What is the impact of no PS3 price drop?

[DrJay24]

I've just always been somewhat shocked this generation that joe (american) six pack walks into Wal Mart and chooses 360 over PS3. Not being sarcastic, I really am. I would think that just "playstation" branding would be the deciding factor for most J6packs.

Americans have been pro-Xbox since last gen. Nothing is cool about the Playstation brand in the US. MS has had the core 14-24 group locked up since Halo 1, with marketing that includes Axe body spray, MTV, Mountain Dew, etc.

Sony's only hope is to take off in Japan and Europe with a big price drop next year. They can hope for decent NA sales with a price drop and KZ2, but nothing will fix the branding and anti-Sony bias they have here.

 

[Zassk]

I've just always been somewhat shocked this generation that joe (american) six pack walks into Wal Mart and chooses 360 over PS3. Not being sarcastic, I really am. I would think that just "playstation" branding would be the deciding factor for most J6packs.

I think you've just overestimated the value of the "branding". Most PS2 owners weren't buying a Sony product; they were buying "that toy that lets me play Dance Dance Revolution or Singstar" or whatever casual game hooked them. These people called all consoles "Playstation" because it sounds generic, not because they identified with Sony.

I suspect many customers are only dimly aware that their Wii was made by a different company from their PS2.

I don't know if there's anything magical about the $199 price point, but there is definitely something magical about being "the same price as the Wii", which the 360 recently reached (more or less). Right now the PS3's price isn't even in the same layer of the stratosphere as the Wii. The PS3's price sticker looks comparable to HDTVs and 5.1 HTIB packages. How many Joe Six Packs will casually buy a game "toy" at that price? Even in Europe, the market is proving limited.

 

[tcrews]

A lot of buying is also based off "my friend has a blank" or "everybody at school has a blank" or "my neighbor's brother's second cousin's kids have a blank" so that's what people buy.

I think that's one reason why the Wii has taken off so much...it's what "everybody has" so those that don't want what everyone else has.

Of course there also is being able to play the same games or play with your friends.

People keep mentioning it's not a race, it's a marathon. Unfortunately...it really is a race. A race to reach critical mass numbers where suddenly everyone wants one because it's what everyone else has.

In my group of co-workers (about 15 people....IT field), 8 of us have 360's, 2 have Wii's and no one has a PS3. 1 Wii owner's 8 year old son wants a 360, and one 360 owner wants a Wii for their child. The other Wii owner also has a 360 and is getting a PS3 for Christmas.

If someone wanted to play with us.....it would be a 360 recommended immediately.

Heck...my 10 year old nephew is a huge Nintendo fan...Gameboy, Gamecube, DS, Wii, etc... I bought my other nephew a 360 for Christmas and when he played it with him...my Nintendo nephew was willing to sell all his Nintendo game systems (including the Wii) for a 360 (I had bought one for him too...he just didn't know it yet). He was asking his parents every day for a 360 and trying to figure a way to justify it.

Sony may not be able to afford a price cut (which is understandable) but I don't think they are hoping to rely on a "marathon" aspect for adoption of their console. Technology moves on....and so does the buying public.

It's all speculation on my part...but I think we'll see a point where one of the HD consoles reaches "critical mass" and will start steamrolling forward in sales. It will be the "in" thing to have. Right now Microsoft has the lead towards this.....a few missteps could ruin that for them or Sony making some key plays in their favor could push Sony ahead.

Again...most people I know bought a PS2 because "everybody has a PS2" not because it was a Sony....or because it was a "Playstation".

 

[Brodda Thep]

A lot of buying is also based off "my friend has a blank" or "everybody at school has a blank" or "my neighbor's brother's second cousin's kids have a blank" so that's what people buy.

I think this has a lot of validity. If we think of the market as a graph we could have "seeds" be people that first buy the technology and then each connection to that node would be more likely to buy that technology.

Of course these would be weighted edges. The stronger the edge the more likely a purchase.

So you have the xbox and 360 starting at the top of this pyramid. (Those at the top are more likely to purchase cutting edge technology and thus make up less of the market.) So you end up with less seeds.

