Playstation 3: Hardware Info and Price

[pipo]

How do price drops affect stores and older stock? If there's a load of $600 PS3 bought into a store for $600 each (as I understand it, no profits on consoles), and they sell all but two, and then there's a price drop to $500, does the store sell these two more expensive PS3's at $500 and make a loss?

Good one, I've been wondering this myself too...

 

[NANOTEC]

They get a credit from SONY.

 

[Platon]

How do price drops affect stores and older stock? If there's a load of $600 PS3 bought into a store for $600 each (as I understand it, no profits on consoles), and they sell all but two, and then there's a price drop to $500, does the store sell these two more expensive PS3's at $500 and make a loss?

I wonder that myself. I was thinking for a while that retailers never actually buy the consoles from the manufacturers, they just sell them and pass the money to the console makers after the sell. But that sounds bit strange as well. Maybe if they have some stock of the old expensive consoles they report that and get the difference back or something...

 

[Nesh]

I don't think they're concerned about keeping it as cheap as possible - quite the opposite in fact, they want to keep it as expensive as possible. But they also want it to sell as many as possible... it's just supply and demand.

So I suspect the question should be more about "when will they consider it necessary" rather than when are they able... It's a matter of mitigating whatever losses they're going to make in the short term without damaging their long-term market share.

As long as the machines are selling (to consumers - not sitting on a shop shelf) they'll probably sell it for as much money as they possibly can. Given that it's impractical (and probably undesireable) to adjust the price constantly, like some kind of hardware stock-exchange, they have to chose discrete price-points. The moment stock starts to sit on shelves instead, they have to judge what price point to aim for next, and find the moment where dropping the price will increase sales more than it will increase losses...

IIRC, when the XBox came out, PS2 was still selling for quite a premium (I can't remember exactly - I seem to remember that the XBox was introduced at a similar price to PS2 was selling for?). A lot of people assumed a price-cut would be imminent, but Sony held their ground. The fact was, even at a price-point that seemed less attractive with the introduction of competition, they were able to sell most of the units they shipped - which meant cutting the price would only have cut their profits (or more likely at that stage increased their losses) without affecting their userbase.

I don't like the PS3's price-point either, but in principal I think Sony can sell as many units as they can build even at that price, so I can't honestly expect them to make it cheaper. My fingers are crossed that production capacity increases quickly so that they have so many machines going into the wild that they have to reduce prices to shift them...

I totally agree

I said when they can because I took it as self-evident and as a factor that this time many people are very concerned with the price and that it will have a bigger negative impact on the sales than previously.

Its very important for them to start boosting their sales as much as possible and as soon as possible to take over some market share.

There is a competitor in the market with a head start, many AAA games on the way, and sold cheaper.

Also its important that they reach a specific number of consoles sold because developers right now are waiting for it to be released to sell their games.

If it doesnt sell enough many developers will hesitate to support.

Right now Sony hasnt raised demand enough because the consumer's perception for the PS3 in general isnt any different from the 360's. There is some hesitation.

 

[mckmas8808]

Right now Sony hasnt raised demand enough because the consumer's perception for the PS3 in general isnt any different from the 360's. There is some hesitation.

Good thing for Sony that they will have the Playstation party in July and TGS in September. I suspect many things (consumer demand/perception) will change after these two shows.

 

[Platon]

Good thing for Sony that they will have the Playstation party in July and TGS in September. I suspect many things (consumer demand/perception) will change after these two shows.

Wanting though is not enough, peole should be able to afford it as well. Sure thet PS3 offers a lot for that price, but for a lot of people it does not work that way. They don't look for the value you get. If it is above a certain price a lot of people will not buy even if it offers great value...

 

[Urian]

We don´t know when Microsoft is going to fab the 360 components at 65n and when they are going to distribute them.

If the number of sold 360 is below than expected the price drop is going to wait, they must clean all the 360 90nm stock from the stores.

 

[Acert93]

We don´t know when Microsoft is going to fab the 360 components at 65n and when they are going to distribute them.

They already mentioned Q1 2007 for Xenon and have made a number of comments that a number of staff (something like 50% of the 360 hardware staff) are on "price reduction detail" and I know ATI has said they are still under contract on price reduction. With ATI shipping 65nm early in 2007 it also seems logical it will transitioning pretty quickly as well.

If the number of sold 360 is below than expected the price drop is going to wait, they must clean all the 360 90nm stock from the stores.

