NPD April 2007

[bomlat]

Huh?

Value doesn't always scale at the same rate as disposable income. If you made $25,000 and bought a $250 dollars Wii doesn't mean if you made $50,000 you would automatically buy the $Wii at $500.

Yes, usualy that mean you can afford more than the double of the money.
And the other thing, you have a sum amount of money that you can spen onto entertraitment, and if you receive more for your money from the wii, yu will buy that,even if yu can buy more processing speed for your money with the ps3.
But the point is the income distribution among the potential buyers .

 

[Johnny Awesome]

Your economics are completely off Bomlat. I know people that make $150K that won't pay $600 for a PS3. They probably won't even pay $500. I also know people that would spend their whole paycheck for a PS3.

 

[Cheezdoodles]

But in this enviroment, the best way to see the possible result is the direct obsevation of the customer behavior.(like if your job is to found a root cause of a rare soft/process bug)
Data:
-second hand prices
-current sales numbers
-general internet sources: atricles, forums and so on
-personal experiences
-personal impressions

No. This is completely wrong. If your going to make an theory worth anything about console price elasticity (which is what your actually talking about), internet sources like forums, personal experiences and impressions are NOT something your supposed to use. You can use second hand prices (if you have proper sales data), sales numbers, and stuff like that. What your personal experiences in hungary is, is irrelevant for this discussion.

If we assume that the customer base of the wii and the customer base of the 360+ps3 don't have common elements , and if we assume that the price of the wii is on the same level as the price of the 360, the possible sales number can be only the half of the current sales number?(equal with the 360 sales)

Can we prove or falsify this assumption?
I think partialy yes .

First, te sales drop would be bigger than the half,because right now the wii market is a sellers market.
Second, the wii market have the same quantity of big fish customers like the hc market, simply because the bigger userbase can have the same number of high dispsable income guys.

This is so broken logic i don't know where to begin. YOU HAVE NO IDEA how the wii would sell at a $400 price point. Your basically just making up stuff.

So, finaly:
Of course,the above statements are not on strong numbers,so the weight of the result is only aprox. 65%.
So, the first question: the

ROFL.

Seriously. What the hell? 65% what? The weight of the result is 65%? Based on what? What kind of mathematical or statistical analysis have you done here to get 65%?

 

[Diamond.G]

But we're not talking about bundling in Fall of 08...are we? we're talking about bundling in the near future in preference to cutting the price. I can't see that as a good move. If they want to get down to $400 by fall '08 and then bundle games, i can't see a problem, what i see a problem with is trying to entice people with a bunch of free games at $600. IMO,at that price, it's not going to work; no matter what you put in it.

Hey now, if Sony bundled the PS3 with GT5 tomorrow (@$600US) I would be in line for one. I imagine others would be as well.

 

[scooby_dooby]

Hey now, if Sony bundled the PS3 with GT5 tomorrow (@$600US) I would be in line for one. I imagine others would be as well.

Sony needs to get the console down to $399 ASAP, at that point they can worry about adding value.

The market for $600 console buyers is just too teeny, as sales #'s are showing. 360 has proven however, that there is a large market at $399, at that point you can get solid sales, not great but at least solid. At $600 or even $500, PS3 is going nowhere fast.

 

[Diamond.G]

Sony needs to get the console down to $399 ASAP, at that point they can worry about adding value.

The market for $600 console buyers is just too teeny, as sales #'s are showing. 360 has proven however, that there is a large market at $399, at that point you can get solid sales, not great but at least solid. At $600 or even $500, PS3 is going nowhere fast.

True, 399 would garnish lots more sales. I am just a sucker for GT (still waiting on GT-PSP).

The Wii is just dominating (hehe, I got one on Sunday for Paper Mario). I never picked up the Gamecube, so this is the first Nintendo Console I have gotten in over ten years. I still plan on getting a PS3 just waiting for more concrete GT5 info (ie release date). If Sony really wanted to jump start sales drop the price to the 299-350 range. They probably couldn't make them fast enough...

