Playstation 3: Hardware Info and Price

[patsu]

In reply to an earlier question....

I would frame the problem this way. The positioning of the 2 SKUs are:
(i) Premium gamer (wants HD and other goodies)
(ii) Pure gamer (Just gaming on SD)
Then find the price for these 2 SKUs so that we make enough e.g., to jumpstart the online services, and the 2 SKUs won't cannibalize each other + PSTwo.

If viewed from this framework, I don't want to sacrifice (ii) because it is addressing a different segment altogether.

As for whether and when they will reduce the price, it depends on their strategic business model. After that the tactical stuff we talk about comes into play (i.e., sales volume, compensating for competitors, natural cost reduction, ...)

Strategically if they believe the "Network is the future" (like MS), then the quicker PS3 expands the user base without losing money, the better. There are indications that MS will drop their price to grab as large a user base as possible. Then reap the benefit (turn it into a cash cow via different revenue stream). This is also the traditional "Market share is king" model. The risk here is that one may not be able to capitalize on the user base (like so many dot.com companies).

Sony seems to have the same idea, but their latest pricing is inconsistent with that vision. Perhaps their data showed them that the first to online market may not win the war and are taking their time to skim the high-def and game market. The downside is: With so many baggages, they may have diluted their own effort (PS2 legacy, High-def war, online war, next-gen game play). The next few months will be critical for Sony to demonstrate its sex appeal (since we didn't get to see it this E3). It seems to be losing its identity.

I don't think Sony is losing control over cost (e.g., the Hard Disk component). But I do think that their people are getting lost in the details "out there" because they are too many things they want to do at once and there are many loose ends.

 

[scooby_dooby]

The shareholders care about Sony's earnings per share. Bragging rights are not relevant.

So they don't care about the future of the company?

And are you saying that the earnings gained from 60% marketshare would be equal to those gained from 30%?

Serenity Painted Death - I know it won't happen

 

[DemoCoder]

I think Apple has shown that being first isn't necessarily best. They were not the first with a portable MP3 player, and not the first store to sell music online. Apple electronics also cost more than cheap chinese MP3 players. Yet, Apple iPod dominates. Why? Apple designed a good simple and marketed it well, first through hard core Mac lovers, and then to the mainstream.

Frankly, I don't see play online services being where the revenue is at, except for some MMORPGs. I think they are hoping Vista+XB360 will give them some leverage over companies like Google in the online business, and competitors in the mobile space too (like Symbian). Unfortunately, I don't see it helping them much.

 

[DemoCoder]

So they don't care about the future of the company?

And are you saying that the earnings gained from 60% marketshare would be equal to those gained from 30%?

They could be. It is entirely based on content sales. Especially if 30% helps them win the BluRay war. Nintendo has a tiny marketshare in consoles, but still profitable.

Sony has more than just games to worry about, their ownership of Columbia, MGM, et al, and reselling that IP is a big consideration.

I frankly don't see it anyway.

 

[patsu]

I think Apple has shown that being first isn't necessarily best. They were not the first with a portable MP3 player, and not the first store to sell music online. Apple electronics also cost more than cheap chinese MP3 players. Yet, Apple iPod dominates. Why? Apple designed a good simple and marketed it well, first through hard core Mac lovers, and then to the mainstream.

Frankly, I don't see play online services being where the revenue is at, except for some MMORPGs. I think they are hoping Vista+XB360 will give them some leverage over companies like Google in the online business, and competitors in the mobile space too (like Symbian). Unfortunately, I don't see it helping them much.

Before yesterday, I would have agreed. But we have to remember that Apple executed almost flawlessly. All public exposure is carefully chereographed and scored. Sony's recent performance did not convince me that they still have the necessary time and determination to attend to all details. On top of that they have to also demonstrate clear and convincing value to justify for the high price (a la Apple).

I will wait for TGS to see where Sony is at.

 

[scooby_dooby]

They could be. It is entirely based on content sales. Especially if 30% helps them win the BluRay war.

But it's entirely possible for Sony to win the BR war while still retaining the majority of the marketshare, which is why I would see that as a definate loss.

 

[Sis]

Because that isn't going to happen?

Here's what I don't get: for all those who are eternally optimistic about Sony's gaming consoles: can you indicate what scenario would have to occur for Sony to not be given an automatic market leader pass?

Seriously, they are currently priced over 50% they're closest competition and if the Wii releases (ugh--terrible turn of phrase) at $250, Sony will have a product that is at least twice the price.

We can spin around all day until we're dizzy saying "Price doesn't matter!" but at the end of the day we need to acknowledge that price always matter, just that sometimes it matters a lot and sometimes it matters a little. At $300 dollars for the PS2 during it's launch, it mattered a little but not enough to constrain sales. At below $200 it matters very little. IMO, for the PS3 at $500 and over, it matters a lot, especially 6 months to a year after launch.