The holiday season will clear out stock this year. There is no reason to believe with current demand and the software coming this fall (and how the media have felt about this falls 360 software based on E3) that demand wont stay high.

But I am not sure MS should lower the price in 2007. With a couple retailers talking about Mass Effect slipping to April 2007, the 360 looks to have a solid front line lineup to keep sales going. Bioshock in Q1, Mass Effect in Q2, Halo 3 in Q3, and GTA4 in Q4.

As Mr. Wibble said about the PS3, a price drop from MS will be based on Supply and Demand. MS has been working on increasing production and it appears they are aiming for ~1.5M units per month in the next couple months based on their press statements about their 3 different manufacturing facillities (which makes sense if they plan to get 5M into consumer hands between July 16st to November 15th).

The 360 is losing money right now as well. If MS is selling every unit they make there really is no reason to cut the price--especially since MS has a $299 console SKU, which historically is pretty typical in the first couple years. No one can predict the future. There are a lot of factors that are going to impact all 3 players:

- Blu Ray Adoption
- How well Wii is received by the market (demand)
- The Wii price and supply
- PS3 and 360 shortages
- Software quality and marketing/market appeal
- Impact of console prices and how casual consumers respond to them

So I don't know what will happen. One can read these things and see all kinds of outcomes. We just need to watch and see what happens

 

[Nesh]

Good thing for Sony that they will have the Playstation party in July and TGS in September. I suspect many things (consumer demand/perception) will change after these two shows.

Yeah hopefully. I hope they took seriously some negative feedback and decided to make up for it in these shows.

 

[blakjedi]

PS3 "probably too cheap", says Kutaragi


Friday 12-May-2006 1:57 PM SCEI president Ken Kutaragi dismisses talk of "over-priced" hardware

PlayStation creator Ken Kutaragi has answered critics of Sony's next-gen pricing policy by claiming that the PS3 is "probably too cheap".

Dropping this golden nugget in an interview with Japanese website IT Media (coming to us via IGN translation), Kutaragi said that it's no different to the way it was with previous PlayStation generations.

"With Nintendo's 16-bit machine selling for about 12,000 yen (85 euros) at the time, the media criticised us for priciness - but it became an explosive hit. The same for PlayStation2," Kutaragi has reportedly elaborated while similarly recalling the launch of the original PlayStation and PS2 in a second interview - conducted with Japanese business journal Nihon Keizai Shimbun."...both had sales that were unthinkable for previous game machines. This is because both offered experiences that could not be had on previous machines," he told IT Media.

Kutaragi went on to reveal to Nihon Keizai Shimbun that "price setting is always a headache for us. No game machines are comparable to the PS3, which is neither a genuine game console, home electronics [product] nor a personal computer. It's a new kind of product."

And Keen to stress PS3's broad functionality, he told IT Media: "...we don't want you to think of it [the price] in terms of games machines... if you can have an amazing experience, we believe price is not a problem.... We believe people who like games will, without question, purchase it."

But ultimately, the debate will be settled by the end user. Kutaragi stated during Nihon Keizai Shimbun's interview that it will be "consumers who decide whether it's expensive or cheap. If a product offers charm, then buyers will be convinced",.

The 20GB PS3 will retail in Europe for 499 euros (roughly 341 GBP), with the full-spec 60GB model priced at 599 euros (roughly 408 GBP).

http://www.computerandvideogames.com/article.php?id=139945

 

[scooby_dooby]

"...we don't want you to think of it [the price] in terms of games machines..."

I want to party like it's 1999

 

[Acert93]

This thread has me thinking back to the "start saving" comments by Ken Kutaragi. I also found this interview... no one cannot say Ken did not warn us.

http://www.beyond3d.com/forum/showpost.php?p=476418&postcount=19

Honda: Though it must be difficult for you to tell the very price of PS3, will PS3 take the same depreciation model as the one of PS2? For instance PSP was cheaper than most expected.

Kutaragi: PSP was evaluated by many people as inexpensive, but still 24,900 Yen. Its cost model can have a feasible cash flow by the higher in-house development ratio and other factors.

The same thing can be said for PS3, but a far more number of PS3 will be sold if you compare it with PSP. But as I mentioned before PS3 has no consciousness as a game console. It was our goal that we wanted to sell a computer for entertainment with added values.

