Ars Technica rumor claims 399 40GB PS3 this year

[Joe DeFuria]

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

Not necessarily.

There is definitely a "magic price" where a console will take off. Just because with last generation's consoles that price may be $200, doesn't mean that's the case with this generation.

Inflation, and value proposition can increase the "magic price."

It will be interesting to see what a $249-$279 "Arcade" 360 sku does this season, if we do see it.

 

[TheChefO]

Not necessarily.

There is definitely a "magic price" where a console will take off. Just because with last generation's consoles that price may be $200, doesn't mean that's the case with this generation.

Inflation, and value proposition can increase the "magic price."

It will be interesting to see what a $249-$279 "Arcade" 360 sku does this season, if we do see it.

Indeed it isn't a magic price. But it is the price point which sold the most ps2 units and if I'm not mistaken, the same was true of ps2.

Where that point will be in the future is anyones guess, but I can gaurantee you, the same product for less money will always sell more.

 

[scooby_dooby]

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.

First, I think the percieved value proposition between PS3, and Xbox1 when it launched are an order of magnitude different.

Second, I never argued that being 'super aggressive' is always the way to go.

• My calls for MS to drop price last spring, a 25% cut, 18 months after launch is not 'super aggressive', similar pricecuts have been seen throughout the industry for decades. MS's current strategy would certainly be defined as a conservative approach.
• In the case of Xbox1, a lower price than PS2 woudl not have done much, as demand was not there, so an aggressive price strategy would not have worked in that situation either.

Now, in the case of PS3 we have something totally different. We have a system that is prohibatively priced, where there is significant demand, but just not at the current price of $500-600.

We also have the Xbox360, proving they can move 6million units in the US at the $400 pricepoint, with a smaller pre-existing userbase, less functionality(bluray), and widespread reliability issues.

I don't think it's unreasonable to guess that the PS3 would sell very well at $400 this holiday, I think ~1.5 would be possible in Nov/Dec. 360 did it last year at $400, on probably a lesser library than PS3 has now.

I don't really understand the complete lack of faith in sales. Just because a product doesn't sell at some ridiculous price, doesn't mean it won't start moving once you bring down to something reasonable.

Anyways, I guess I've argued this enough, I'm obviously in the minority here... and in second thought, Sony probably is not in that much risk of losing major western support anyways.

 

[Joe DeFuria]

Where that point will be in the future is anyones guess, but I can gaurantee you, the same product for less money will always sell more.

Agreed...it also always meas less profit per sale.

One thing MS (or any console maker) needs to be wary of is reaching a mainstream price without having the mainstream software to support it. If you are not selling the cosole itself for a profit, you don't want someone to "impulse buy" the thing, play a few hours with it (one or two games), and then find out there is not the "kind" of software available to suit their tastes.

With "Arcade" (live) games and a wider variety of quality software just coming out this season, MS is positioning itself well, but I personally feel that next X-mas ('08) will be the perfect time for the 360 to hit "mainstream" pricing. Hopefully by then the 360 will have earned a bit more of a reputation as a competitor to Wii for the "casual" gamer in terms of content, and the costs to manufacture will be close enough to minimize risks of losses for casuals that may be of the "low attach rate" type.

 

[TheChefO]

I don't think it's unreasonable to guess that the PS3 would sell very well at $400 this holiday, I think ~1.5 would be possible in Nov/Dec. 360 did it last year at $400, on probably a lesser library than PS3 has now.

True, but I think the timing is different and consequently the market is different.

Had Sony launched at $400 (even $400-500 with limited availability of the $400 unit) I think they would be seeing a very different outlook at this point.

I think too much time has gone by with too little reason for many gamers to wait for Sony and mentally, many are saying to themselves, "Wii or xb360?".

It's partly price and partly games. Sony droped the ball on both from a leadership perspective.

 

[dobwal]

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

"aggressive" and "reactive" dont have opposite meanings, you can both reactive and aggressive at the same time

Sony cut is not "aggressive" as it came 18-19 months after introduction. It also came after 3.5 quarters of profits. Sony's price cut was done out of desire to spread further into the market. The purpose is to move as much hardware as possible to maximize software sales, so any manufacturer is going to have price reduction strategy plan that going to be there regardless of competition and there is no point at sitting at $299 for 3 holiday season, when you seeing cost reductions.

