KK again claims PS3 will be costly.

[BenQ]

The psychology of pricing is very complicated. As long as it's not sky-high, they'll be fine, for a while at least.

Being more expensive than the competition is not necessarily problematic on its own. In isolation, cheaper pricing may not help. The "cheap" approach didn't help Nintendo a whole bundle this generation. Striking a balance between "reassuring expense" and "affordability" would be key, and could work well for PS3, which already has the whole "premium" image locked down.

Basically, within certain boundaries, cheaper isn't always better, and more expensive isn't always worst from the perspective of the market. It all has to be part of a larger proposal, made up of many different components.

I agree. Being more expensive than your competition does NOT spell Doom. The GC reached rediculiously cheap prices this gen, and yet it sold less hardware than the other more expensive consoles.

But there is a line where it could be TOO much. At a certian point a LARGE percentage of the population wil simply have to say "Nope. I can't afford it, that's just too much." I think $399 is about as high as they could go before they hit that line IMO, and even at $399, many will have to simply say "I'll get it, but I can't afford that much right now."

If M$ can hit that sweet spot of $299 ( or even $349 ), it will only have a positive impact on sales.

 

[Carl B]

For a company like Sony who pulls in somewhere in the low 11-figure revenues per year, there's only so low they can afford to go as compared to a Microsoft who probably pulls in 11-figure revenues in one quarter. MS could almost afford to give away 360 for free... did I say "almost"?

Although, Sony might make some more money back with first-party titles since they simply whip them out quicker. Still, a God of War 2 will probably still not pull in the bucks that a Halo3 would.

Well, in actuality Sony has close to twice in yearly revenues what Microsoft does ($67 billion to MS's $40 billion). It's Microsoft's margins which allow them to carry such a clear profit lead over Sony, on the order of ten-to-one.

Here's some financials:

Sony

Microsoft

 

[BenQ]

For a company like Sony who pulls in somewhere in the low 11-figure revenues per year, there's only so low they can afford to go as compared to a Microsoft who probably pulls in 11-figure revenues in one quarter. MS could almost afford to give away 360 for free... did I say "almost"?

Although, Sony might make some more money back with first-party titles since they simply whip them out quicker. Still, a God of War 2 will probably still not pull in the bucks that a Halo3 would.

Well, in actuality Sony has close to twice in yearly revenues what Microsoft does ($67 billion to MS's $40 billion). It's Microsoft's margins which allow them to carry such a clear profit lead over Sony, on the order of ten-to-one.

Here's some financials:

Sony

Microsoft

Sony is not in good shape as of late. Have you seen their newest forecast? They had to slash their FULL YEAR profit outlook by a WHOPPING 90%!

TOKYO - In the latest sign of trouble for Sony Corp (NYSE:SNE - news)., the electronics and entertainment company slashed its full-year profit outlook Thursday by nearly 90 percent and said it slumped to a first-quarter loss because of falling prices and a big charges for reviving its ailing consumer products business.

Sony now expects net income of 10 billion yen, or $89.3 million, for the fiscal year ending March 31, 2006, compared with an April forecast of 80 billion yen, or $714 million. Sales will be 7.25 trillion yen, 3 percent lower than its April outlook, the Tokyo-based company said in a statement.

Sony blamed the downgraded outlook on bigger than expected restructuring costs, falling electronics prices and sliding television sales. The revision underlines the company's difficult struggle in fighting off growing competition in consumer goods from cheaper Asian manufacturers such as Samsung Electronics Co., while falling behind other rivals in hit products like the iPod from Apple Computer Inc.

In March, the company appointed Howard Stringer chairman, the first foreigner to head a major Japanese electronics firm, and charged him with the task to improving results at Sony's faltering core electronics business. Stringer is a dual British-American citizen and former executive at CBS Inc.

Sony said the company posted a net loss of 7.3 billion yen ($65.2 million) in the three months ended June 30, compared with a profit of 23.3 billion yen a year earlier. Sales dropped 3.3 percent to 1.56 trillion yen ($13.9 billion), from 1.61 trillion yen.

Results for the fiscal first quarter were slammed by a 15.9 billion yen ($142 million) restructuring charge, of which 15.5 billion yen was dedicated to reviving the electronics units.

Electronics sales declined 1.4 percent to 1.12 trillion yen ($10 billion) in the period. Falling unit prices for such goods as liquid crystal display televisions were responsible for the division chalking up a 35.3 billion yen ($315 million) operating loss, the company said.