Wii starts out at the bottom of the pyramid. They end up with tons and tons of seeds and it grows much faster due to this. Finally when xbox or PS3 make that price range they are in a part of the graph that is heavily weighted towards the Wii still (each node has far more connections with Wiis than an Xbox/360). Which would explain why 280 wasn't the magic price spot for 360.

You could say that the key to getting market share is reaching certain price points before anyone else. Of course image does help.

I have graphs on the brain lately.

 

[midorigreenwood]

Will there even be a pricecut in March?

If the yen stays strong, it might cancel out any perceived savings from moving to a 45nm process.

It looks like only the start of Sony's woes with Japan expected to suffer a prolonged recession >,>

With so many expensive games like KZ2 and GOW3 being released in 2009....it looks like Sony is sailing into the perfect storm of undesirable financial conditions.

http://www.bloomberg.com/apps/news?pid=20601085&sid=aF1_IdY1za14&refer=europe

Dec. 9 (Bloomberg) -- Sony Corp. plans to eliminate 8,000 jobs in the largest reduction announced by a Japanese company since the credit crunch drove the world into a recession.

Sony will curb investments, outsource production and move away from unprofitable businesses as part of plans to save more than 100 billion yen ($1.1 billion) by the year ending March 2010, the Tokyo-based company said today. The job cuts represent about 5 percent of the electronics division’s workforce, it said.

 

[Crossbar]

Will there even be a pricecut in March?

If the yen stays strong, it might cancel out any perceived savings from moving to a 45nm process.

It looks like only the start of Sony's woes with Japan expected to suffer a prolonged recession >,>

With so many expensive games like KZ2 and GOW3 being released in 2009....it looks like Sony is sailing into the perfect storm of undesirable financial conditions.

http://www.bloomberg.com/apps/news?pid=20601085&sid=aF1_IdY1za14&refer=europe

Your post does not make much sense. Sony is probably in a better position to make cost reductions than any of their competitors. The effect of the yen has already been discussed.

The large part of the cost of the games being released in 2009 has already been taken. How can that be a bad thing?

That Sony is scaling down their TV manufacturing seems like wise decision as things are looking now.

 

[midorigreenwood]

Your post does not make much sense. Sony is probably in a better position to make cost reductions than any of their competitors. The effect of the yen has already been discussed.

The large part of the cost of the games being released in 2009 has already been taken. How can that be a bad thing?

That Sony is scaling down their TV manufacturing seems like wise decision as things are looking now.

They're raising prices of electrical goods in Europe because of the strong yen

By not doing the same for the PS3, this means that they're eating the loss......if the currency trouble continues this is what I mean by cancelling out any effect of any cost reduction from improvements in manufacturing.

Conversely if they are forced NOT to cut prices.....this could affect sales of many big first and second party games that are released in 2009.

ie: they're not getting the return on investment that would be expected in a strong financial climate.

 

[Crossbar]

They're raising prices of electrical goods in Europe because of the strong yen

By not doing the same for the PS3, this means that they're eating the loss......if the currency trouble continues this is what I mean by cancelling out any effect of any cost reduction from improvements in manufacturing.

Conversely if they are forced NOT to cut prices.....this could affect sales of many big first and second party games that are released in 2009.

ie: they're not getting the return on investment that would be expected in a strong financial climate.

It seems like you are believing that every PS3 is manufactured in Japan and every component included in the PS3 is manufactured in Japan. They are not.
They are to a large degree using the same assembly plants and components as their comptetitors.

By the way, so far I have not seen any raise in prices of Sony TVs here inSweden outside the normal fluctuations, which is quite remarkable as the Swedish Krona has plunged even more than the £.

 

[midorigreenwood]

It seems like you are believing that every PS3 is manufactured in Japan and every component included in the PS3 is manufactured in Japan. They are not.
They are to a large degree using the same assembly plants and components as their comptetitors.

Nintendo is a japanese company so they report their earnings in Yen. However the bulk of their income comes from foreign markets like America, Europe, Britain, Australia etc.

So the sudden unwinding of the carry trade means that profits are slashed when these foreign currencies are converted back to Yen. The british and australian currency especially has fallen pretty drastically against the yen.

ie: they're getting less Yen for the same product..... so they either raise prices to compensate or eat the loss in profits.

By the way, so far I have not seen any raise in prices of Sony TVs here inSweden outside the normal fluctuations, which is quite remarkable as the Swedish Krona has plunged even more than the £.

