Ars Technica rumor claims 399 40GB PS3 this year

[Johnny Awesome]

I actually think Sony is forced to play it conservatively here. They have to stay at $500 or above this year and hope that the likes of MGS4, GT5, and FFXIII along with a $400 price point and Blu-Ray can save them. If not they have to remain profitable for the whole generation and cutting price won't do that for them.

 

[Tap In]

A 33% cut after 18 months is not aggressive? When you're drastically outselling your competition??

Surely, at the time, you would've argued that Sony was not in need of a pricedrop, and should concentrate on profitability, no?

It certainly was aggressive, much moreso than the 13% pricecut implemented by MS after 18-19 months.

while I agree with you in principle that MS should be more aggressive in their price strategy, let's not forget that PS2 did not have a competitor in the price range above them.

MS has got to be careful to not get too far away from Sony price-wise (downwardly) as to not give the false impression that it is any lesser of a value/machine (which is why there is even an Elite IMO). People are conditioned to think price equals value.

it is a delicate balance.

 

[TrungGap]

Is there though? I'm not feeling the love right now in NA for the PS3.

I agree...In the mind of perspective buyers(gamers), the PS3 has a lot of potential, but just not right now. So there's no need to get one right now.

I think most people here had said something about the Sony PR guy, talking about how the games have yet to unlock the power of the PS3, was the stupidest comment by any PR guy. As seller of anything, you want people to act today, as nobody can predict the future. That's why when you go to a car dealer, they offer you a deal, but only if you act today.

So Sony needs more than a price cut right now. They need games now, which they don't have...so they need to be creative here. Do a Christmas bundle. Dig up some holiday Sony Classic movies and holiday limited edition of MotorStorm or something. It's time they offer something cheesy and gimmicky to get everyone in the spending mood.

Of course, they can sweeten the deal with a price cut, because I really tempted with PS3 just for Ratchet and Clank.

 

[dobwal]

I have no doubt that in 2001, both you and Joe would be arguing that Sony should maintain their $299 pricepoint to increase revenues. There was certainly no pressure, or any need for them to drop price at that point, yet they did.

Thats doubtful. Look at the scenarios.

PS2
18-19 months before first price drop
7-10 million consoles in the US alone and 12-15 million worldwide
US sales leader in overall sales as well as month to month (300-400K)
leader in software and peripheral sales.
Target for next fiscal year 25 million units

PS3
10-12 months
2 million in the US and 5 million worldwide
behind to all competitors in overall US sales as well as month to month (100-150K)
behind competitor in software and peripheral sales.

Xbox 360
18-19 months
5-6 million in the US and 10 million worldwide.
US sales leader in overall sales but not month to month (150-180K)
back and forth with the Wii for leadership in software and peripheral monthly sales. Huge amount of stuffing the channel going on. Forecast for shipments for the next 6 months: >2 million. RROD problems that undermining actual cost incurred through hardware sales by creating high cost through warranty replacements.

Who by far has the most leverage when it comes to a price cut without little or no affect on their bottom line.

 

[Joe DeFuria]

I have no doubt that in 2001, both you and Joe would be arguing that Sony should maintain their $299 pricepoint to increase revenues.

And you would be wrong.

For some reason, you just seem to ignore that the absolute price is not the only thing that stimulates demand. It's the value proposition (what you get for the money) combined with the absolute price.

Relative to the competition, PS1 had lots of perceived value to offer vs. its competition. (Software library for starters). PS3 right now? Not so much.

Sony has made a ton of mistakes already this generation....

I agree there. Principally, I think Sony was overall too aggressive (technology wise) with PS3. Ultimately, leading to a much higher cost of the console (without much value-add for gaming), and more importantly gave MS the early opportunity to ship much earlier and gain a foot-hold.

And sometimes, Scooby, you can't make-up for your past mistakes this generation. What you can do is learn from your mistakes, while keeping things afloat as reasonably as you can.

I'm not saying this is definitely the case here with PS3, but it clearly might be.