MS didn't have the luxury of almost a year of profit from its gaming division or the demand level of the PS2

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...

Definite 1 maybe 2, while MS in relation has about 6 with 6 more quarter to go. Irregardless of apples and oranges, Sony was in a very comfortable position to make a price cut given the PS2 time already on the market and the financial performance of the gaming division over the previous 3 quarters.

MS pricecut is on the eve of its first possible profitable quarter during the life of the 360.

 

[Joe DeFuria]

I think the percieved value proposition between PS3, and Xbox1 when it launched are an order of magnitude different.

Not sure why you are comparing perceived value of PS3 to XBox1? It's the relative perceived value of "PS2 vs. XBox1" and "PS3 to XBox360" that matter.

• My calls for MS to drop price last spring, a 25% cut, 18 months after launch is not 'super aggressive', similar pricecuts have been seen throughout the industry for decades. MS's current strategy would certainly be defined as a conservative approach.

As someone else mentioned, a 25% cut at a time when you are not currently the highest price console does seem super aggressive to me.

Now, in the case of PS3 we have something totally different. We have a system that is prohibatively priced, where there is significant demand, but just not at the current price of $500-600.

I still cannot see how you can insist that there "is" significant demand "just not at $500-$600." All we know is that there is not significant demand at current prices...we have nothing other than guesses as to what demand would be at any specific lower price. All guesswork.

I recall lots of folks saying that 360 would not see any significant price jump for a "measly" $50 price cut. How did that guess work out?

Now, to be clear the demand for 360 is likely due to a multitude of factors...which include the price drop, but not the price drop entirely. (Likely, price drop plus newly released software (BioShock/Madde), and expectations of upcoming software...Halo3).

My point (again), is that price PLUS perceived value = demand. 360 got a jolt from two directions this summer: "small" price cut, plus "pretty big" value prop increased (new software) combined to drive up sales. It's questionable how much more sales would have increased from a larger price cut.

We also have the Xbox360, proving they can move 6million units in the US at the $400 pricepoint, with a smaller pre-existing userbase, less functionality(bluray), and widespread reliability issues.

1) Personally, I think the "pre-existing user base" is widely overblown as a factor. The user-base flocks from console to console as conditions warrant. See pretty much all previous generation consoles.

2) Blu-Ray...how much "value" do gamers give to blu-ray as a feature? Hard to say, particularly when at this time the format war looks to be pretty even and even tilting toward HD-DVD.

You seem to argue that it's a "given" that at an identical price point, consumers would see PS3 as the more valuable console over the 360. I don't think we can assume that.

I don't really understand the complete lack of faith in sales. Just because something doesn't sell at some ridiculous price, doesn't mean it won't start moving once you bring down to something reasonable.

On the contrary, I don't really understand the position that price is really the only thing hindering PS3 sales...

 

[scooby_dooby]

Sony cut is not "aggressive" as it came 18-19 months after introduction. It also came after 3.5 quarters of profits. Sony's price cut was done out of desire to spread further into the market.

Not gonna argue with you over semantics. It was clearly a much more aggressive pricing strategy than MS's current one..

MS pricecut is on the eve of its first possible profitable quarter during the life of the 360.

Ya..one the 'eve', as they just wrote off 1billion in future expenses

 

[scooby_dooby]

On the contrary, I don't really understand the position that price is really the only thing hindering PS3 sales...

Name me a console that was ever succesful at $500.

Not sure why you are comparing perceived value of PS3 to XBox1? It's the relative perceived value of "PS2 vs. XBox1" and "PS3 to XBox360" that matter.

Because you raised the Xbox1 as an example of something with low percieved value. And then, put words in my mouth by saying I would advocate the same strategy for Xbox1. I'm pointing out that's not the case. I feel the PS3 does have high value, wheras Xbox1 did not.

I still cannot see how you can insist that there "is" significant demand "just not at $500-$600." All we know is that there is not significant demand at current prices...we have nothing other than guesses as to what demand would be at any specific lower price. All guesswork.

Ya, just guesswork. Just like your guesses that it would not sell.

