What is the impact of no PS3 price drop?

[Limanima]

Let's face it, Resistance is a good game but it is not a hype/system seller type of game like Gears Of War.
Neither is Motorstorm, and LBP is a new franchise.
It's not surprise for me that neither R2 or LBP are selling well at this moment.
But when we think about MGS4, now, that is a big, big system seller, so it sold really well (or GTA).

In the next year, it's easy to predict big sales for RE5, God of War or GT5. These are very strong established franchises that will sell millions of copies easely. Probably when GOW releases the PS3 will see the biggest boom in sales since it launched.

As for Killzone 2, unfortunalety I don't think it will do extremely well. I think it will do just well. Killzone 1 was a good game, but Killzone is not a strong franchise and has only 2 titles released.

 

[wco81]

Read a blurb over at Gamespot in which MS claims the X360 outsold the PS3 by a 3 to 1 margin, either on BF or through the weekend.

Also claimed sales were up 25% compared to the same sales period last year.

 

[Carl B]

The yen has ranged from 110 to the dollar to the highs of 93 lately. This is in the last 6 months, an indication of how volatile the dollar has been to other currencies.

All currencies are volatile right now, but the strong yen is brutal for the Japanese exporters. A product that had a 5% positive margin before is now well negative, and a product that had a pre-existing negative margin like the PS3 is now much more so.

The PS3 sells for $400 - for Sony that was 44,000 yen. Now for the same $400 they get 37,200. A $100 price cut before would have taken it to 33,000... they're almost there already without having done anything. A $100 price cut now would take it to 27,900 - approaching half of what they received just half a year ago.

I don't know the production costs of the PS3, but I know they're higher than 27,900 yen. The only solace is that for externally sourced components, the yen strength will help to reduce those sourcing costs. But that's not much comfort, since the one side of the scale so vastly outweighs the other.

Sony is discounting its other products, such as the Bravias, in this tough economic environment, in order to move them.

Because they have to move them. Believe me, look at Panasonic's recent profit revision to get an idea of the brutality out there - they slashed net income forecasts by 90% due to the exchange rate and slowdown issues.

With the PS3, if it's built, at least you'll be able to sell it later on if it's stuck in inventory. The way the TV product cycles work, if it's built, but it's not sold, then it's looking at being an eventual huge write down. Sony will be selling different TVs next year - if they want to recover on the manufacturing of this years sets, then they need to sell them, and sell them now... at any price (within reason).

Next year, obviously, they'll simply build fewer TVs. The reports of LCD ramp-downs for next year are everywhere.

Have they transitioned all of their silicon to 65 nm by now?

Remember the fixed costs are on the manufacturing side, so in that respect 65nm does matter (and the answer is yes they have), but those savings only effect new production. If you have legacy hardware in the channel and you decide to mark down the PS3 price based on current cost savings, you're still absorbing a write-down spread on that older pre-existing product. And as above, I mean... those cost savings are all they can do right now just to mitigate exchange rates.

That's not anything directly related to what you were saying or even the thread itself, but it's something to think about. People sometimes equate manufacturing cost savings with the ability to price reduce immediately; only when your inventory is essentially zero on the pre-existing. Otherwise, you're still facing a stark choice as it relates to eating cost on those other systems.

 

[Zassk]

My (unsubstantiated) impression is that Motorstorm 1 and Resistance 1 each sold about 1 million copies at retail, and the rest of their "sales" were through bundles in various regions. If that is true, then we should expect their sequels to sell only 1-2 million at retail. Resistance 2 looks to be on target for that range, Motorstorm 2 not so much.

God of War was never a big selling franchise on the scale of Gears; God of War II sold less than Resistance, for example. I think the big pending cash-in for Sony is GT5, period, and Sony is probably counting on it being ready for release in 2009.

 

[assen]

I think you'll see Insomniac games continue to end up in PS3 bundles and such, basically a way of guaranteeing income/revenue for the guys at Insomniac.

Bundles bring significantly less royalty per copy to developers than retail copies, AFAIK.

 

[Carl B]

Bundles bring significantly less royalty per copy to developers than retail copies, AFAIK.

