NPD May 2007

[Carl B]

It's obviously a balancing act, with a large grey area. Which is why I don't find the argument "Market share is not worth self-sacrifice" very compelling, they self-sacrifice every generation in order to secure marketshare. What's changed?

I think a point of confusion here is my use of the phrase 'self-sacrifice.' The way I think you interpret me as having used it is in the vein of "effort," "pain," "perseverance." In that context yes, absolutely - and yeah the business (traditionally) is of course loss-led for the first hardware iterations every new gen.

But I meant self-sacrifice as in... falling on your sword. Like, with an emphasis on the sacrifice. Nothing that would take them further away from profitability rather than closer, I'll put it like that. Even now the gen has to start getting back to normal for them if they're going to work through the first year loss, and another loss like that would I think guarantee the entire gen be red for them overall, no matter what profits later.

Yes this makes sense, and I'm not trying to argue it's the right time for Sony to cut price. I mean, certainly, it may be much more advantagous to wait for costs to reduce for a few more months before stimulating sales with a pricedrop.

But, from the POV of the 360, it's entirely different. They do have cost controls in place, and they are experiencing a large drop in demand, the best *strategic* time for a pricedrop is definately very near, if not already passed.

Edit to my post in response to your edit of my edit!

Ok yeah in terms of the 360, I see where you're coming from. "Any day now" would seem a reasonable way to view the lack of price-cuts so far. But... I mean we all know they're just milking it for what they can before the pressure actually starts to increase. I'll stand by my 'not until after Halo 3' predictions of previous, but I recall that you are on the record as thinking MS is playing a little to cavalier with their present position.

 

[Teasy]

Robert.. This isn't a competition for profitability. MS and Sony don't care if Nintendo makes a profit while they barely break even. You want to play the profitability game as a corporation comparison, MS wins and its not even close. This is competition for space in the living room, and Wii isn't competing with MS or Sony.

That reads like a collection of PR.. In reality Wii is most definitely indirectly competing with both PS3 and XBox. Also this is a competition for a few things, one of those is profit, and its pretty impotant to both MS and Sony.

Simply and completely laughable. An equally priced 360 would result in having no effect on Wii sales, but would push 360 sales to heights that would make the adoption rate of the Wii look flat.

Was the simply laughable bit a disclaimer for the comments that followed it? Sales of 360 would not treble with a $150 price cut..

 

[Todd33]

But, from the POV of the 360, it's entirely different. They do have cost controls in place, and they are experiencing a large drop in demand, the best *strategic* time for a pricedrop is definately very near, if not already passed.

Do they? If you factor in the failure rates and warranty replacement program (which was extend to 1 yr to save face) do you think they are sitting pretty with profits? Since they mask their loss/profits in an "entertainment" devision we just don't know. They could be limping along awaiting a 65nm redesign with new cooling knowing Halo 3 will buy them time.

 

[Dave Baumann]

With regards to stating or not stating you are considering a price cut, you have to consider the positions. The plans are always there and there are likely always discussions if you need to alter that plan (bring it forward, move it back, change it entirely), but communicating that depends on what you need to protect.

We've seen comments from MS that they are considering a price cut, only to be quickly rebuffed to say "there are no plans at the moment" - MS are concerned about the traction in the channel for the product that is already in distributers hands and on store shelves. They only want to talk about a real price cut very close to it happening in order to maintain the margin on the product thats out there for as long as possible - they aren't quite as worried about gaining marketshare and keeping developers onside, as they already have a reasonable install base and all the 3rd party devs / publishers are seeing pretty damned good sales.

It seems to me that by openly talking about the pricing strategy and saying we are revisiting it that Sony are more concerned about the long game right now and trying to make sure that Devs / publishers are going to maintain support for the product. Afterall, talking about a price cut that will happen sometime in the future doesn't do anything for sales of the console now.

 

[Tap In]

....

It seems to me that by openly talking about the pricing strategy and saying we are revisiting it that Sony are more concerned about the long game right now and trying to make sure that Devs / publishers are going to maintain support for the product. Afterall, talking about a price cut that will happen sometime in the future doesn't do anything for sales of the console now.

that's how I see that talk as well.

