The PS3 price drop/ mass market thread (yeah Sony is in BIG trouble..)

[Undercover Cop]

Let's paint a best case (though completely unrealistic) scenario for the PS3 to reach mass market price. Suppose Sony will be extremely aggressive with its price drops (since the competition will be doing the same or making killer bundles)? If so, then we can expect a $100 price drop every year (just before Christmas).

This means that:

Christmas 2006 - $599 US dollars.
Christmas 2007 - $499 US dollars.
Christmas 2008 - $399 US dollars.
Christmas 2009 - $299 US dollars.
Christmas 2010 - $199 US dollars.
Christmas 2011 - $99 US dollars.

By the year 2010 we would have already been looking towards the NEXT generation. In fact forget about looking forward that far, do you think people will hold out that long while the 360 and Wii are available alternatives? It took years for even the PS2 to drop to mass market price of under $200 dollars, where it made its most sales.

(Hell, we can even look at this another way. Lets compare this with the PS2 pricing, it launch at $299 and it currently at $129 six years later. That mean that even if the PS3 would follow the same rate of depreciation (56.6% over 6 years) it would be at a lovely $260 by the year 2012. Thats still ten more bucks than the Wii is today.)

And that's the best case scenario: we all know the PS3 won't be following these paths. It's already losing nearly $250 with every unit sold, with very costly and complicated hardware components. It's going to stay expensive for a VERY long time. Damn Sony is in for some hurt.

 

[jamesnmandy]

i think it's pretty hard to use the Wii as a comparator against the PS3 or 360, it's a very different animal and doesn't warrant anywhere near the same pricetag as the PS3 or 360

 

[Undercover Cop]

i think it's pretty hard to use the Wii as a comparator against the PS3 or 360, it's a very different animal and doesn't warrant anywhere near the same pricetag as the PS3 or 360

Okay fine, forget the Wii. It's still going to be very expensive and above mass market price for a long time using either model (and those were very generous).

 

[dobwal]

Let's paint a best case (though completely unrealistic) scenario for the PS3 to reach mass market price. Suppose Sony will be extremely aggressive with its price drops (since the competition will be doing the same or making killer bundles)? If so, then we can expect a $100 price drop every year (just before Christmas).

This means that:

Christmas 2006 - $599 US dollars.
Christmas 2007 - $499 US dollars.
Christmas 2008 - $399 US dollars.
Christmas 2009 - $299 US dollars.
Christmas 2010 - $199 US dollars.
Christmas 2011 - $99 US dollars.

By the year 2010 we would have already been looking towards the NEXT generation. In fact forget about looking forward that far, do you think people will hold out that long while the 360 and Wii are available alternatives? It took years for even the PS2 to drop to mass market price of under $200 dollars, where it made its most sales.

(Hell, we can even look at this another way. Lets compare this with the PS2 pricing, it launch at $299 and it currently at $129 six years later. That mean that even if the PS3 would follow the same rate of depreciation (56.6% over 6 years) it would be at a lovely $260 by the year 2012. Thats still ten more bucks than the Wii is today.)

And that's the best case scenario: we all know the PS3 won't be following these paths. It's already losing nearly $250 with every unit sold, with very costly and complicated hardware components. It's going to stay expensive for a VERY long time. Damn Sony is in for some hurt.

The PS2 debut in the US was at $299.00, it debut in Japan months earlier for around $387.00. That means the rate of depreciation is closer to 67% and would put the PS3 at 199.00 in six years.

That doesn't account for the fact that Bluray potential for cost savings is actually higher than DVD's potential at the time of the PS2 debut. DVD was a pretty mature technology with sub $300.00 DVD players available at the time of the PS2 debut. However, thats just potential cost saving and if Bluray doesn't dominant then cost will never drop near current DVD levels.

 

[MechanizedDeath]

I don't see a pricedrop before 2008. If demand isn't far behind supply, I'd expect them to keep it $599 all through this year. They didn't get a chance to milk the $600 pricepoint yet. They'll want a Christmas at that price to generate all the profit they can, b/c they should be able to turn a profit by then. Maybe a value pack or a giga pack or something. But a price drop before 2008? I am not optimistic.