A lot...I mean a LOT of the future of PS3 is going to hinge on the 2008 software line-up. (Stating the obvious I know...)

 

[scooby_dooby]

Who by far has the most leverage when it comes to a price cut without little or no affect on their bottom line.

Impossible to say without know the BOM for the consoles at that point in time.

What we can say those points do make clear, is that the PS2 was the one console LEAST in need of a priceut. The one with the largest cushion, and the least amount of pressure, was actually the one that was most aggressive.

We know that strategy worked, and paid off in spades.

We have no idea how MS's middle of the road approach will play out.

So I would argue history favours my proposed strategy much moreso than yours.

Other than Nintendo, how many console manufacturers have managed to make a good profit in 2nd place, and survive generation to generation?

 

[Heinrich4]

The Sales of x360 reachs big jump,how many (%..) Elite participate this(more effective to resist 3rls)?

 

[Joe DeFuria]

We know that strategy worked, and paid off in spades.

No, we do not.

For all we know, Scooby, is that if they didn't drop the price, Sony STILL would have completely dominated that generation...just with much larger profits.

For all we know, Sony knew this, but was sacrificing some profits to try and force MS out of the cosole space (by forcing MS losses to be astronomical and not enter the next generation race). That didn't happen either.

Based on your logic, XBox-1 should have been "super aggressive" in price (even more than they were), and that could have turned the tide?

Price + Value Proposition = Demand.

If the value prop is not there...dropping the price will ultimately have little effect.

 

[AlphaWolf]

xbox360 went 21-22 months before a price drop, not 18-19. Price drop was in August 2007, release was in November of 2005.

 

[TheChefO]

Price + Value Proposition = Demand.

If the value prop is not there...dropping the price will ultimately have little effect.

I think that's his point WRT MS.

The value prop IS there ATM, thus, demand would be through the roof had they been more aggressive with their pricing.

OTOH, PS3 isn't in such a position, yet.

 

[TheChefO]

For all we know, Sony knew this, but was sacrificing some profits to try and force MS out of the cosole space (by forcing MS losses to be astronomical and not enter the next generation race).

The roles were reversed this Spring, and MS took their foot off the gas.

Who knows how it would have ended, but I can say with confidence that MS would have clearly outpaced ps3 with a $100 price cut across the board this spring and secured the gen. Even with a pricecut response from Sony, momentum was on MS' side at the time and the software library was (and is) building. The only thing that would have made it worse for Sony would have been having GTA4 on the shelf this year too in combination with Halo3 and a $200 core sitting on the shelf for Christmas shoppers.

It would have been an interesting battle to see though.

 

[dobwal]

Impossible to say without know the BOM for the consoles at that point in time.

What we can say those points do make clear, is that the PS2 was the one console LEAST in need of a priceut. The one with the largest cushion, and the least amount of pressure, was actually the one that was most aggressive.

We know that strategy worked, and paid off in spades.

We have no idea how MS's middle of the road approach will play out.

So I would argue history favours my proposed strategy much moreso than yours.

Other than Nintendo, how many console manufacturers have managed to make a good profit in 2nd place, and survive generation to generation?

Actually the Xbox as well as the GC took more aggressive stance toward price cutting by starting their price cutting cycle 6 months into their life cycle. Their price cutting did little to impede the sales of the PS2 and did no more than stabilize their sales around 150K monthly each year.

You do know that the PS2's $199.00 price cut came during profitable quarter for Sony's gaming division and not a loss something that wasn't possible for the 360 last spring?

Actually the price cut came in the middle in a profitable quarter and Sony gaming had seen profits for the last 3 quarter before the PS2 had a price cut.

 

[Joe DeFuria]

Who knows how it would have ended, but I can say with confidence that MS would have clearly outpaced ps3 with a $100 price cut across the board this spring and secured the gen.

I'll simply have to disagree. Yes, they would have gotten more sales, but enough to secure this gen? I can't say that.

