only one worth buying) Xbox 360 SKU.
- Much enhanced ability to "steal sales" from the 360 because of it.
- Much enhanced ability to "get people to wait" right now.
- Far less feverish a reaction from the gaming community and gaming press which, while augmented in our little world, will still have spill-over to the general public--especially through folks like Gamestop employees who likely ARE in "our little world..."
- Not breaking the mental $500 price point.
- Provided they're reading the demands right at $499-599, they create enhanced demand-due-to-unavailability which attracts more attention, garners more press, drives the secondary markey wild, garners MORE press...
...and all the other typical usual enhancements that simply "having a lower price" will do versus "the same device costing $100 more." (Enhanced a bit more than usual, depending on if they can deliver the software and overall package that lets the PS3 dip into PC-dom, PVR-dom, media-center-dom, as well as the obvious Blu-Ray.)


IMHO, that seems like a much more viable strategy to me.

(Another strategy would have been to not announce a price at E3, link "price scare" estimates to the press putting the PS3 bill at $800+, and THEN mention the current prices, hoping people and press won't react as badly. )

(Yet another strategy would have been to have a more compelling E3 show. )

[Carl B]

Wait now, let's not go overboard.

I mean $600 million in and of itself - that can be recouped. But we're talking about $600 million on top of the $1 billion plus they will already be losing on the PS3 launch this year. I say over $1 billion because I assume that the estimated ~$850 million in losses will be after profit from the PS2 and PSP would have otherwise been worked through. So I mean, sure they can make up losses, but it is a business afterall...

What's the point of market penetration 'at any cost' if it nullifies any profits you would make after that point due to the strongly negative starting position?

I think Sony is offering a 'healthy' level of subsidy as it is. Just right. Sure, their price point is less than ideal, but more than fair. They included Blu-ray so this is just the reality of the trade-off. I was hoping they'd hit $450 myself, but alas not.

[scooby_dooby]

Your 'blowback' is completely unquantifiable, that's the problem with your rationale. Sure 360 will see 'some' increase in consoles sold because of the higher price, of course they will experience 'some' consumer blowback, but is it at all substantial? Will it matter in the long run? Or is it more important to save some money up front, enabling a cheap console in 07, and slowing 360's momentum as soon as possible?

We'll see what happens with the pricing, but Sony could very well have deemed this blowback is negligible and that saving $600million+ in year one was a better strategy. I'm sure there are internal limits on how much they can lose and this money they save now, off the backs of the early asopters, may allow them to drop the price earlier than they could have otherwise.

[Geo]

In retrospect, I've been wondering how much money MS left on the table the first 6 months. $500M? They could have cut prices at the same time as Sony's announcement and still looked good. Ah well, there are some disadvantages to going first. . .

[nelg]

Originally Posted by geo

In retrospect, I've been wondering how much money MS left on the table the first 6 months. $500M? They could have cut prices at the same time as Sony's announcement and still looked good. Ah well, there are some disadvantages to going first. . .

I have been wondering if they are going to heavily subsidise the HD-DVD player ($100-150) instead of price cutting the console itself.

[mckmas8808]

Originally Posted by RancidLunchmeat

I think the real question here is when the end of the day happens.

I think the end of the day is almost here for the 360. Now, it may have been extended by the PS3 pricing announcement. However, it also may arrive sooner depending on a Wii pricing announcement. (The interaction of both of those events, their expected delivery capacity and the proximity to the Holiday season are also all factors).

However, I still see the end of the day for the 360 as arriving very shortly after the Holday season, if not before. And that's at $299 and $399 price points.

Why? Because the majority who want to purchase one at those prices will have already done so. So they introduce price cuts to make it attractive to the $249 and $299 crowd (or whatever).

The question for Sony is when the end of the day for $499 and $599 versions happens, and then where they go from there.

I agree 100%.

[Fox5]

Originally Posted by nelg

I have been wondering if they are going to heavily subsidise the HD-DVD player ($100-150) instead of price cutting the console itself.

Hopefully this Winter we'll see an Xbox Premium at $400 with a 40GB harddrive and HD-DVD player included, cause really, who wants to get an external HD-DVD drive for their Xbox. (unless it's usb and will work in a PC too, but even then it's lame)

[rabidrabbit]

If the external HD-DVD drive were writeble, it would have use in PC, as a read only device it's use is very limited.
Watching High Def movies from small PC screen is a bit silly.

[TheChefO]

Originally Posted by Fox5

Hopefully this Winter we'll see an Xbox Premium at $400 with a 40GB harddrive and HD-DVD player included, cause really, who wants to get an external HD-DVD drive for their Xbox. (unless it's usb and will work in a PC too, but even then it's lame)

Perhaps - I think in order for that to happen Toshiba or one of the other major backers of hd-dvd would have to chip in. Personally I don't see that happening anytime soon. I could see them realistically having hd-dvd built in to the premium system by fall 2007 with a nice price 400-300 w/hdmi. But not this soon without someone else who has a vested interest in hd-dvd helping to foot the bill.

[rabidrabbit]

In the closeup pics of the two SKU's, they both seem to have that flap in front, left of the disc slot.

In the more expensive unit, this hides the various memory card/stick slots, but as the cehaper unit has none of them (not even Memorystick as far as the the data on the official website is to be believed), is it just empty, or a "dummy" trapdoor.

At least both of them flaps have the slightly raised "friction dots" for opening in front, but maybe they are there just for show on the cheaper unit.
Or do both of them have slot(s) for old PS2 memorycards?

[Squeak]

What does a top of the line gaming PC cost in US dollars, without monitor? $2500? $2000?
Looks to me like consumers is getting a very good deal with the PS3, even when considering the lower amount of RAM (which is faster in PS3) and smaller harddrive.

[Fox5]

Originally Posted by Squeak

What does a top of the line gaming PC cost in US dollars, without monitor? $2500? $2000?
Looks to me like consumers is getting a very good deal with the PS3, even when considering the lower amount of RAM (which is faster in PS3) and smaller harddrive.

1. It's cheaper to build a top of the line gaming rig yourself than buy one from a company, companies tend to build their computers in tiers so you really get shafted.

2. You're assuming it would take a top of the line gaming PC to match PS3. Right now, you could probably take one of those $400 specials, slap in a 7900GTX, and get an equivalent gaming experience. (total cost of like $800, and probably has a larger harddrive and more functionality) If Cell is made good use of, perhaps that investment cost will rise another $200 or $300 later on.