I think it is directed more at the investor/dev side than the consumer side at this point. trying to keep defections low (based on current sales), hoping to elicit hope in the future of greater install base/sales.

 

[scooby_dooby]

Do they? If you factor in the failure rates and warranty replacement program (which was extend to 1 yr to save face) do you think they are sitting pretty with profits? Since they mask their loss/profits in an "entertainment" devision we just don't know. They could be limping along awaiting a 65nm redesign with new cooling knowing Halo 3 will buy them time.

Well actually I'm leaning towards that outlook as well. It's really the only thing that makes sense.

MS must have wanted to do a pricedrop by now, we know they are most likely making a nice profit off the sales of the box. So the question is 'what's holding them back?', and the answer seems obvious, bad reliability, high failure rate, and delays getting to 65nm.

That's why I posted that they may have their hands tied somwhat with this issue right now.

Dave - Bang on imo.

 

[Inane_Dork]

Well, if MS is waiting for 65 nm to price drop and potentially redesign/shrink the case, I respect that. They already have enough SKUs out there. I don't want to see a month or two of a new console build only to be superceded quickly. I certainly hope that's the reason for the hold.

If not that, then I don't get it. Yeah, there are reasons against a price drop, but nothing ultimately convincing, IMO.

 

[zed]

whats all this talk about a $400 console
it seems that ppl are forgeting that you can buy a xbox360 for $300, ie $50 more expensive than the wii

MS must have wanted to do a pricedrop by now, we know they are most likely making a nice profit off the sales of the box

do we know theyre making a profit off the hardware yet, i havent seen this confirmed for the xbox360 or ps3 (+ based on the latest quarter entertainment divisions loss, ild say its unlikely )

im wondering perhaps its time for a pricecut on the ps2, to $99.

 

[JardeL]

There's a problem on market about PS3's role , IMO ... Consumers on the market still see PS3 as a gaming console only ... If you see from this aspect , yep PS3 is too expensive for a gaming console ... Sony has to make the consumers understand that PS3 is not a gaming console only , its an entertainment device ... You play games with PS3 but you can also watch Blu-Ray @ full HD, PS3 is an standalone Blu-Ray player also ...

And after all , as we all agree , Sony has to drop price [ and some system-seller games ] , maybe around $150 - $200 ...

I think these can lead a huge impact on PS3 sales...

BTW , WOW @ PSP ...

 

[aselto]

MS will cut the price when they can get some synergy from it, i.e. along with Halo 3.

I think announcing pricedrop at E3 would be a better thing (because it's earlier). Basically all media cover that event, and when they describe Microsoft's conference with new game announcements and pricedrop, almost everyone would get to know about this.

 

[RancidLunchmeat]

That reads like a collection of PR.. In reality Wii is most definitely indirectly competing with both PS3 and XBox. Also this is a competition for a few things, one of those is profit, and its pretty impotant to both MS and Sony.

No, the Wii isn't close to being in competition with the 360 and/or PS3 until the Wii starts offering revenue stream generating media downloads, which is the entire purpose of both the 360 and PS3, lest you people continually forget.

The Wii is a video game console, period. Neither the 360 nor the PS3 are or were meant to be.

As Keyn got half-way to pointing out, one of the main problems with the PS3 is that it went too far into the multi-media component realm, but doesn't see rapid adoption in that space because of its "Play Station" branding. It's also too expensive and lacks the games to be attractive as a gaming console.

MS took a middle road. It is neither the pure gaming console of the Wii, nor is it the extreme 'do everything' piece of equipment that the PS3 represents.

The 360 and the PS3 are most certainly in competition with each other. The Wii's only competition at this point are existing pure gaming consoles. The Xbox is no longer supported, so that leaves the PS2.

Was the simply laughable bit a disclaimer for the comments that followed it? Sales of 360 would not treble with a $150 price cut..

I'm not familiar with the word treble in the context that you are using it. To believe a $250 Wii would outsell an equally priced or lower priced 360 (which is what the original poster said) is completely laughable.