Wouldn't surprise me at all, but I do think that Insomniac will be afforded special regard wherever possible. For not being a first party studio to Sony, they are still essentially as important as one.

 

[obonicus]

All currencies are volatile right now, but the strong yen is brutal for the Japanese exporters. A product that had a 5% positive margin before is now well negative, and a product that had a pre-existing negative margin like the PS3 is now much more so.

The PS3 sells for $400 - for Sony that was 44,000 yen. Now for the same $400 they get 37,200. A $100 price cut before would have taken it to 33,000... they're almost there already without having done anything. A $100 price cut now would take it to 27,900 - approaching half of what they received just half a year ago.

Why don't they go for a price cut in Japan, though? It's not like the PS3 is a commodity, and Japan is the region the PS3 has been least successful in (also the only region they're easily beating the 360 at, but I'm fairly sure Sony doesn't care about the war when their marketshare is so low). Costs in foreign currency?

 

[Carl B]

Why don't they go for a price cut in Japan, though? It's not like the PS3 is a commodity, and Japan is the region the PS3 has been least successful in (also the only region they're easily beating the 360 at, but I'm fairly sure Sony doesn't care about the war when their marketshare is so low). Costs in foreign currency?

Well, Japan would be the least painful place to do it, that's for sure.

The 360 is also doing much better there lately; this whole forex situation benefits MS because in terms of cracking the Japanese market, they're able to the cut the price there with the exchange rates serving as a positive buffer as opposed to the reverse situation for Sony in the US.

 

[NERO]

Carl has hit it so thoroughly that I'm not sure if anything can be added. Due to the PS3's late start, Sony's BRD strategy, Stringer's goals, the world economy and the exchange rate fluxes a price drop simply isn't feasible, unless Sony totally reverses their strategy and wants to piss off their shareholders. There is no room to maneuver and it is unfortunate for consumers and companies.

 

[wco81]

Why isn't Nintendo hit by the currency fluctuations?

Also, even though MS is American company, the product is manufactured in the Far East. Is it because the Yuan is pegged to the dollar that it doesn't hit them as much?

But it would hurt the proceeds from Europe and the UK, since the dollar has appreciated against he Pound and the Euro in the last few months.

 

[Carl B]

Why isn't Nintendo hit by the currency fluctuations?

They are. Who ever said otherwise? But are we discussing price cutting strategies as they pertain to the Wii? Here's the Nintendo strategy: no price cut. Case closed.

Also, even though MS is American company, the product is manufactured in the Far East. Is it because the Yuan is pegged to the dollar that it doesn't hit them as much?

But it would hurt the proceeds from Europe and the UK, since the dollar has appreciated against he Pound and the Euro in the last few months.

MS is effected - this is all discussed in the respective financial threads as well I should note.

But when we're talking about price reductions, and we're talking about the US as the primary market for MS, they simply have more flexibility than does Sony. It's really just the US market we're talking about here ultimately in terms of MS vs Sony pricing. For Europe and the UK, honestly I don't think we'll be seeing an MS price cut anytime soon either... and indeed, they're probably done with price cuts for the foreseeable future here as well.

Yes though the dollar peg to Taiwan and China keep that aspect of the supply chain steady for MS, and for Nintendo and Sony it makes it less expensive. RAM sourced from Korea right now btw will be downright dirt cheap for all players, as that currency has been cut in half. The gains on supply-side just can't make up for the damage on the sales side though.

 

[BadTB25]

One of the other dangers that Sony may be at danger is of MS gaining name-brand recognition as a gaming platform.

A big argument for Sony entering this generation, which is somewhat true in Europe, is the brand loyalty issue.

If MS coninues to make gains this generation, particualrly in regards to superior on-line service with comparable game title support, I believe it'll that much easier for MS to be competitive next time.

If Sony and MS were to launch this generation at the same time frame, I believe they would have wipe the floor on the Xbox 360. Next time, although there may be a disparity, I don't believe it would be anywhere near it would've been.