 

[borowki]

I don't want to keep coming back to this, you're right of course - You didn't need to save games to enjoy them on the NES, but I don't think you can compare the days of the NES, where games often could be completed in an afternoon, to the last 5 years. I can only really think of beat 'em ups as a genre that *might* let you get away with no memory card. It is an essential purchase.

I'm not going to argue against persistent storage. It's an advancement, for sure. It's one thing to say a thing is necessary, it's quite another to say it's known generally to be necessary. Consumer ignorance is something to be taken advantage of, not fight against. If you look at the X360, you can see that Microsoft is executing correctly. You really need the harddrive, but they'll sell you a console without one just so you have to pay $100+ for it later.

Games are a differnt matter, of course. Everyone knows you need games to play games.

But we're not talking about bundling in Fall of 08...are we? we're talking about bundling in the near future in preference to cutting the price. I can't see that as a good move. If they want to get down to $400 by fall '08 and then bundle games, i can't see a problem, what i see a problem with is trying to entice people with a bunch of free games at $600. IMO,at that price, it's not going to work; no matter what you put in it.

Anything done now cannot be undo later. A price cut now means a cut forever. Price increase is pretty much unheard of in the industry. Any price reduction is a burden that'd going to be bore through the rest of the product cycle, which is why it has to be avoided. The cost of a game bundle, on the other hand, disappears over time--if you choose to not update the line-up. Bundling R:FOM when R:FOM2 is out would sort of be a negative cost, in fact, since it promotes the sales of the sequel.

Selling a console at $600 is tough--there is no doubt about that. Throwing a big lump of cash at each console, on the other hand, is just crazy.

 

[scooby_dooby]

I'm not going to argue against persistent storage. It's an advancement, for sure. It's one thing to say a thing is necessary, it's quite another to say it's known generally to be necessary. Consumer ignorance is something to be taken advantage of, not fight against.

I find your argument a little ridiculous, the only people who don't know a PS2 required a memory card when they bought it were the most ignorant of ignorant consumers. Everyone else and their pet dog spanky knows you need a memory card, it's been that way for the last 10 years.

HDD is another matter. But arguing that a large number of consumers are unaware that a console requires a memory card is pure craziness!

I mean, your argument might have flew a couple years after the release of the PS1, but it's about a decade old at this point.

 

[Paul_G]

True, 399 would garnish lots more sales. I am just a sucker for GT (still waiting on GT-PSP).

The Wii is just dominating (hehe, I got one on Sunday for Paper Mario). I never picked up the Gamecube, so this is the first Nintendo Console I have gotten in over ten years. I still plan on getting a PS3 just waiting for more concrete GT5 info (ie release date). If Sony really wanted to jump start sales drop the price to the 299-350 range. They probably couldn't make them fast enough...

I think regarding your purchase of a PS3 bundled with GT5, at $600 you'd be in a fairly small group. Of course there is no hard data to back this up, but to me, the strength of the Playstation brand, and it's inability to shift large numbers of units tells me nothing but a reduction down to approx $400 is going to change things. And you're right, selling for $299 to $350, they'd fly off the shelves, but it would be financial suicide. If we're right when we say they're losing *some* money on PS3 at the moment, a cut like that would mean a minimum loss of $250 per box. For every thousand they sell, they lose $250,000. If their sales went up to what we would expect of them - 200,000+ per month, that would be a minimum monthly loss of $50m. It just wouldn't be sustainable.

On this basis, I and others are suggesting they're stuck between a rock and a hard place because they either bleed money making up marketshare, or they bleed marketshare to keep close to the black. The ultimate result of this is at some point the gap in sales will be so large as to be insurmountable before it's moot anyway, and the next gen is upon us. The ultimate question is, will Sony cost reduce and start selling PS3 in decent numbers before, or after this point?

 

[Paul_G]

I find your argument a little ridiculous, the only people who don't know a PS2 required a memory card when they bought it were the most ignorant of ignorant consumers. Everyone else and their pet dog spanky knows you need a memory card, it's been that way for the last 10 years.

HDD is another matter. But arguing that a large number of consumers are unaware that a console requires a memory card is pure craziness!

I mean, your argument might have flew a couple years after the release of the PS1, but it's about a decade old at this point.