Sony's game unit, which makes the
PlayStation 2 and PlayStation Portable gaming consoles, saw a 64 percent sales increase to 105.4 billion yen ($941.1 million). But the division also booked a 5.9 billion yen ($52.7 million) operating loss due to marketing and research expenses. That loss widened from 2.9 billion yen the previous year.

Shipments of the PSP, which went on sale late last year in Japan and earlier this year in the United States, totaled 2.09 million worldwide, while PS2 sales rose nearly fivefold to 3.53 million units.

In the motion picture segment, Sony reported a 3.5 percent rise in operating profit to 4.1 billion yen ($36.6 million) on a 2.6 percent decline in sales. Profits were bumped up by distribution fees from the library of titles associated with U.S. film and television studio Metro-Goldwyn-Mayer.

Stringer, who ran Sony's entertainment operations before assuming the corporate helm, oversaw the April acquisition of MGM for about $2.94 billion cash, and assumed debt of about $1.9 billion.

Home video releases of "Hitch," "Are We There Yet?," and "Boogeyman" helped offset lower box office revenues in the United States and the release of fewer films, Sony said.

Sony's shares, which have risen slightly this year but are still worth about half of what they were four years ago, gained 0.26 percent to 3,850 yen Thursday on the Tokyo Stock Exchange. The company released earnings after the market closed.

Sony is in the worst possible shape for a pricing war with M$.

 

[London Geezer]

Yes, Sony and MS's profits will always be very different simply because one is a hardware company, whose every manufactured product carries a cost (e.g. Plasma TVs, Sony spends a lot to manufacture them so their profit will be affected on each unit sold), and the other is a software company who rips millions of people off by overcharging products with virtually no cost per unit and sometimes demanding multiple licensing fees even from the same copy of their software (e.g. Office XP, MS spends money to develop it, then there is virtually no cost involved in selling the product itself, or the cost - mainly for packaging - is negligible compared to price we pay to license it - one office will have to buy a license for each and every PC used, even if the office itself uses the same copy of Office to install on all PCs - and that's a lot of profit right there).

Sony might have higher revenues than MS, but their costs will always be higher than MS, therefore their profit will always be affected.

 

[Shifty Geezer]

If M$ can hit that sweet spot of $299 ( or even $349 ), it will only have a positive impact on sales.

This is less of an impact at launch as demand invariable outstrips price, especially this upcoming gen of consoles I think. At $300 MS will sell all they can make for say the first year. That would probably also be true at $350-400. Those that really want XB360 will get it, even if it means doing a bit of overtime. Like, if people will spend n hundred bucks on a golf club, or whatver they're hobby is, they'll finance it.

The key price is after launch and you're manufacturing's well tuned and you can pump truckloads of the kits out. Then you have to make sure price isn't too high that you'r not selling shipped stock, but not too low that you're losing profits (at least, that's corporatye thinking, not gamer thinking).

Indeed, in terms of marketting getting PS3 out there at $500 means when the price drop comes, everyone goes 'wahay I can afford this 'luxury' item. I mean, imagine how many people would buy a Ferrari F350 if it got a price drop to 15k!

 

[Carl B]

Sony is not in good shape as of late. Have you seen their newest forecast? They had to slash their FULL YEAR profit outlook by a WHOPPING 90%!

Yeah yeah I know BenQ, don't act like you're not happy.

Anyway Sony's going through hard times right now, no doubt - but if you see the forest through the trees it seems that they're starting to execute once again on the engineering and design side of things. Their TV's are carrying a good reputation again, Sony Ericsson is 'chic,' PSP - though not the blockbuster - is slowly gaining traction, and they're finally fighting back on the MP3 front. I just think some of the image of Sony as a 'hip' brand is starting to return, and that is key when your pricing power is based so much on brand.

Anyway we'll see what happens. I think if the CE division begins to improve their situation, then even if they experience reduced earnings next year due to the PS3 launch, their underlying financial foundation will be improving drastically.

(And also - remember not to post whole articles! )

 

[London Geezer]

Indeed, in terms of marketting getting PS3 out there at $500 means when the price drop comes, everyone goes 'wahay I can afford this 'luxury' item. I mean, imagine how many people would buy a Ferrari F350 if it got a price drop to 15k!

A Ferrari F350 costing 15k wouldn't have the same status it has now, obviously.

Personally, if Ferrari comes out tomorrow saying all their cars are now 15k, i'd think they're gonna go bankrupt the day after.

 

[seismologist]

I'd pay $100 more for a considerable leap in quality over what we've been seeing from Xbox 360.