And what is so special about $100? Why shouldn't it be $150, $200...or why isnn't $50 enough to secure this gen for that matter?

IMO, no matter how many MS sells this season, we really have to wait for Sony to make its first major move (and then see the effects) to determine if MS will have "secured" this gen. I'm assuming Sony's "move" will be in the spring, with a "re-launch" of sorts: highly anticipated titles, Home + price-cut (plus whatever else we may not know about).

It would have been an interesting battle to see though.

Certainly agree there!

 

[Heinrich4]

I have the impression Sony really believes whith only sell games will be enough to make ps3 as console videogame(...) a good competitor (against wii,x360 at US$ 250/350) with high prices.

(theses a big ,big mistake .. like PSX/tivo console like times ...they need a better price now! )

 

[Mythos]

That interview is laced on a bunch of "maybe"s that dependent on cost reductions on the RSX, Cell and BluRay that may or may not happen in fiscal 08. A margin of zero is dependent on a uncertain price point but its unlikely its a $399.00 price point as that would more than likely mean that the $599.00 80Gb PS3 is already breaking even.

The article seems to pull out of thin air that the Sony loses $200.00 for every PS3 sold, which means it cost Sony $700 for the 60Gb sku and $800 dollars for the 80Gb, which seems unlikely because 20 extra gigs and a pack in game shouldn't cost a $100.00 for Sony.

Well Sony is at 65NM Manufactoring and also software emulation for back words compat...so their is some cost reductions in place...

You seem to be pulling out of thin air how the PS3 is losing the $200. per unit.....

 

[Carl B]

You seem to be pulling out of thin air how the PS3 is losing the $200. per unit.....

It's not him that was pulling $200 out of thin air, it was the article you referenced. If you read the last sentence in the quote of his you provided, you'll see that.

 

[Mythos]

It's not him that was pulling $200 out of thin air, it was the article you referenced. If you read the last sentence in the quote of his you provided, you'll see that.

Yup. the reference is that he was holding to $200 dollars per unit lose without where that number is coming from...editorial...What Sony is losing per unit is an unknown.

 

[dobwal]

Well Sony is at 65NM Manufactoring and also software emulation for back words compat...so their is some cost reductions in place...

You seem to be pulling out of thin air how the PS3 is losing the $200. per unit.....

Retail PS3es at the moment have no 65nm Cell or RSX only that 65nm production of the Cell has started at IBM. Plus there is no guarantee that those 65nm units will show up before March 08 as the article keep stating that cost price down related to those components "may" occur not "will" occur before the fiscal year is out.

No Im not. Im assuming the PS3 is losing <$200.00 per unit, whether thats $1 or $199.00.

 

[TheChefO]

And what is so special about $100?

Getting to the $199 price bracket with great software is key to sales. Especially going into the holidays.

Check ps2 sales after price drop to see what I mean.
They had a solid games lineup and an affordable price. End result was 20+ million units moved that year.

I'm not saying MS would have repeated the exact performance, but I imagine they'd be moving a bit more than the 1.x million they've done so far.

I think 10m is a fairly conservative projected number to have expected.

 

[scooby_dooby]

Actually the Xbox as well as the GC took more aggressive stance toward price cutting by starting their price cutting cycle 6 months into their life cycle. Their price cutting did little to impede the sales of the PS2 and did no more than stabilize their sales around 150K monthly each year.

That's not aggressive, it's reactive. They had no choice, due to pressure put on them by Sony.

You do know that the PS2's $199.00 price cut came during profitable quarter for Sony's gaming division and not a loss something that wasn't possible for the 360 last spring?

Actually the price cut came in the middle in a profitable quarter and Sony gaming had seen profits for the last 3 quarter before the PS2 had a price cut.

How many unprofitable quarters did sony have from 2001-2003? And haven't ALL previous Xbox pricedrops, including Xbox1, come during a negative quarter for the games division? Sortof apples and oranges.

If MS waited until a profitable quarter, they'd be sitting there until sometime in 2008...