All purpose Sales and Sales Rumours and Anecdotes [2019 Edition]

Discussion in 'Console Industry' started by AlBran, Feb 4, 2019.

  1. manux

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    My view is sony will keep ps4 around and that is the mass market device. Ps5 looks like it's expensive and is not going to replace ps4 at 249 or even 199$ any time soon. We will likely see ps4 breaking records ps2 set assuming sony can make a true cheap and slim ps4 version. If sony can't price reduce ps4 to less than 200$ does that mean ps5 will also have tough time getting cheaper?

    Other angle for price reduction is that consoles used to have exotic one off hw. This would affect engineering costs, yields... There was plenty to optimize and amortize after release. Now that consoles piggy back on amd pc hw the yields and r&d cost should be much better controlled and spread around than during ps1/ps2/ps3 time.
     
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  2. Shifty Geezer

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    You still haven't said how that strategy affects loss-leading on PS5. ;) Does keeping PS4 around for longer have any impact on the pros and cons of loss-leading PS5?
     
  3. manux

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    I would first define capacity to reduce bom/price over lifetime of product. Selling at loss reduces that capacity.

    Let's assume console sells at +-0 at 500$ and lifetime capacity for price reduction is 250$. This would allow eventually selling cost reduced console at 250$ while not making loss.

    On above scenario if the initial loss was 100$ and retail price 500$ the lifetime low price without loss would be 350$.(600-250)

    The question is, will price drive sales? How low ps5 price has to be for ps5 pro/ps6 to be able to come out in viable pricepoint?
     
  4. goonergaz

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    Perfect, thanks shifty.
     
  5. goonergaz

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    It wouldn’t be 100 more that 100 would likely reduce by a similar overall percentage wouldn’t it? So 300 not 350.

    I believe also that SSD might be a source of cost reduction during the early years like the RAM on PS4.
     
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  6. Shifty Geezer

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    Unless there's a reason that $100 is static, it'll scale with the rest of the system. If the price halves over 5 years, the entire price will halve, making a $50 loss on a year 5 PS5 which'll be absorbed with a game and profitable with a couple of years of network sub. I also don't see much value in pricing your console based on a mid-gen refresh. We don't know what the margins are on those mid-gen consoles and, being clearly premium boxes for a niche, you could get away with charging more for them rather than penny-pinching to reach the mainstream. I'd look only at PS5 cost and value on day 1 and through to the final year cost and value, and looking to keep that curve the best it can be. Any other devices are ancillary and shouldn't IMO be a concern for that bottom-line bread-winner back-bone business strategy of lots of boxes under lots of TVs selling lots of content.
     
  7. manux

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    Given same hw the price reduction capacity would be equal in both cases. It would not be relative to sales price.
     
  8. Xbat

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    I feel NAND storage could be where they take a hit in the beginning. Also the competition also plays a part in deciding what kind of loss or not to take.
     
  9. Silent_Buddha

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    I think a lot of people are losing sight of this when they think about the leeway that companies have to launch with a significant loss leader strategy (PS1, PS2, PS3) versus a very minor loss (almost insignificant) loss leader strategy (PS4).

    Node shrinks are becoming far more challenging and thus coming far more slowly. Also each node shrink now is significantly more expensive than the previous node compared to previous node shrinks. Also complicating things is that the time for the new node to reach cost parity with the older node is taking longer and longer with each new node shrink.

    In other words, there may not be an opportunity to have a 200 USD SOC at launch halve in cost in 3 or so years with a node shrink. So don't look for the SOC going down significantly in cost as it has in previous generations.

    The one area with potential to see major cost reductions within the lifespan of the next gen consoles is likely to be NAND. That's also probably why so much R&D is being focused on the storage subsystem in the next gen consoles. It's the one area where they can potentially spend a lot a launch and see it reduce in cost enough over the next 2-3 years that the hardware might break even.

    Considering the slowing of node transitions and thus limited growth in the amount of power you can pack into an SOC, the storage subsystem is also the area that could give the greatest performance increase to games.

    At least for me, the storage subsystem in the next consoles excites me far more than whatever SOC ends up inside of them.

    Regards,
    SB
     
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  10. Shortbread

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  11. milk

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    That's nor your opinion. It is a fact.
    But an interesting question is: do sony and ms need or even want that kind of longevity these days?
    PS4 and Bone's launches showed a marked uptake in consumer's interest and dollars spent in console gaming. Dragging the old ps360 out for as long as they did proved to have dried some of the exitement around those platforms. But it ended up being necessary, because their launches were so damn expensive, and so were their successor's launch gonna be as well.
    A new gen, generates Buzz, media coverage, and excitement. People who just bought a new machine, wanna buy new shine games to play on it.
    Maybe sony and MS realized they don't want their platforms to last 10 years. 5 is enough. Maybe they are considering going with less.
    How does selling at a Loss help, in those circumstances?
     
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  12. Globalisateur

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    They need to sell at a loss also (mainly ?) because of competition, and the main competitor of Playstation and XB is...PC. This is one of the reason Sony did their mid-gen (mid-premium) console.
     
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  13. Silent_Buddha

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    It is arguable how well that would apply to this generation, however. For example, would we have seen the consoles reduced to their current price point if they had launched with say a 100 USD higher BOM?

    Meaning, would Sony want to continue eating a 100 USD loss on each machine sold this late in the generation? Or 50 USD loss? Opportunities to cost reduce are coming more infrequently and at smaller increments than it has for prior consoles. And that applies to more components than just the SOC. For example, DVD and BRD costs dropped massively over the life of the PS2 and PS3, but are virtually flat for PS4. HDD prices dropped significantly during the life of the PS3 but haven't gone down to nearly the same extent for the PS4.

    Would the install base be all that much larger? Enough to justify the lost profit?

    A major part of why PlayStation and by extension Sony are so profitable right now is because they didn't follow a loss leader strategy with the PS4.

    This is especially important as any losses from the PlayStation 4 couldn't be spun off as an investment to push penetration of other technologies (DVD in PS2, Cell and BRD in PS3) that would potentially bring in revenue in other areas of the company to investors.

    Hell, are we even going to see significant price drops for the next gen consoles over their lifetime? PS4 dropped less in price over its lifetime than PS3. PS5 might drop in price less than PS4 in its lifetime.

    Regards,
    SB
     
  14. milk

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    I never argued against those points. I conceeded that subdised hardware nets the system more longevity, which is unquestionable. I still did so only to put in check the value of such longevity at this day and age anyway. All your other arguments, I agree with.
     
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