I would too. Unfortunately, at this time, I have seen ZERO evidence that the PS3 can actually render graphics ANY better than the Xbox 360.

Only evidence I've seen are the E3 demos. I think there's a lot of pressure for Sony to delivered what was shown in the E3 demos.


How they intend to do that is another story. We still dont exactly know the final PS3 hardware specs.

 

[Kabbage]

Thats the second place along with Engadget, I have seen only use only part of what he said.

Sure it's going to cost more but it seems a few sites want to portray it as being $900

"I'm aware that with all these technologies, the PS3 can't be offered at a price that's targeted towards households. I think everyone can still buy it if they wanted to," said Kutaragi to a mostly Japanese crowd. "But we're aiming for consumers throughout the world. So we're going to have to do our best [in containing the price]."

http://www.gamespot.com/news/2005/07/22/news_6129611.html

 

[BenQ]

I'd pay $100 more for a considerable leap in quality over what we've been seeing from Xbox 360.

I would too. Unfortunately, at this time, I have seen ZERO evidence that the PS3 can actually render graphics ANY better than the Xbox 360.

Only evidence I've seen are the E3 demos. I think there's a lot of pressure for Sony to delivered what was shown in the E3 demos.


How they intend to do that is another story. We still dont exactly know the final PS3 hardware specs.

I think Sony may run into a bit of a problem when their launch titles fall short of what was shown at E3..... people are expecting Killzone 2 level graphics :?

The difference between M$ and Sony ( at E3 ) is that M$ went "Hey, here's what were working on right now, look at what we have made." And then proceeded to show off REAL games, even playable ones... even if the framerate wasn't quite up to snuff yet. They were excited to show off what they were working on, expecting people to be forgiving if these unfinished products were a little rough around the edges.

Sony on the other hand was busy showing off vids and tech demos that were little more than "visual representatons of what may be possble later on in the gen."

Sony used some pretty mischevious tactics to accomplish this, Killzone 2 is an example. The jury is still out to what that was ( CGI or ingame gameplay ect ), but according to PSM it was being rendered in realtime but at LESS than 5FPS, and then sped up to 60 FPS in post production.... pretty sneeky.

 

[Farid]

Microsoft correct abreviation is MS, or MSFT, its market name. But it's not M$.

Oh, and "Quoting Someone's Words". Only one quote nest at a time. One.

 

[Carl B]

Thats the second place along with Engadget, I have seen only use only part of what he said.

Sure it's going to cost more but it seems a few sites want to portray it as being $900

"I'm aware that with all these technologies, the PS3 can't be offered at a price that's targeted towards households. I think everyone can still buy it if they wanted to," said Kutaragi to a mostly Japanese crowd. "But we're aiming for consumers throughout the world. So we're going to have to do our best [in containing the price]."

http://www.gamespot.com/news/2005/07/22/news_6129611.html

Well this post of yours makes it seem like GameSpot told the whole story though, which is hardly the case. They added another sentence, to be sure, but it's still out of context and with an emphasis on grabbing the most sensationalist part of the translation. After a point, the whole thing just becomes like a game of telephone, with sites writing articles based on what they saw published by tertiary sources (across a language divide no less.)

 

[BenQ]

Microsoft correct abreviation is MS, or MSFT, its market name. But it's not M$.

Oh, and "Quoting Someone's Words". Only one quote nest at a time. One.

Oh, I think "M$" is highly appropriate.

 

[seismologist]

I think Sony may run into a bit of a problem when their launch titles fall short of what was shown at E3..... people are expecting Killzone 2 level graphics :?

The difference between M$ and Sony ( at E3 ) is that M$ went "Hey, here's what were working on right now, look at what we have made." And then proceeded to show off REAL games, even playable ones... even if the framerate wasn't quite up to snuff yet. They were excited to show off what they were working on, expecting people to be forgiving if these unfinished products were a little rough around the edges.

Sony on the other hand was busy showing off vids and tech demos that were little more than "visual representatons of what may be possble later on in the gen."

Sony used some pretty mischevious tactics to accomplish this, Killzone 2 is an example. The jury is still out to what that was ( CGI or ingame gameplay ect ), but according to PSM it was being rendered in realtime but at LESS than 5FPS, and then sped up to 60 FPS in post production.... pretty sneeky.

It's not sneaky at all when the PS3 hardware isn't even finished.
Supposedly they are trying to demonstrate what FINSHED PS3 games will look like.
But You seem pretty convinced that the PS3 will disappoint.
The fact is that we still dont know how close the games will be to the E3 demos.
On a technical level Sony delivered with the PSP so right now I'm giving them the benefit of the doubt. That they wil release something impressive to justify the price point.