 

[DemoCoder]

Apples to Apples, they are not overpriced 50%. You can keep bandying about this "Core" fallacy, but PS3 compares with Premium, not Core, and customers will know thay are getting more than what a Core provides. The vast majority of consoles MS has sold are Premiums, not Cores. PS3's initial customers will be looking at PS3 vs Premium, not going "how Core come is so cheap compared to PS3?" And "oh yeah, maybe I should go without an HDD and wireless controllers"

After the early adopter markets are saturated, then we can talk. And maybe by 2008 then you'll see a stripped down PS3, no BD playback (BD drive, but no movie playback, so save on paying royalties to compression codecs and AACS), small HD, wired controllers only, and new cost reduced CELL and RSX on 65nm.

Sony will have no problem selling every unit they can make for a while.

 

[patsu]

I don't doubt that Sony can sell all its PS3 at launch (I'm going to buy one too !). Also Sony knows its own market best.

I'm pointing out that Sony is vulnerable based on its latest public performance. If this continues, MS will be better than Sony in executing Sony's game plan.

The perception of Sony's expensive image is inevitable. Ken himself said so. Like I said, the perceived extra value is not there _yet_ (even though the component is there).

 

[Sis]

Apples to Apples, they are not overpriced 50%. You can keep bandying about this "Core" fallacy, but PS3 compares with Premium, not Core, and customers will know thay are getting more than what a Core provides. The vast majority of consoles MS has sold are Premiums, not Cores. PS3's initial customers will be looking at PS3 vs Premium, not going "how Core come is so cheap compared to PS3?" And "oh yeah, maybe I should go without an HDD and wireless controllers"

After the early adopter markets are saturated, then we can talk. And maybe by 2008 then you'll see a stripped down PS3, no BD playback (BD drive, but no movie playback, so save on paying royalties to compression codecs and AACS), small HD, wired controllers only, and new cost reduced CELL and RSX on 65nm.

Sony will have no problem selling every unit they can make for a while.

In fact, they are overpriced by 50%. Just because feature to feature does not align, doesn't mean you get to ignore the $300 Xbox 360 core. Otherwise, we can't really compare the Wii at all (damn that name--everywhere it's used just sounds bad, or maybe I'm just immature). The Wii has no movie playback, no HDD, doesn't support natively Hi-Def resolutions. So is the Wii's price mathematically a NaN when compared with the PS3?

Also, I find your last statement interesting, since I've said the same thing. But now that I've given firm numbers that we can look back on in a year, it's your turn. How long will Sony continue to sell out units at $500-$600 before they have to redesign it or drop the price? You say 2008, so in two years? With or without a price drop?

 

[NANOTEC]

Has anyone thought about how much a PS3 will cost after tax and a game or two? $750?? That's CRAZY!!

 

[pakotlar]

Before yesterday, I would have agreed. But we have to remember that Apple executed almost flawlessly. All public exposure is carefully chereographed and scored. Sony's recent performance did not convince me that they still have the necessary time and determination to attend to all details. On top of that they have to also demonstrate clear and convincing value to justify for the high price (a la Apple).

I will wait for TGS to see where Sony is at.

I agree with both you and DemoCoder. Apple did execute flawlessly, and did show that not only does being first to market not assure largest penetration, but also that understanding how to appeal to your target market is a key to success. I think what was weirdest about Sony's press conference is that they missed the mark. Wheras they have the past 2 generations dead-on, no questions asked, enticed the gaming market with amazing promises of pazaaz, this time around they did not instill in me this wonderment, this undeniable understanding that not only did they know what the gamer wanted, but that they were able to deliver more and by a wider margin than anyone had anticipated. There were no surprises for me at this conference, save that amazing FF real-time demo, and in fact underwhelmed me a bit compared to what they showed in 2005.

Of course I knew that e3 2005 was filled with CG. However, the DREAMERS in us hoped that Sony could deliver that fidelity. FFXIII delivered, but not much else did. Everything I see on PS3 I see on X360 but 200 dollars cheaper. We can argue all day about Blu-Ray, but what it comes down to is, dollar for dollar, Microsoft is offering more gaming for the dollar. Not only that, but the XBL marketplace has taken off, and the possibility that I may be able to play Sonic on my x360 along with 100's of backcatalog Sega games (Dreamcast too maybe!) is almost enough enticement alone. The idea that I could sit down, and play for 30 min - 1 hour at a time some great arcade games, like geometry wars, has a great appeal. Of course I want the epic adventures, MGS4, GOW, etc, but I also want some light gaming to relieve the stress I have at work. PS3 still has some great exclusives, and I'm rooting for MGS4 to become a success (Hideo Kojima imo is one of the best directors, film or game, alive), but it is absolutely undeniable that Microsoft is doing great things right now.

ps: this post has some really poorly worded sentences damn!