Agreed, and even if they don't know, the shop assistant is pretty quick to point it out. All i'm saying borowki is that when someone asks you how much the PS3 is, do you say $650? I'd be very surprised if you did. It's common sense that you have to buy a game, same as you have to buy a memory card, but the psychological price is $600. A lot of people have real trouble getting their heads around that, and even if you threw in 3 games, another controller and a Blu-ray film, there are some people who just won't bite. The only way you're going to catch these people is a pricecut, and it has to happen fairly soon (before October IMO) to kickstart sales in time for Christmas

 

[Cheezdoodles]

I'm not going to argue against persistent storage. It's an advancement, for sure. It's one thing to say a thing is necessary, it's quite another to say it's known generally to be necessary. Consumer ignorance is something to be taken advantage of, not fight against. If you look at the X360, you can see that Microsoft is executing correctly. You really need the harddrive, but they'll sell you a console without one just so you have to pay $100+ for it later..

I don't think its so much consumer ignorance as it is psychology, there is a very small % that doesn't realize you need a memory card or some sort of storing device at this time. Looking at X360 core vs Premium sales, could also tell you that they know this.

I guess, the people who doesn't know are generally people who are buying gifts, not consoles for themselves. Anyways, sales clerk is quick to point out that you need a harddrive\mem card when you buy one.

The psychology part tho, is trickier. You just hear the price of entry, i doubt many people spend time thinking about real console cost, in terms of mem cards and gamepads etc. They know you need it, but in the back of the head, what they hear is the price for the console alone. Further, since your only thinking about the entry price, once you actually decide to buy a console, and the sales guy tell you that you need a harddrive, most people end up buying it all that day anyway.

 

[AlphaWolf]

No, but still, not many consumers see the distinction. For PS2, realistically, you needed a memory card, something you had to pay extra for. If Sony had added the price of a memory card to the PS2 and made that it's launch price, i think there would have been a small group of people who would have said it was then too much. The problem with adding value, be it through games or Blu-ray or wifi or whatever is that the consumer generally doesn't see it as value. They see the sticker price and can't move past it. I would be pretty confident that if you sold a PS3 with two bundled games for $600 and a PS3 on it's own for $500, the one on it's own would sell better. Even if a condition of the sale was two separate game purchases, it would still do better. Sony need to get that base cost down, especially since they canned the 20GB model. Adding games will not do much to sway sales IMO

Hasn't the xbox 360 core system been outsold significantly by its beefier brother? I don't have any current statistics, but that is my recollection.

 

[Paul_G]

Hasn't the xbox 360 core system been outsold significantly by its beefier brother? I don't have any current statistics, but that is my recollection.

Yep, it's quite a big skew in favour of the premium too. I don't know why that is - my guess would be it's another psychological effect, namely that the more expensive model must be better. Well in the case of the 360 premium vs core it is, there is more than $100 worth of additions in there, but further to that, i think $400 is approaching the limit of what most consumers who buy a new console in it's first 1-2 years will tolerate. Let's not get confused here though. I'm not really talking about why the top SKU tends to perform better than the base model (though Sony/MS seem to skew it with production numbers anyway). I'm talking about psychological cost of entry, that most consumers no matter what is in the box, balk at a $600 games console. I don't think that is going to change any time soon, so if Sony want to pick up their sales, they need to cut the price.

 

[Johnny Awesome]

Exactly right. I would say that there's a very sharp drop in demand for game consoles above the $400 price point.

 

[bomlat]

No. This is completely wrong. If your going to make an theory worth anything about console price elasticity (which is what your actually talking about), internet sources like forums, personal experiences and impressions are NOT something your supposed to use. You can use second hand prices (if you have proper sales data), sales numbers, and stuff like that. What your personal experiences in hungary is, is irrelevant for this discussion.




This is so broken logic i don't know where to begin. YOU HAVE NO IDEA how the wii would sell at a $400 price point. Your basically just making up stuff.




ROFL.

Seriously. What the hell? 65% what? The weight of the result is 65%? Based on what? What kind of mathematical or statistical analysis have you done here to get 65%?