 

[Powderkeg]

The psychology of pricing is very complicated. As long as it's not sky-high, they'll be fine, for a while at least.

Being more expensive than the competition is not necessarily problematic on its own. In isolation, cheaper pricing may not help. The "cheap" approach didn't help Nintendo a whole bundle this generation. Striking a balance between "reassuring expense" and "affordability" would be key, and could work well for PS3, which already has the whole "premium" image locked down.

Basically, within certain boundaries, cheaper isn't always better, and more expensive isn't always worst from the perspective of the market. It all has to be part of a larger proposal, made up of many different components.

That is all very true, but I think Sony would have a very hard time convincing the average Joe consumer that the PS3 offers something that is worth the higher price. It's not exactly providing something new and exciting that will motivate the average consumer to pay a higher price.

If you take out the Blu-Ray drive, then it really offers nothing in functionality that can't be found on the ($300) Xbox 360. At least it offers nothing that the vast majority of the population would want or need. (I'm a network admin, and I don't know why I would want 3 ethernet ports on a console)

Add in the Blu-Ray drive, and tell consumers that they need to buy an HDTV to watch the Blu-Ray movies, and few will be impressed. Add in HD-DVD players out at the same time, and people will wonder if Blu-Ray isn't the next Sony Beta.

What's left is a console that is unlikely to be any better than the 360, lacks the hard drive that the 360 has, launches a year later, has fewer, less developed games (360 will be 2nd gen games by PS3 launch) and yet it costs more.


Next-gen is Sony's to lose, but if they price themselves significantly higher than the 360, they very well could take that loss.

 

[BenQ]

It's not sneaky at all when the PS3 hardware isn't even finished.
Supposedly they are trying to demonstrate what FINSHED PS3 games will look like.
But You seem pretty convinced that the PS3 will disappoint.
The fact is that we still dont know how close the games will be to the E3 demos.
On a technical level Sony delivered with the PSP so right now I'm giving them the benefit of the doubt. That they wil release something impressive to justify the price point.

Oh, I have absolutely no doubt that we will NOT be seing launch games for the PS3 that look anything like Killzone 2 / Motorstorm.

I would "bet the farm" that come early 2006 ( at the latest ) when we have a good idea of it's launch titles, we will see no less than 13 million threads around the world in forums, read something like....

"Sony Hype machine strikes again" - At which point REAL launch game screenshots will be compared to those Killzone 2, Motorstorm ect "visual representaton of what were trying to accomplish" pics.

If M$ was to have taken the same route as Sony and released vids of games ( I use the word "games" very loosely here ) so graphically intensive that they were only being rendered at LESS than 5FPS and then sped up in post production, we would have seen M$'s version of Killzone 2 at E3. M$ was simply being far more upfront and honest than Sony was. But Sony was the smart one. I have no doubt that they fooled MOST people.

I do belive that graphics on par with Killzone 2 are "possible" for the PS3,but I don't believe any developer is being quite so ambitious with any of their PS3 launch titles. This will become very apparant when launch titles are compared to what was shown at E3.

 

[Shifty Geezer]

Sony used some pretty mischevious tactics to accomplish this, Killzone 2 is an example. The jury is still out to what that was ( CGI or ingame gameplay ect ), but according to PSM it was being rendered in realtime but at LESS than 5FPS, and then sped up to 60 FPS in post production.... pretty sneeky.

I'd hardly call that mischievious. At worst it's overly optimistic. Heavenly Sword too was running realtime at 5 FPS yet the world saw 60 fps sped up images. But talking with one of the devs on this forum, when you hear that was running on a single thread and not using the SPE's at all, and was a WIP without a lot of strong optimizations, the likelihood of that game appearing as shown at E3 is very high. Certainly 30 fps if not 60.

One thing that's essential in marketting is appreciating most people have no ability to see potential. Present an idea and you'll get turned down. Present as working prototype and they may take you up. Show people games in development as they are, and people see low quality visuals, choppy frame rates and leave unimpressed. Jow Public isn't going to say "Hey look at this! Okay it's not so hot now but if you give it time and factor in the development environment isn't finalised, this will turn out really good." You need to show them the finihsed product. If you don't have a finished product to hand, mock one up.

Sony only had two options : show nothing or show predictions. And they did show plenty of realtime stuff; it just wasn't interactive.