 

[Tars Tarkus]

can you indicate what scenario would have to occur for Sony to not be given an automatic market leader pass?

I wouldn't say that I'm eternally optimistic about Sony but to answer your question: If developers jumped ship on them.
Even without their current level of third party support though they have been very busy constructing a first party software base which would allow them to turtle (i.e. button up and weather the storm) for possibly several generations ala Nintendo during the N64 and GC years.

 

[RancidLunchmeat]

Has anyone thought about how much a PS3 will cost after tax and a game or two? $750?? That's CRAZY!!

That was exactly the point that some of us were trying to address.

You can buy a Core, plus a HDD, plus an extra controller so you can play with your friend, plus.. Believe it or not, an actual GAME! for less than the cheapest PS3.

I would also dare say that most consoles are "social" environments, so most will not only want a game but also a second controller.

So what does that come to? $120 on top of the $499? In my side of the world (assuming controller and game both at $60), that comes to $673 for the low-end PS3, a game and a controller to play with a friend.

Buying a Core, HDD, controller and game come to $564. Or, you could save $40 by going the memory card route. And pay only about $520.

Guess what the ultimate difference is? (Duh! It's multiplication, it's going to be the same! ) It's the premium for the Blu-Ray disc. And it's about $100. And that $100 is the difference between an extra controller and a game, or just having a blu-ray player because you can't afford any games!

 

[hey69]

to be honest... i know 3 guys who bought a core cause they coudltnt find a premium last month. all 3 of them bought the 100 euro harddisk , one of them bought the wifi dongle for 80euro on top ... still hovering around 400-500 euro

what i want to say is, practicly nobody that I am aware of is just buying the core pack alone without the harddrive. maybe in 2 years time, MS will fade out the core pack .

I paid 540euro to be exact for a ps2 at launch here in europe together with Tekken for another 55 euro... that was 600euro for a bloody console .

my excuse to my parents was that it was the next gen movie player ... yeah good old times

 

[patsu]

Playstation 3 will shine if it can deliver its promised potential:
* Next-gen gaming like Heavely Sword, MGS4, FF XIII, that Eye-Toy card game (Check)
* Free online gaming (Where ?)
* PVR (Huh ?)
* Video and audio player with the most popular, largest HD standards (Not mentioned)
* Anywhere access to home media (What ?)
Then it will shed its "expensive" image instantly. All of MS's MSN, XBL, ... etc. assets will be irrelevant.

Conversely, PS3 will remain "expensive" if all we can say is:
* Cell
* RSX
* Blu-ray
* PS Online
* Launch games
* Hard disk

Does it make it clearer what I'm trying to tell Sony ?

 

[RancidLunchmeat]

I'm sure that's true Hey, but we're still talking about early adopters here.

Some of us are projecting that $100 price difference across the lifespan of the console, or at least the first few years of the lifespan of the console.

So either Sony suddenly knocks off a huge amount of its pricetag all at once (which has been discussed) or it decreases its price in smaller, steady increments, which still means that price difference is going to be around for quite some time.

Sure.. anybody buying the $499 console can really buy the $599 console, and I'm sure most will want to. (Although in this case, those who buy the $499 console won't have the ability to upgrade to the $599 unlike in the X360 situation, which actually makes the $599 all the more attractive and the $499 all the less so.)

But what happens when the prices start to drop so the average consumer can start buying the consoles? Those are the people who are going to look at the price of both and then think they could be buying a game and a second controller for the same price as the other console sans controller and game.

 

[RobertR1]

Does it make it clearer what I'm trying to tell Sony ?

that you actually want them to deliver on their promises!?

 

[RancidLunchmeat]

Does it make it clearer what I'm trying to tell Sony ?

That you want Sony to live up to what it hyped up over a year ago that they've clearly backed way off of?

Free online Gaming, PVR, most popular HD standard (they're doing their best on that one), anywhere access to home media...

These things simply aren't going to happen. They are what KK's dream of the PS3 was. But then again, I think that's what KK's dream of the PS2 was to be as well.

The PS3 is a video game console that plays Bluray. Any sort of distributed computing, or enhanced multi-media capabilities have been effectively removed from what take from their presentation.

If you are expecting more out of the PS3, I think you're going to be very disappointed.

 

[patsu]

that you actually want them to deliver on their promises!?

... (even if they missed 1 or 2), they need to be able to deliver and demo the value in public performances. They didn't even say anything except:
* Heavenly Sword
* Ducks
* Shopping
* some more games I can't remember
so now I'm not sure what I'm getting for PS3 for 100 dollars more than MS's premium pack.