To believe that premise one must believe that relative price plays no part in the pace of adoption of the Wii. I think that idea is ludicrous. As was discussed in a previous thread, there are a number of factors that are working together to spur the adoption of the Wii. Price is certainly one of them.

 

[Rangers]

No doubt, at this point it's hard to say the Elite was much more than a giant waste of both time and resources.

I think MS would've dropped price already if it weren't for their reliability problems, and the delay getting to 65nm. I think their hands are somewhat tied because of these issues.

Strategically, it would be best to drop the price in Aug, a month before Halo 3 comes out, by $100. MS would ride extremely strong sales all the way into spring. That would also set up the $299 Halo 3 bundle for Xmas which would be a killer.

It also would setup a $199 Core w/ GTA, which would probably move huge units...if MS fixed the peripheral pricing of the HDD and Memory Card. There must be hordes of people who just want to play GTA as cheaply as possible, and $199 sounds pretty damn attractive I would think.

If you live in utopia.

MS is not going to bundle two of it's strongest sellers..maybe second rate games..

 

[scooby_dooby]

If you live in utopia.

MS is not going to bundle two of it's strongest sellers..maybe second rate games..

I never really meant official bundles, certainly not in the case of GTA.

 

[crazygambit]

To believe a $250 Wii would outsell an equally priced or lower priced 360 (which is what the original poster said) is completely laughable.

That's a pretty bold statement. And are you talking premium or core? I think it's pretty likely that a $250 Wii would still outsell a $250 Core by a wide margin. Whether it outsells the premium at that price or not I don't really know, but I think it's certainly within the realm of possibility. I'm pretty sure a lot of Wii buyers wouldn't trade their Wii for a 360 evenly. Being outsold by the Wii at the same price point would be catastrophic for Microsoft. Actually I'm pretty sure if they dropped the price now it wouldn't outsell the Wii. I just don't see the 360 selling more than 350k in this slow season with no big releases. After Halo 3? That's a different matter completely.

 

[fearsomepirate]

The Wii is a video game console, period. Neither the 360 nor the PS3 are or were meant to be.

Ah, that explains why the only input device they ship with is a video game controller.

 

[Shifty Geezer]

Ah, that explains why the only input device they ship with is a video game controller.

You mean versatile wireless multi-function controllers. Or does Sixaxis only work on games and can't operate XMB or BRD playback or the web-browser?

 

[Cheezdoodles]

You mean versatile wireless multi-function controllers. Or does Sixaxis only work on games and can't operate XMB or BRD playback or the web-browser?

Why does that matter? Its still a console controller

 

[Shifty Geezer]

Why does that matter? Its still a console controller

Yes, it's a console controller, controlling the console. All the console. All it's features. Just because it looks like a gaming controller, doesn't mean it's useless for other functions.

Fearsome's got hung up about a controller design/layout, but that's irrelevant to the function of the machines. You don't decided the purpose of a machine solely by the stereotype of its design. If a cigarette lighter is shaped like a gun, does that mean it's only good for shooting people and not for use in lighting fags? If a PC is shaped like a toaster, does that mean you'd expect it to bake bread and not run software? If sixaxis were shaped like a golf-ball, what would that make PS3? A games console? A media device? A golf trainer? What if a TV came with a controller like Wii's? Would that make it a games machine, or would it just be a TV with a novel controller? What about Wii itself? It's controller is more like a remote than a stereotypical game controller. Does that make Wii a CE media device instead of a games machine?

PS3 and XB360 come with controllers capable of handling all the non-gaming features they came with. One can argue whether XB360 and PS3 were intended as gaming machines with extras or multi-function devices, but not on the strength of the choice of standard controllers designs!

 

[scooby_dooby]

One can argue whether XB360 and PS3 were intended as gaming machines with extras or multi-function devices

....seriously?

 

[Shifty Geezer]

All I'm doing with that remark is distancing the argument of the intended applications of the machines from the controller. If people want to argue the intended markets by all means they can go ahead, but don't cite the controllers as proving any such point!