BTW, there's still the very capable 20GB at $500. That might become the Premium at some point, with the 20GB models getting phased out. My guess is, like the PSP, they are willing to take a hit on total install base this gen in favor of reestablishing "The Sony Premium". The system comes out on the cusp of a die shrink, and one of the costliest components is an optical drive, which scales great in cost. I'd think they'd want to ride a potential profit margin boom through the time of year when they could sell it the easiest. PEACE.

 

[Arwin]

Yeah, it sucks that people fail to realise there is a 499 PS3. And there is plenty of room for prices to go down, and they will. By next Christmas, I'm fairly sure that we'll see a 399 PS3.

 

[Rangers]

I think a $100 drop in fall 07 is a given. Dont forget that Blu-Ray will drop much faster than normal components would in price. You can think of a lot of the PS3's excess price as fluff. Even if Blu-Ray doesn't win the format wars I would assume this holds true. PS3 alone should create mass manufacturing gains on Blu-Ray.

However, they will face another issue in my opinion once they reach the <$249 mark, the built in HDD $50 cost premium which grows in importance, while seeming irrelevant now.

The thing is one price drop and the 20GB model reaches $399, already a somewhat accepted mass market price by 360. A single price drop. So it isn't all so bad.

Plus I think nobody tends to account for inflation. Yeah it's no big deal on a yearly basis, but over time that 3-5% of inflation adds some significant price drops itself. You can put it another way, that every year a console stays the same price is actually a slight price cut. That is why I think +299 price point are now becoming somewhat accepted. $399 is probably equal to what $299 was ten years ago when PS1 came out.

And that's the best case scenario: we all know the PS3 won't be following these paths. It's already losing nearly $250 with every unit sold, with very costly and complicated hardware components. It's going to stay expensive for a VERY long time. Damn Sony is in for some hurt.

And all (mostly) because of Blu-Ray. Do you think Sony ever asks themselves if it was worth it?

 

[dobwal]

I don't see a pricedrop before 2008. If demand isn't far behind supply, I'd expect them to keep it $599 all through this year. They didn't get a chance to milk the $600 pricepoint yet. They'll want a Christmas at that price to generate all the profit they can, b/c they should be able to turn a profit by then. Maybe a value pack or a giga pack or something. But a price drop before 2008? I am not optimistic.

BTW, there's still the very capable 20GB at $500. That might become the Premium at some point, with the 20GB models getting phased out. My guess is, like the PSP, they are willing to take a hit on total install base this gen in favor of reestablishing "The Sony Premium". The system comes out on the cusp of a die shrink, and one of the costliest components is an optical drive, which scales great in cost. I'd think they'd want to ride a potential profit margin boom through the time of year when they could sell it the easiest. PEACE.

Being that Sony is behind the competition in terms of sales and and a higher price point, I don't think there much of a chance to milk the $600.00 price point. Unless the 360 maintains its price point till next year, I doubt that will happen. The 360 has to do better this year if it really wants to run for the top spot and that probably is going to take a price drop on the 360. This will evitiably force Sony to respond, because I don't think Sony will fare well with a $500.00-$600.00 console versus a $250.00-$350.00 competitor.

While, the 360 is of no consequence in japan, the Wii is still there to place pressure on Sony's pricing. The DS versus the PSP has already showed that a cheaper price even at the cost of graphics but with the addition of a gameplay novelty is formidable competitor. Sony already stated that shipment for the PSP in fy2006 will be less than fy2005 and thats not a good sign for the PS3.

 

[DeadlyNinja]

Yeah, it sucks that people fail to realise there is a 499 PS3.

I think a lot of people do realise there is a 500 bucks PS3, but I believe the common misconception that it's a badly stripped down system (like the cheap 360 model) that's keeping people away from it. At least I think it isn't as stripped down as the cheaper 360.

 

[dobwal]

Plus I think nobody tends to account for inflation. Yeah it's no big deal on a yearly basis, but over time that 3-5% of inflation adds some significant price drops itself. You can put it another way, that every year a console stays the same price is actually a slight price cut. That is why I think +299 price point are now becoming somewhat accepted. $399 is probably equal to what $299 was ten years ago when PS1 came out.