We know a few more things than that as well, we know no console has ever sold at such a high price, we know that the 360 has sold succesfully at $400, and we know the vast majority of gamers from last generation, predominantly ps2 owners, have not yet purchased a console.

Personally, I think the "pre-existing user base" is widely overblown as a factor. The user-base flocks from console to console as conditions warrant. See pretty much all previous generation consoles.

I think it's overblown, as evidenced by the PS3's sales, but it's still more significant than you're giving it credit for.

 

[dobwal]

Not gonna argue with you over semantics. It was clearly a much more aggressive pricing strategy than MS's current one..

Ya..one the 'eve', as they just wrote off 1billion in future expenses

I guess our definition of "aggressive" is different. You seem take account timing of the ps2 price drop in relation to the GC and xbox time on the market.

I take account time, financial performance as well as overall shipped and sales through numbers.

 

[Joe DeFuria]

Name me a console that was ever succesful at $500.

Did I say that a console would be successful if it remains at $500 forever? I know there are consoles that were not "sucessful" even when they reached $199 price points.

So what's your point?

Because you raised the Xbox1 as an example of something with low percieved value.

At launch...relative to PS2.

I feel the PS3 does have high value, wheras Xbox1 did not.

I feel the PS3 does NOT have very high value relative to the xbox 360.

We know a few more things than that as well, we know no console has ever sold at such a high price, we know that the 360 has sold succesfully at $400...

Interesting...what console has ever been successful at $400 before? I guess there is one now...

The PS3 COULD have been successful at $500...if the platform delivered more value for the price.

Again...to drive the point home: "success" (demand) = combination of price and perceived value

and we know the vast majority of gamers from last generation, predominantly ps2 owners, have not yet purchased a console.

And the vast majority wont until the combination of price and value meets their needs...from whatever vendor delivers it to them.

I think it's overblown, as evidenced by the PS3's sales, but it's still more significant than you're giving it credit for.

The impact of prior generation user base is not overblown simply based on current PS3 sales...its based on console sale and leadership hand changing ever since the Atari 2600 days.

 

[Joe DeFuria]

Ya, just guesswork. Just like your guesses that it would not sell.

One more thing...I did not say that PS3 would not sell or even sell "successfully" (significantly more volume) at $400. It might.

I'm saying that "selling successfully" at $400 may ultimately do Sony more harm than good, which apparently is exactly what Sony has calculated and is the reason why they are not going that route at that time.

 

[Heinrich4]

The most part of Joe says im agree but i have to increase 2 points:

1 - Ps2 japan was release at 03/04/2000 =~ US$380 (with memory card include)/~= 100/110 yens per dolar= 39800 launch price at this time and sold something like 980 thousand consoles in less 3 days...(certainly MS see this and focused price at similar levels price release x360 same in time release)...so ps2 in launch date is the first console at near US$400 levels with success;

2 - Another point is there probably many ps2 consummers(more tham going to x360 and wii...) in "stand by"/ waiting some day for new price redution at levels 300/400 dolars to purchase... and this who knows maybe can drained sales of ps3 to.


(sony needs today 2 things: more games "AAA" like and price sub US$499...in march/08 maybe is too late )

 

[Cheezdoodles]

Again...to drive the point home: "success" (demand) = combination of price and perceived value

Success for console manufacturers:

Success = having a higher than 0 NPV after the project its discounted on whatever internal rates they have predicted.

Edit: Which is why MS is struggling to continue to the Xbox franchise unless they start showing some results soon. Stockholders = not happy

 

[avaya]

Sucess for console manufacturers:

Sucess = having a higher than 0 NPV after the project its discounted on whatever internal rates they have predicted.

They use payback over NPV. They are silly.

 

[Cheezdoodles]

They use payback over NPV. They are silly.

Who does?

Ms and Sony? Are they retarded?

And if they do, they need to fire their finance divisions, they are obviously not qualified for the job. Going by payback only when deciding on projects is.... well.... dumb.

 

[Joe DeFuria]

Success = having a higher than 0 NPV after the project its discounted on whatever internal rates they have predicted.

I agree 100%. That's why I put "success" in quotes in my previous post...because Scooby seems to put a great emphasis on getting as large an installed base today to bring about "success."

I'm only trying to point out to him that increasing demand by lowering the price has a cost associated with it. So even if there is a significant demand increase via a large price drop...this doesn't mean it's in Sony's best interests to do so.