Probably in this generation, PS3, will be able to be sold even for 200,000 Yen for those who want the power. Those who want it won't judge by the price. Of course if it's the case not many people can enjoy it, but some people may think it's expensive if they think game consoles as the standard. However, PS3 is built as a product overwhelmingly wanted. Car and TV are like that. You can't help wanting it. Even we, who developed it, want it. We created such a product.

(Honda's comment: To complement Kutaragi, apparently SCE told partners that PS3 would be sold under 40,000 Yen. So far PS1 & PS2 were launched at 39,800 Yen so they are not very expensive. But, as PSP was launched at the "final price" that contains no further pricecut, PS3 may launch at 39,800 as the final price without pricecut in the near future. Anyway PS3 will be launched at a price well in the range of a common sense)

 

[RancidLunchmeat]

Even Microsoft knew - they intended for a 80:20 ratio between the premium and the core pack. If they thought rock bottom prices were the way to go, then shouldn't the ratio have been reversed? I can confidently say that most of you bought the premium bundle over the core, even if I do not have the official statististics from Microsoft.

No link for the sales figures, so how about a link for the 80:20 ratio you are presenting?

Even if you would want to artificially limit the argument to "poor but impulsive" buyers, they wouldn't represent the majority of the console buying population (my original point being that the core is of limited significance).

Artifically limit the argument? No, there's nothing artifical about it. First, we are specifically discussing the effect of the PS3's high price on impulse buyers. Second, we aren't talking about poor consumers, we're talking about the majority of consumers.

The median income in the United States is $43,318. They will pay approximately $7494.50 in FIT alone on that income. This doesn't include any state, county, city, use or sales tax. Still, just deducting the FIT alone, the median consumer is left with $35,823.50 to spend.. or approximately $688.91 a week.

With that level of income, those people could afford to impulse buy a 360. They simply could not afford to impulse buy a PS3. They would have to save for the PS3 purchase, which definitionally removes them from the realm of impulse buyers.

i think the whole problem with the situation is that you seem to have elevated yourself to be above the "average gamer", calling "it" impulsive or ignorant of value - you yourself have bought the premium pack and figured that all your mates are not smart enough to do the same. Nothing makes you special.

No, the problem is tthreefold. 1) Your assumption that I own a 360 of any variety, which I don't. 2) Your lack of understanding about how much the average consumer actually brings home each week. 3) Your lack of understanding the concept of impulse buyers and the unwillingness for the majority of NA consumers to deal with delayed gratification.

Sony does not need to compete with the $300 core bundle. If they "reduced" the price, it is to compete with the premium bundle, as I have mentioned many times. Over the lifespan of consoles, price reductions are anticipated, if to remain competitive with whatever the intended target was.

The 'intended target' what kind of hogwash is that? You've just defined 'the intended target' as the premium bundle in your second sentence, why get all mysterious in your third?

And yes, of course they need to compete with the $300 core bundle as the median income figures I've provided above demonstrate. Remember again, that those figures are median income. There a great deal of console consumers that are at income levels far below the median, which is why $300 still isn't the tipping point for console sales.. it's $199. The PS3 needs to get to that price point as quickly as they can, and by starting at $300, the 360 can get there more quickly.

You act as if the PS3 isn't in the same race as the 360. It most certainly is. The race is to $199, and the $299 core pack gives the 360 a huge headstart. (Just as the Wii priced at $249 or $199 will give them an even bigger headstart)

While you'd also like to argue that BR is unnecessary technically, I'll simply say that it is at least technically desirable (much like the fabled xenos, technically unnecessary for next-gen graphics, but you could at least see that it is desirable, honestly).

Desirable is not necessary. You claimed it was a necessary component, which it isn't.

 

[RancidLunchmeat]

This thread has me thinking back to the "start saving" comments by Ken Kutaragi. I also found this interview... no one cannot say Ken did not warn us.

It reminded me of that, it reminded me of all the comments from KK and others at Sony saying for months that the PS3 was going to be expensive, it reminded me of the outcry of "MS LIED TO US!" when they released the $299 version and the $399 version and how the basis for the outrage was that the $399 bundle should actually be sold at $299 and the $299 version shouldn't even exist. -We were supposed to get the $399 value (HDD, wireless controller), but at the expected $299 price point.

I'm mildly amused at the dichotomy.

 

[Shifty Geezer]

I'm not really following this thread but I'll input anyway

The median income in the United States is $43,318. They will pay approximately $7494.50 in FIT alone on that income. This doesn't include any state, county, city, use or sales tax. Still, just deducting the FIT alone, the median consumer is left with $35,823.50 to spend.. or approximately $688.91 a week.