No one perceives inflation in such a manner over a short period of time. A $399.00 360 doesn't look any cheaper to me than it did last year.

 

[Undercover Cop]

I don't see a pricedrop before 2008. If demand isn't far behind supply, I'd expect them to keep it $599 all through this year. They didn't get a chance to milk the $600 pricepoint yet. They'll want a Christmas at that price to generate all the profit they can, b/c they should be able to turn a profit by then. Maybe a value pack or a giga pack or something. But a price drop before 2008? I am not optimistic.

Neither am I.

BTW, there's still the very capable 20GB at $500. That might become the Premium at some point, with the 20GB models getting phased out. My guess is, like the PSP, they are willing to take a hit on total install base this gen in favor of reestablishing "The Sony Premium". The system comes out on the cusp of a die shrink, and one of the costliest components is an optical drive, which scales great in cost. I'd think they'd want to ride a potential profit margin boom through the time of year when they could sell it the easiest. PEACE.

Yeah there's that 20G counterpart to the $60 SKU, but it's very clear on which version Sony wants to sell. The ratio right now is about 15:85.

And Sony actually looses MORE money on the 20 G SKU ($300) as opposed to the 60G SKU ($250) since there are that many hardware costs to adding 40G, some ports, Wifi and a chrome plate.

http://www.isuppli.com/news/default.asp?id=6919




So I don't know how much production costs they can drop to make profits soon...

Seriously, it's like Coca Cola suddenly announcing that they were going to stop making their highly successful mass market product and start making wines at $150 a can. And then wondeingr afterwards why they crashed and burned.

 

[Undercover Cop]

Yeah, it sucks that people fail to realise there is a 499 PS3.

Yeah a $499 SKU that Sony sells in an even lower ration to Microsoft's $299 Core SKU.

It's quite clear which one Sony wants to sell. The reason no one talks about the 20G version is cause it's not an option made available for most people in the first place.

And even then, it's still half a grand.

Does this:

Christmas 2006 - $499 US dollars.
Christmas 2007 - $399 US dollars.
Christmas 2008 - $299 US dollars.
Christmas 2009 - $199 US dollars.
Christmas 2010 - $99 US dollars.

... really change my argument much?

 

[Teasy]

i think it's pretty hard to use the Wii as a comparator against the PS3 or 360, it's a very different animal and doesn't warrant anywhere near the same pricetag as the PS3 or 360

Based purely on manufacturing cost it doesn't warrant anywhere near the same kind of price tag, but what does that matter? What most consumers care about is what a product gives them, how fun it is to use. A console can cost $2000 to make, but if its no fun its not worth $50 to a consumer never mind $2000.

Also I don't see the connection at all between price tag and being competition or not..

 

[dobwal]

Yeah a $499 SKU that Sony sells in an even lower ration to Microsoft's $299 Core SKU.

It's quite clear which one Sony wants to sell. The reason no one talks about the 20G version is cause it's not an option made available for most people in the first place.

And even then, it's still half a grand.

Does this:

Christmas 2006 - $499 US dollars.
Christmas 2007 - $399 US dollars.
Christmas 2008 - $299 US dollars.
Christmas 2009 - $199 US dollars.
Christmas 2010 - $99 US dollars.

... really change my argument much?

Competitive pressure has already put a dent in Sony's price. Doesn't the non-prem go for like $427.00 in Japan? Do you think the first time monthly sales show trend downwards at that $500-$600 price point, Sony won't cave? Xbox saw a price drop after five months and that console never got anywhere near profitable.

 

[Undercover Cop]

Competitive pressure has already put a dent in Sony's price. Doesn't the non-prem go for like $427.00 in Japan? Do you think the first time monthly sales show trend downwards at that $500-$600 price point, Sony won't cave? Xbox saw a price drop after five months and that console never got anywhere near profitable.