The second hand price is the main point, but the general experience is as important,simply because the price is only a variable in a very complex equation.

You have to patch the holes in the equation with this.

From the other side, my experience not came from hungary.Thanks (or no...) to my job, I have to travel frequently in europe.


The 65% is simply: everything that I said have this weight in the decision tree .So , by 35% chance it is not true.Possibly it is not so good, but I think it is better than the avarage analysis on this forum .

 

[Cheezdoodles]

Lmao.

Seriously, your assumptions and theories is just beyond any mathematical logic i can think of.

 

[ninzel]

You're correct, but it's safe to say that X360 and PS3 would sell more units than they are right now if their prices were lower. Whether or not the X360 would sell enough additional units to overtake Wii monthly sales is anyone's guess, but I think a $100 drop would make them competitive with Wii in NA over the holidays. Europe is hard to say. Japan is lost to MS.

Good points.It's obvious that the 360/PS3 will sell more as their prices come down,the question is how fast will this happen and how much and how fast. Most importantly though,where will Wii be by the time let's say the 360 Premium reaches $250? I only mention the Premium because I see no weekly flyers advertising the Core anymore,who knows maybe MS has big plans for the Core.
By the time the 360P reaches $250 will the Wii have already established a larger installed base and still be maintaining strong momentum due to let's say a $139 price?

 

[borowki]

Agreed, and even if they don't know, the shop assistant is pretty quick to point it out.

You mean this shop assistant of yours will try to dissuade you from buying a PS2 if you will not buy the memory card?

All i'm saying borowki is that when someone asks you how much the PS3 is, do you say $650? I'd be very surprised if you did. It's common sense that you have to buy a game, same as you have to buy a memory card, but the psychological price is $600.

That's a strange argument. You're basically saying that consumers aren't capable of understanding that a purchase can consist of multiple products and that what they have to pay is the sum of the prices of these products.

A lot of people have real trouble getting their heads around that, and even if you threw in 3 games, another controller and a Blu-ray film, there are some people who just won't bite. The only way you're going to catch these people is a pricecut, and it has to happen fairly soon (before October IMO) to kickstart sales in time for Christmas

There are some people who won't bite even if the PS3 is free. Blind people, for instance. And quadriplegics. And the Amish--since they don't even have electricity in their house. Sony is clearly doomed.

 

[Paul_G]

You mean this shop assistant of yours will try to dissuade you from buying a PS2 if you will not buy the memory card?

No, but they're likely to point out when you show up at the till that if you don't have a memory card, you may want one, because for the aforementioned reason, it's a near essential purchase.

That's a strange argument. You're basically saying that consumers aren't capable of understanding that a purchase can consist of multiple products and that what they have to pay is the sum of the prices of these products.

No, they're capable of understanding, but how many people do you see on this forum saying 'That PS3, it's far too expensive since it costs $650' or 'Xbox 360 premium for $450? I won't be buying that until it's $350'? perceived price and the real price are not always the same. Most people will make their decision whether or not to buy based on the list price, so it's the price that has to change, not the contents of the box.

There are some people who won't bite even if the PS3 is free. Blind people, for instance. And quadriplegics. And the Amish--since they don't even have electricity in their house. Sony is clearly doomed.

If you're just going to be silly about this, there is no point having this conversation. I'm not saying Sony is doomed, but they do need to start making some hard decisions about what to do to make up sales if they want to have a chance at winning this generation. A price cut is one route to making up some sales. must-buy games are another, as is bundling. I am of the opinion that in the face of slow sales for something with as solid a brand name as Playstation, triple-A games aren't going to change things much. Nor will bundling since the price is an obstacle and will remain the same. I see no other alternative than a price cut.

 

[Butta]

I think Sony would surely do well to reduce the PS3 from the current $599 US to $449. Also, I think that the timing of this reduction would be critical. The best time to do it would be the week that Heavenly Sword, Home and Warhwak come out...which also happens to be the timeframe for Halo3.

I think doing would create a huge surge in sales as people would not only have a significant price reduction but amazing software to go along with it (and more coming later in the year).