I'm sorry for quoting Engadget....but I remember reading the same thing in another article and I can't be arsed searching for it :3

The bad news from the Japanese consumer electronics industry continues. Sony just announced plans to cut about 8,000 global jobs from its beleaguered electronics business while making unspecified reductions to its seasonal and temporary workforce. The move, as Sony explains it, comes "in response to the sudden and rapid changes in the global economic environment." Ominously, it looks like Sony will also be raising prices in the countries where "Sony makes significant sales" (read: US and Europe) if we're reading this statement correctly:

"Going forward, Sony intends to adjust product pricing to mitigate the impact of the appreciation of the yen."

Sony is also delaying or at least curtailing some of its investments while planning to "downsize or withdraw from unprofitable or non-core businesses." All these moves are meant to cut operational costs by some $1.1 billion in operational efficiencies before the fiscal year closes on 31 March 2010.

Update: Yup, we were right. According to Reuters, Sony will "raise prices on some electronics products in Europe from the beginning of 2009." Also, Bloomberg reports that 8,000 contract workers from the electronics division will also be shed for a total of 16,000 personnel added to the world's unemployment roster.

 

[Crossbar]

Nintendo is a japanese company so they report their earnings in Yen. However the bulk of their income comes from foreign markets like America, Europe, Britain, Australia etc.

So the sudden unwinding of the carry trade means that profits are slashed when these foreign currencies are converted back to Yen. The british and australian currency especially has fallen pretty drastically against the yen.

ie: they're getting less Yen for the same product..... so they either raise prices to compensate or eat the loss in profits.

Still what makes a profit or loss is the difference between the cost of the console and the price of the console. With regard to that Sony is not in a very different situation compared to Nintendo and Microsoft.

I'm sorry for quoting Engadget....but I remember reading the same thing in another article and I can't be arsed searching for it :3

Reeves already made a statement saying that the price of the PS3 will stay the same until they break even (not specifying what breaks even). If that is in response to the current economic climate or not we will never know.

Anyway you can bet that Sony will introduce new cost reduced PS3 models during 2009 at a lower price point, but when is hard to tell.

 

[midorigreenwood]

Still what makes a profit or loss is the difference between the cost of the console and the price of the console. With regard to that Sony is not in a very different situation compared to Nintendo and Microsoft.

yup, but Nintendo is an extremely fiscally conservative company.....so they're really only printing less money

Microsoft has 50 billion dollars in the bank and can feed like a drunken sailor on their OS monopoly.

On the other hand, Sony is the typical bloated japanese manufacturing corporation with massive revenues but tiny profit margins......so they'll be the worst affected of the lot.

If they're making tiny profit margins when the economy is strong..... you can imagine how bad it will be now that the shit has hit the fan.

Thats why 2009 could be a disastrous year for Sony.

They have funded so many expensive first party and second party games that are going to be released in the next two years.

A game like Killzone 2 could have cost over 60 million dollars and need around 3 million copies in sales just to break even.

If they still had an install base of 150 million consoles and the economy was strong then this investment would be justified........but not anymore it would seem.

Reeves already made a statement saying that the price of the PS3 will stay the same until they break even (not specifying what breaks even). If that is in response to the current economic climate or not we will never know.

Anyway you can bet that Sony will introduce new cost reduced PS3 models during 2009 at a lower price point, but the when is hard to tell.

You would assume so....... but who knows in this economic climate >,>

 

[function]

Sony is probably in a better position to make cost reductions than any of their competitors.

It's going to be hard for them to cost reduce a HDD down to the cost of a 256MB flash chip, and a BluRay drive down to the cost of a DVD drive (and they're still going to be stuck with more memory chips, as far as I can see).

The success of the 360 after its recent price cut shows that Sony need to be at least semi-competitive with MS on price (even in Europeland!), and it's hard to see them doing that without losing money on hardware - money that they don't appear to be in a position to lose this year (or next year).

After the Saturn and the Xbox, why the hell would a company design a games console to be a millstone around their neck?