The Xbox's losses were big, but not on the scale of Sony's. Read the charts, they are losing the cost of an entire Xbox console, if you want to do that comparison. And Microsoft has the money to handle it. Sony doesn't - their company is only JUST coming out of the red after 10 years..

The price drop in Japan came about because that region has the LEAST PS3s sold, remember? The 100,000 units they supplied while NA got 400,000 so that they could get a foothold over here to stave off Microsoft? Sony figured they could take the loss for a while. And I don't know if you remember, but the Japanese were REALLY vocal about the price over there even more than people here in the States and Europe. It was in national papers everywhere.

Can Sony go about doing that same sort of drastic action elsewhere? And lose even MORE money worldwide? And you said the non-premium version, things are different outside of Japan where they are selling and marketing the premium SKU a hell of a lot more.

How happy would their shareholders become? Don't think consumers and developers are the only folks who ar thinking about jumpig ship should Sony keep slipping up...

 

[jamesnmandy]

Based purely on manufacturing cost it doesn't warrant anywhere near the same kind of price tag, but what does that matter? What most consumers care about is what a product gives them, how fun it is to use. A console can cost $2000 to make, but if its no fun its not worth $50 to a consumer never mind $2000.

Also I don't see the connection at all between price tag and being competition or not..

greater technology demands a greater pricetag

the relatively last gen abilities of the Wii don't warrant a bigger pricetag, thus it is priced lower, but based on it's potential longevity and ability to keep up with what the vast majority of people are comparing it to, the 360 and PS3, it falls far short, my point is Wii pricing doesn't really factor into or cannot be compared to the PS3 and 360, it's like comparing Apples (Wii) to Oranges (360 and PS3), a year from now, the 360 and PS3 will be very capable systems touting specs that many more consumers will be looking for, HiDefinition, great graphics, etc....that the Wii will be lacking

the OP's statement,

(Hell, we can even look at this another way. Lets compare this with the PS2 pricing, it launch at $299 and it currently at $129 six years later. That mean that even if the PS3 would follow the same rate of depreciation (56.6% over 6 years) it would be at a lovely $260 by the year 2012. Thats still ten more bucks than the Wii is today.)

he compared the projected price of the PS3 with depreciation over six years time to the Wii price of today, if one were to depreciate the Wii over 6 years, i dont think it would even be sold.....to be honest, the Wii doesn't have 6 years of demand behind it, nor does it have the abilitites to keep up for 6 years, the 360 and PS3 do, that was my point, that by the time you depreciate a PS3 6 years, the Wii will have been replaced (lets all hope for the sake of competition) with whatever will replace it

something else to take into consideration is the depreciation of the 360....even though it is just as capable as the PS3, it is already priced much lower and more desirable, so after 6 years either it will be ridiculously cheap or will have been replaced as well.......

it will be interesting how far Sony plans to drag out the "useable" life of the PS3

 

[Avon_Implosion]

your theory is full of holes. first, you're basing the future price reduction of the PS3 to the PS2, which was already a mass success; as a result, Sony had no NEED to quickly reduce the price in order to stay competitive, as it was already a mass market success at its original price-tag. Second, you're assuming that the PS3's production costs will stay sky-high for years on end. Sony will no doubt be selling the console at a loss for 1+ year (like almost every other company has done in the gaming market); however, that loss will slowly widdle itself away over the course of the PS3's lifetime, each due to the hardware itself becoming less costly to produce, and the profit they will (hopefully) reap in software. There is also no need to compare the PS3's pricing strategy to that of the Wii, as they tend to appeal to different markets and audiences. the PS3 will need to watch the 360's pricing much more closely. Your doomsday approach to the situation is not warranted, nor logical.

 

[inefficient]

Welcome to 2007

Oh great! Someone found the contentous isuppli.com BOM analysis and we get to have this discussion again...

Good thing too since I was feeling nostalgic for 2006.

 

[Avon_Implosion]

They're a multi-billion dollar company...they can handle themselves.

 

[Carl B]

That iSuppli chart is wrong. Not to say we know what's right, but I know that this thing is not costing $40 in labor to assemble. And $33 for the enclosure? $22 for the mounting cage? What, is Sony paying retail at CompUSA or something?