With that level of income, those people could afford to impulse buy a 360. They simply could not afford to impulse buy a PS3. They would have to save for the PS3 purchase, which definitionally removes them from the realm of impulse buyers.

I'm pretty sure impulse purchases aren't based on weekly income. It's not like a person gets their pay cheque and has a week to spend it all, and then it's gone and they have to spend their next pay cheque. On the one hand after bills I doubt many people have hundreds of dollars per week spare (depends on prices over there though. Certainly not here in the UK) so you're looking at spending based on savings. Each week x amount is put away into the bank account, and if they have enough in the account to pay for a product, they may impulse buy. But secondly, big ticket items are invariably put on the credit card AFAIK, so current availability of funds isn't an issue. I think impulse purchases are more a case of 'I want it' and then deciding if it's pricey or not based more on gut feeling than anything. I don't think most people have the financial sense to work out how much of their income goes towards a purchase in how many payments at what interest etc.

 

[patsu]

No thanks:
http://theinquirer.net/?article=31810

LOL. It's only my speculation at this point.

Comparing a relatively open system like OS X to PS3 OS may not be relevant in this regard.
* PS 3 has built-in hardware partition and security-related facilities
* You need to know SPU and PPU binary and run-time very well to fool the system
* PS 3 checks itself and only runs certified apps. As long as you don't mod your PS3, you should be pretty safe.

If having a web browser is a security risk (buffer overflow, cross-site scripting, phishing, ...), it will affect Xbox 360, Wii and PS3 equally. You don't have to be a "computer" to get attacked.

 

[patsu]

How do price drops affect stores and older stock? If there's a load of $600 PS3 bought into a store for $600 each (as I understand it, no profits on consoles), and they sell all but two, and then there's a price drop to $500, does the store sell these two more expensive PS3's at $500 and make a loss?

Depends.

Usually the retailer/distributor takes title of the goods (i.e., they pay for and own the goods at wholesale price). In hi-tech industry, it's not uncommon to have "Price Protection".
i.e., if Sony drop the price, they will need to compensate the "differences" to their resellers, so that they can maintain their margin. This kind of arrangement has caused Creative Technologies, Intel, Sun and Apple to lose millions before. Today, before vendors change price, they will work with the resellers to clear their inventory first (e.g., delay new orders, run promotions).

The second approach is stock balancing, usually negotiating with the product vendor to swap products once in a while.

However if your product sells very well, it's also possible that none of the above are provided (Reseller eat their own cost because they over-order). It also depends on the relationships and history between the reseller and the product vendor. It can be a mess sometimes.

 

[dobwal]

I'm not really following this thread but I'll input anyway


I'm pretty sure impulse purchases aren't based on weekly income. It's not like a person gets their pay cheque and has a week to spend it all, and then it's gone and they have to spend their next pay cheque. On the one hand after bills I doubt many people have hundreds of dollars per week spare (depends on prices over there though. Certainly not here in the UK) so you're looking at spending based on savings. Each week x amount is put away into the bank account, and if they have enough in the account to pay for a product, they may impulse buy. But secondly, big ticket items are invariably put on the credit card AFAIK, so current availability of funds isn't an issue. I think impulse purchases are more a case of 'I want it' and then deciding if it's pricey or not based more on gut feeling than anything. I don't think most people have the financial sense to work out how much of their income goes towards a purchase in how many payments at what interest etc.

Yep, CCs are the method of choice for impluse buys or purchases that one normally can't afford.

 

[dobwal]

LOL. It's only my speculation at this point.

Comparing a relatively open system like OS X to PS3 OS may not be relevant in this regard.
* PS 3 has built-in hardware partition and security-related facilities
* You need to know SPU and PPU binary and run-time very well to fool the system
* PS 3 checks itself and only runs certified apps. As long as you don't mod your PS3, you should be pretty safe.

If having a web browser is a security risk (buffer overflow, cross-site scripting, phishing, ...), it will affect Xbox 360, Wii and PS3 equally. You don't have to be a "computer" to get attacked.

I doubt bank account info, social security #s, credit card #s and other sensitive infomation will be readily stored on your ps3, 360 or wii.

 

[Fox5]

I doubt bank account info, social security #s, credit card #s and other sensitive infomation will be readily stored on your ps3, 360 or wii.

Doesn't xbox already store your credit card number?