 

[gongo]

Sony should just go third party, sell off the PLAYSTATION brand while it is worth a dime. Kutaragi is no longer at the helm, that takes out half the fun of waiting for the next PLAYSTATION. I don't see Stringer and Kaz wanting to go the next level in technology. I don't even like Reeves - a wrong guy for the job, and Tretton - doesn't seem like the brightest spark around. Heck Stringer is so much about closing the books, i can forsee the investment in PS4 will be very conservative with the economic depression starting.

Sorry for the rant. I am just pissed off at Sony. I am angry they still look clueless in the HD-Broadband era 3 years on. How hard is it to knock down a standard for a start? Today's news about cutting costs tells me SCE has lost the chance to do just that. It will be a tighter and rougher ride from now on.

 

[Shifty Geezer]

There's always one every gen, isn't there? "This company should pull out now" Anything can happen between now and last gen. Nintendo's catastrophic slide over two gens wasn't enough to stop them getting back on top. PS4's investment was always set to be on the light side because us on the sidelines were looking at PS3 as a future-focussed tech, with PS4 being an extension of PS3 saving them a bundle on development. We don't know, but things are due for a shake-up anyhow. Technology isn't progressing in the same way. It's getting bigger to get faster, which doesn't do. Quad GPUs?! Not really a sustainable future

 

[gongo]

But this is Sony we talking about, if they don't bring the hardware then i have to question their existence. Do we need to split up the console market with another lame duck hardware struggling to get the software right? Going the Wii way will not work for the Sony philosophy Im not sure SCE have a vision for the future of PLAYSTATION. Well Im sure they have some but its now accountants vs engineers with the odds heavily stacked against the engineers. Its just not the Sony way anymore. Its really hard to feel for the PS4.

 

[obonicus]

But this is Sony we talking about, if they don't bring the hardware then i have to question their existence. Do we need to split up the console market with another lame duck hardware struggling to get the software right? Going the Wii way will not work for the Sony philosophy Im not sure SCE have a vision for the future of PLAYSTATION. Well Im sure they have some but its now accountants vs engineers with the odds heavily stacked against the engineers. Its just not the Sony way anymore. Its really hard to feel for the PS4.

Fair enough. What was your forecast for Nintendo in the middle of last generation? Were you correct? Futurology is hard enough to do when you have sufficient information. As it stands, we know jack squat.

 

[ShadowRunner]

You seem to have the idea that sony is all about extremly powerful and expensive hardware. This doesnt really apply to either the PS1 or PS2. The PS3 is in the situation it is now due to investment in new technologys, im sure thier plan was always to spread some of this investment accross more than one generation. I fully expect PS4 to utilize the next iteration of Cell + Bluray which could potentially allow much lower costs in terms of investment in the future.

 

[Crossbar]

It's going to be hard for them to cost reduce a HDD down to the cost of a 256MB flash chip, and a BluRay drive down to the cost of a DVD drive (and they're still going to be stuck with more memory chips, as far as I can see).

The success of the 360 after its recent price cut shows that Sony need to be at least semi-competitive with MS on price (even in Europeland!), and it's hard to see them doing that without losing money on hardware - money that they don't appear to be in a position to lose this year (or next year).

After the Saturn and the Xbox, why the hell would a company design a games console to be a millstone around their neck?

My point still stands, there are far more cost reductions to made on the PS3 than on any of the other consoles.

 

[Zassk]

The Sony news gets worse... source... There's no question that this cutback will affect the games division, the only question is to what extent?

It will cut its investment in electronic operations by 30% and shut down about 10% of its 57 production facilities.

"The number sounds big, but this staff reduction won't be enough," said Katsuhiko Mori, a fund manager at Daiwa SB Investments.

"Sony doesn't have any core businesses that generate stable profits - the next thing we want to see is what is going to be the business that will drive the company."

 

[gongo]

I never paid attention to Nintendo TBH but i know GC was profitable and Wii is something i expected out of Nintendo. Call me confused and depressed at the same time after reading todays news. I made a prediction about PS4 in the other thread, i expect a modest but still kickass hardware. Its just... SCE inactions... its waiting and waiting. Then bam the news that Sony is taking drastic cost cutting measures...whats next??? when times were fine, SCE was just fiddling around without a solid strategy , now that times are bad, how can i stay positive? You know Stringer will be lurking around with an axe in hand only thinking of budgets and figures.