I know that this generation isn't over yet, but so far it doesn't look like marketshare finishes are going to change. I sincerely hope that both remain strong and viable...strong competition from both means we WIN in the end.

 

[Gubbi]

For Europe and the UK, honestly I don't think we'll be seeing an MS price cut anytime soon either... and indeed, they're probably done with price cuts for the foreseeable future here as well.

They pretty much hit the mainstream price point.

Don't know about pricing in the UK with the sterling tanking and all. But here in Denmark an Elite costs 65% of a 80GB PS3, the 60GB premium roughly 53% and the arcade is just so cheap they are practically giving it away in cereal boxes.

Microsoft is running tons of adds with Arcade bundles. I'm guessing there will be a lot of 360s under the christmas tree this year.

Cheers

 

[catisfit]

We all know that Sony has been chasing profitability over sales this year, I belive their biggest concern would have been if the 360 was significantly outselling the PS3 and forced them to drop price to maintain pace.

I think they'll be relatively pleased that this hasn't happened, in fact it's the recent price drop which has allowed the 360 to catch up to the PS3 sales this year in the US, while in Europe and Japan the PS3 remains ahead YTD.

It's hard times for Sony with the general position of the PS business coupled with the wider economic situation, but given that they've been able to maintain price all year while also maintaining sales pace with their major competitor, so it could have been a lot worse IMO. If 360 sales had forced them to move price, they'd be in a much deeper hole.

One thing's for sure, they wouldn't have changed their position just to temporarily chart a few of their exclusives a bit higher. I'm assuming the figures you're using for sales come from October NPD? That's surely a bit soon to start predicting a bunch of developers abandoning IPs and contracts to jump ship?

 

[DuckThor Evil]

We all know that Sony has been chasing profitability over sales this year, I belive their biggest concern would have been if the 360 was significantly outselling the PS3 and forced them to drop price to maintain pace.

I think they'll be relatively pleased that this hasn't happened.

It is however happening as we speak and most likely the price cut for the PS3 is only few months away, because of it.

 

[Rangers]

We all know that Sony has been chasing profitability over sales this year, I belive their biggest concern would have been if the 360 was significantly outselling the PS3 and forced them to drop price to maintain pace.

I think they'll be relatively pleased that this hasn't happened, in fact it's the recent price drop which has allowed the 360 to catch up to the PS3 sales this year in the US, while in Europe and Japan the PS3 remains ahead YTD.

It's hard times for Sony with the general position of the PS business coupled with the wider economic situation, but given that they've been able to maintain price all year while also maintaining sales pace with their major competitor, so it could have been a lot worse IMO. If 360 sales had forced them to move price, they'd be in a much deeper hole.

One thing's for sure, they wouldn't have changed their position just to temporarily chart a few of their exclusives a bit higher. I'm assuming the figures you're using for sales come from October NPD? That's surely a bit soon to start predicting a bunch of developers abandoning IPs and contracts to jump ship?

I dont know, it seems to me this is a crucial point, 3rd holiday for 360 2nd for PS3. And one could make the case that Sony is fiddling while PS3 burns. Being outsold 3-1 stories bandied about a lot lately.

If PS3 was to catch 360, they would have had to be steadily gaining at this point, PS3 is not the new kid on the block anymore. They were gaining, but to suddenly suffer this setback..

Run the numbers on the USA, and it's grim for PS3. Current install base is around 11.5m 360 and 5.5m PS3. 360 ahead by 6 million. When PS3 launched in Nov 2006, 360 was ahead by ~3 million.

In 2008 PS3 had outsold 360 by a few hundred k before the 360 price drop, thats all been wiped out in two months and they're now tied on the year. 360 will surge ahead the next two months. So 2006 was a loss, 2007 was a loss, 2008 will now be a loss for Ps3 in install race?

So some basic math on 6m shows that Ps3 would have to top 360 by 200k a month for 30 months to go ahead. If that happened now starting this month, you're at mid 2010. Never mind that 360 is probably going to put up to another million between them in the next two months. Now run the numbers, you're into 2011. Never mind that PS3 outselling the 360 by 200k for even one month seems a fantasy right now.