 

[scooby_dooby]

I'm only trying to point out to him that increasing demand by lowering the price has a cost associated with it. So even if there is a significant demand increase via a large price drop...this doesn't mean it's in Sony's best interests to do so.

Seriously Joe, get over yourself.

Just because I don't agree with your opinion doesn't mean I don't understand and agree with these basic concept's, such as costs associated with a pricedrop, or the definition of value

You don't need to constantly repeat yourself as if you're telling me something I don't know. I'm aware of all those things, it doesn't change my position that Sony will be much more succesfull in the long run, if they invest the extra 300-400million required for a pricedrop this holiday. I'm not the only one here who feels 2008 may be too late.

And for the second time, I'm over with this debate, it's simply going in circles.

 

[Joe DeFuria]

Seriously Scooby, we wouldn't be going in circles if any of your posts actually demonstrated that you do get the "basic concepts" such as a value proposition.

I mena, you asked me questions about when was a console "ever" successful at $500? Asking me that question certainly doesn't convey to me that you understand the value concept.

Comparing the "value" of PS3 to XBox 1? Same thing.

Now personally, I think you do understand the concepts, but for some other reason (stubborness?) refuse to simply acknowledge them.

Leave the thread or stick around...don't care. I'm only still up because the Yankees came back late in the 9th and are in extra innings.

 

[RancidLunchmeat]

Oh, come on people.

The only REAL question that exists at this point is HOW FAR BEHIND Sony expected their sales to be in relation to the 360.

Despite all the fanfare, everybody has already discounted the Wii as insignificant, regardless of their sales.

Their software adoption ratio has only further cemented the fact that whatever hardware sales the Wii gets are irrelevant in the larger "Console Wars" picture.

I think it's OBVIOUS that Sony expected their sales to fall behind the 360's for the first two years, and possibly through the third year as well.

The real question at hand is whether or not they expected to fall behind THIS MUCH.

I really do enjoy the quite obvious FANBOY statements from all parties involved, as you see people clamoring to state that Microsoft didn't LOWER THEIR PRICE quickly enough or in great enough DEGREE while you see Sony fanboys stating the same factor on the other side of the coin.

People keep bashing MS for not lowering the price more than they did for this holiday season and people keep basihng Sony for not doing essentially the same thing.

How difficult is it to REALLY understand that both MS and SONY had pre-laid plans that are dictating their pricing strategy and that both are TOO EARLY in their lives in order to adjust?

I would say that MS is "pushing" their pricing strategy at the moment and getting MORE out of their inventory than they previously believed was possible because of Sony's miscues.

I would also say that Sony is pretty much RIGHT WHERE THEY EXPECTED TO BE in terms of sales at their current price point, with a slight hesitation towards the fact that the 360 seems to be gaining ground that they didn't expect.

So, to summarize what "the Suits" think of all this.. I'd say that the 360 is VERY PLEASED with their current sales rate and it's higher than they expected so it's putting OFF a price cut.

I'd also say that the PS3 is selling ACCORDING to their expectations, but that they are disappointed by the adoption of the 360 which might indicate a problem for the PS2-PS3 transfer rate.

It seems to me that the FANBOY CONSUMERS keep wishing and hoping for price drops from both the 360 and the PS3 that aren't needed or dictated by the sales statistics we have available.

It's as if everybody assumes that the first console to hit $199 automatically wins, and that is a FOOLHARDY assumption considering that both of these consoles cost a tremendous amount of money to produce!

Yes, the snowball effect most certainly DOES seem to favor MS and the 360 at this point, but Sony would have clearly known that was the case EVEN BEFORE LAUNCH unless they were run by a complete set of idiots.

Both MS and Sony launched at HIGH price points and so far both MS and Sony have REFUSED to drop the price point significantly despite what the "Internet Idiots" declare are necessary in order to "win".

Maybe you should all re-evaluate what it is you expect from this generation in terms of sales, because it doesn't seem like anybody seems to understand the same 1) Price Point, 2) Life Span, 3) Added value of these consoles when you are making these evaluations.

I can't believe that on THIS FORUM on THIS WEBSITE we're having this level of conversation.

Seriously, people.