Ummm, I've just realised I'm going way off topic here. Better stop before Vysez notices

 

[Carl B]

That is all very true, but I think Sony would have a very hard time convincing the average Joe consumer that the PS3 offers something that is worth the higher price. It's not exactly providing something new and exciting that will motivate the average consumer to pay a higher price.

If you take out the Blu-Ray drive, then it really offers nothing in functionality that can't be found on the ($300) Xbox 360. At least it offers nothing that the vast majority of the population would want or need. (I'm a network admin, and I don't know why I would want 3 ethernet ports on a console)

Powderkeg I think you touched on some points and I'm going to go a little further on them.

When we talk about the population who would be buying a PS3 or 360 at launch, who does this include? In my opinion, it includes parents wanting to get 'awesome presents,' hardcore gamers, technophiles, and people who are bored and need things to spend their money on.

I place myself squarely under 'technophile.'

But when we say 'average Joe gamers' not needing the extra features of PS3, why not take it a step further and say, why do they need the extra features of the 360?

Current gen consoles will still be going strong and with a fairly serious effort game-wise this holiday season. There will be a battle fought for casual gamers, sure - but that battle is a year out at the minimum. The first few battles will be strictly for the dollars of the 'hardcore.'

 

[BenQ]

I think this whole thread bolis down to if Sony can justify a potentially very expensive console and balance it with it's functionality.

If Sony can demonstrate that it really can deliver performance above and beyond the Xbox 360, then I think most would feel the price was justified.

However I do not believe tht they will be able to demonstrate this. While Sony didn't come right out and say it, they certianly did their best to paint the PS3 as 2-3X's more powerful to average Joe public. And there is plenty of reason to believe they have accomplished just that.

The problem is that average Joe public is now expecting the PS3 to be pumping out 2-3X's the viuals that the Xbox 360 can. This is something that simply isn't going to happen.

Infact, at this point I'm not certian that there will be ANY visable difference between PS3 and Xbox 360 games.

Marketing the PS3 as a "Super computer" may INITIALLY provide the PS3 with an aura of it being appropriately priced, some may even see it as a bargain. But when it comes time to open up the wallet, 99.9% of buyers will NOT be buying a PS3 because they always wanted a Linux driven supercomputer. They will be buying it as a next gen gaming console.

BlueRay WILL help justify this higherprice but only to a small fraction of the public, and having YET ANOTHER format war going on isn't going to help matters. ( Unless BlueRay manages to successfully blow HD-DVD out of the water very early on ).

 

[Powderkeg]

Powderkeg I think you touched on some points and I'm going to go a little further on them.

When we talk about the population who would be buying a PS3 or 360 at launch, who does this include? In my opinion, it includes parents wanting to get 'awesome presents,' hardcore gamers, technophiles, and people who are bored and need things to spend their money on.

I place myself squarely under 'technophile.'

But when we say 'average Joe gamers' not needing the extra features of PS3, why not take it a step further and say, why do they need the extra features of the 360?

Current gen consoles will still be going strong and with a fairly serious effort game-wise this holiday season. There will be a battle fought for casual gamers, sure - but that battle is a year out at the minimum. The first few battles will be strictly for the dollars of the 'hardcore.'

When you talk about launch sales, you are only talking about sales in the first 3-6 months. After that, you live or die based on what the average Joe does.


The original Xbox was very much geared towards the "hardcore" or "technofile." But it was the casual gamers PS2 that dominated the industry, despite the fact that the "technofiles" system actually had a better launch.

And the casuals are very easily swayed, especially by price.


Another thing that should be remembered is price drops would play into MS's favor, not Sony's. If Sony comes to the market significantly later, and at a higher price, then MS can afford to drop their prices when Sony does since MS's 360 manufacturing wpuld have been going on longer than the PS3's. Also, since it would have been manufacturered for months to a year longer than the PS3 (A full year longer in North America), MS could start making profits on the hardware before Sony could afford their first price drop.






And then of course, there is the remote possibility of the ultimate Xbox fanboys wet dream.....

Updated Halo/Halo 2 bundled with the Xbox 360 for $300, and Halo 3 all released the week before the PS3 launch. (And don't forget the PS3's higher price)


Yeah, I think it's a pipe dream, but some fanboys are convinced it's going to happen. Realistically, there is an outside chance that it could, but there is also an outside chance that I'll win the lottery.

But I think you can count on some sort of game bundle from MS just in time for the PS3 launch. Xbox 360 and 2 games for $300, or a PS3 with no game for $50-$150 more? Oh, and the 360 has more games, and they are putting 2nd gen games up gainst Sony's limited launch lineup.....

What's a casual gamer going to do when presented with that option?