Even worldwide, where once due to Japan if nothing else one would have had to assume PS3 would eventually top 360, is now firmly in doubt due to 360's current surge.

Do I believe it's all bad news for PS3? No, but I'm showing there's other ways some are looking at it. Which is what prompted this topic really, plenty of PS3 fans are pretty concerned. This is a crucial time in the generation, the ability to commandeer third party exclusives is probably slipping away for this gen for good for Sony right now. Sony's current no price reduction strategy honestly makes me question how committed they are to PS3.

OTOH, a cut to $349 probably wouldnt have that much effect. So it's 299 or dont bother. And we know how crushing that would be to profit. The yen's recent strength is another thing likely really hurting any chance of a cut.

What could really benfit PS3 is a PS3 core imo. Put it out at 299, and suddenly a guy like me might be in market come KZ2 time (more important, it would help a lot right now in 08). They should stash in 8GB of flash or whatever they need for minimum mandatory HDD installs required by some PS3 games, and push it out yesterday. Wont happen, though. Besides, I doubt it would change the cost structure on PS3 much.

 

[eastmen]

It really all depends.

The 360 is out selling the ps3 again by a large margin , nov results hsould be in next week. If they were able to outsell sony by a large enough amount it will simply put sony further back than earlier in the year. A price cut may help early next year but the ps3's life cycle may be cut beyond sony's control. If MS launches in 2010 or 2011 with a new system a wii hd is out at the smae time , sony will have no choice but to move on to the next platform. You also have to remember that the 360 should allways be cheaper than the ps3. If bluray drives drop enough in 2009 (you can get one for the pc for about $90 right now) ms can add a blruay drive for movies to their systems if they so choose. The 360's chips are also smaller than the ps3s which means they can combine these things sooner than sony. Then factor in that bluray players ae cheaper than ever and a $400 or even $350 ps3 doesnt compare so well to a $100 insigna at best buy to a cash straped public

I really think in the end the ps3 will allways be one price cut to little for consumers. Sony has already dumped a ton of oney into the ps3 that it most likely will never see again. hopefully they learn from their mistakes and next gen put out a compentant system. Just look how great the xbox 360 has been compared to the xbox 1

 

[Carl B]

@catisfit: I'm not sure how Microsoft could force Sony to cut the price in *any* circumstance. Being outsold 20:1? Well, they still don't need to cut the price. And certainly it's not about Sony being able to have 'maintained' price all year - that's the thing they've been 'forced' to do! I'm sure they'd love nothing more than to slash that price right on down; and as soon as it is economically viable for them to do so, that's what we'll see happen. But not before that, and not based on any other external factors at this point.

I think we'll see something in 2009 though, so hopefully soon we have a thread discussing an actual cut vs another in a long line of many asking when a cut is coming.

 

[Carl B]

If bluray drives drop enough in 2009 (you can get one for the pc for about $90 right now) ms can add a blruay drive for movies to their systems if they so choose. The 360's chips are also smaller than the ps3s which means they can combine these things sooner than sony.

Blu-ray drive price reduction benefits Sony more than MS; for Sony it means a key expense of their system is coming down rapidly, whereas for MS it would mean adding expense. Plus we have reason to believe that the MS 360 team just might not want to deal with BD support (from the software side) at all.

As for chip combination, bigger or smaller it doesn't matter; a slightly larger chip is going to be able to be combined at 32nm just as the slightly smaller chip would be, because they're both 'small' at that point. That said, I don't know that we should ever expect either console to have a unified CPU/GPU, simply due to the IP involved with each chip. EE+GS was a special case because it was Sony/Toshiba right down the line.

Just look how great the xbox 360 has been compared to the xbox 1

It's important to note though that 360 is still a money loser for the gen. We'll have to tally up the totals when it's all said and done to see if it ate away at some of the originals losses, or whether it simply mitigated its own.

 

[obonicus]

I think we'll see something in 2009 though, so hopefully soon we have a thread discussing an actual cut vs another in a long line of many asking when a cut is coming.

Why wait? Clearly Sony should have gone with a $100 cut instead of the measly $50 cut they gave us!