Price drops in BRD in effect in Sony BRD player - price drop for PS3?

[Shifty Geezer]

As we've generally been saying since PS3's launch, substantial price drops should be possible pretty quickly with BRD drive improvements and process shrinks. GI.biz reports that Sony's new BRD player is coming out a $100 lower than anticipated, with Sony attributing the lower price to production efficiencies.

Of course Sony deny any price drop considerations, but with this and the recent (EU) chipset modifications, something must be on the cards.

 

[Gradthrawn]

As we've generally been saying since PS3's launch, substantial price drops should be possible pretty quickly with BRD drive improvements and process shrinks. GI.biz reports that Sony's new BRD player is coming out a $100 lower than anticipated, with Sony attributing the lower price to production efficiencies.

Of course Sony deny any price drop considerations, but with this and the recent (EU) chipset modifications, something must be on the cards.

With the expected Holliday line-up, and good marketing, a price drop this year would be, IMO, point-less. Even at $600 I anticipate that production capacity will be the limiting factor in sales. However, following up a strong Holliday line-up with a late spring/early summer pricedrop (lets say $100), could really help bolster sales and keep them there in the long term. Re-introducing the Base model at $400 could be significant as well.

On a side note, I'd like to see the introduction of an online only, customizable built-to-order, $900+ "Elite" model, if you will, with a feature set so crazy it can't be described in the English language. Rackmountable even. Why? Because it would satisfy all of us out there looking for something like that. All 2 of us.

 

[Platon]

With the expected Holliday line-up, and good marketing, a price drop this year would be, IMO, point-less. Even at $600 I anticipate that production capacity will be the limiting factor in sales. However, following up a strong Holliday line-up with a late spring/early summer pricedrop (lets say $100), could really help bolster sales and keep them there in the long term. Re-introducing the Base model at $400 could be significant as well.

Wouldn't they have to start selling like PS2 numbers in oder for that to happen. there are pretty compelling games comming up, and of course the silly season that is the holidays, but I still very much doubt they will be seing such a huge increase in sales.

As for the price of the PS3, I kind of doubt that the cheaper BR drives will make the PS3 cheaper just now. Atleast they will not be loosing money on the console any more but will it be enough so that they can actually lower the price and still not loose money? One shouldn't also forget that the nomal BRD playesr are being sold with a margin for profit, which I could imagine is quite huge, and hence they can also lower them even more compared to the PS3, it is just that they profit will not be as big, but on the other hand the adoption might become better which is what Sony wants I would assume...

 

[Gradthrawn]

Wouldn't they have to start selling like PS2 numbers in oder for that to happen. there are pretty compelling games comming up, and of course the silly season that is the holidays, but I still very much doubt they will be seing such a huge increase in sales.

Historically, I believe, the increase in sales over the Holliday period is dramatic. Mind you, I'm referring specifically to the Christmas period, and not anytime over the next 3 months.

Atleast they will not be loosing money on the console any more but will it be enough so that they can actually lower the price and still not loose money?

That's a good question. But we should also ask if SCE wants to go to hardware profitability immediatly, or just minimize losses while lowering the retail price quickly. At some point, they could probably get to the price they want while breaking even, and continue to take cost reducing measures from there. It would be interesting to know what their priority is at this point in time (the 1st one to two years), market share or hardware profitability.

 

[AlphaWolf]

As we've generally been saying since PS3's launch, substantial price drops should be possible pretty quickly with BRD drive improvements and process shrinks. GI.biz reports that Sony's new BRD player is coming out a $100 lower than anticipated, with Sony attributing the lower price to production efficiencies.

Of course Sony deny any price drop considerations, but with this and the recent (EU) chipset modifications, something must be on the cards.

Do they want to keep losing the same amount of money on each console, or eventually make money on them?

 

[Shifty Geezer]

Eventually make money on them. But before that'll ever happen, they need an install base! No point having profitable hardware if it costs so much no-one buys it. That's the traditional loss-leader console model, and this gen there's scope for accomodating greater losses because the revenues are much higher through downloaded content.

 

[Laa-Yosh]

With the expected Holliday line-up, and good marketing, a price drop this year would be, IMO, point-less. Even at $600 I anticipate that production capacity will be the limiting factor in sales.

You realize that Sony's already sitting on at least 1.5 million consoles? They'll be happy to sell that many in the holiday season...

 

[AlphaWolf]

You realize that Sony's already sitting on at least 1.5 million consoles? They'll be happy to sell that many in the holiday season...

That would also be another limiting factor on a price drop. Those were all produced prior to the blu-ray cost reduction.

 

[Arwin]

They simply can't afford too big a gap with the competition, so they have to be ready for a price drop sooner rather than later. And I think they aren't happy with not selling at their full production capacity either. And I'm quite certain that they'll not sell enough consoles, even during Christmas, at $600.

This obviously despite the fact that content is also an important factor. I know that here in Europe, regardless of its price, the console will start selling as soon as those soccer games hit, and even at this price I can see a lot of people getting one for Christmas. Once it grabs people's attention with good content, then they will be motivated enough to figure out that in terms of value for money and actual cost, the PS3's price isn't that bad. But even here they can't afford to let the gap become too wide, and in other regions, they will have to fight harder, against Nintendo in Japan, and Microsoft in the U.S.

But if they can, I think they'll more comfortably sit in a position where they can make more than they can sell, and if they can achieve that with the consoles selling at a break-even point or even a fraction below, I'm sure they will go for it. They don't just have themselves to consider, but also game development budgets. If sales for PS3 software take too long to get going, they may lose more third party support than they should be comfortable with.

So all in all, yes, I agree with Shifty that a price-drop is certainly possible. I don't expect it before september, but it is possible we may see two smaller price-drops, the first in order to get old stock out, and the second upon introducing the one that is cheaper to produce.

 

[jonabbey]

Sony can't afford to let the competition race too far ahead in sales rate forever, or else the network effects driven death spiral will eat away the console's potential until it's a wholly lost cause, with developers fleeing like rats from a sinking ship.

To be sure, they wouldn't get much benefit from dropping the price without having the next wave of content ready to hit the console, as there's no worse PR they could suffer than seeing a price cut come out without a marked rise in sales, justifying the perception that the console is just a doorstop.

But come the fall, when Lair, Heavenly Sword, GTA IV, Home, and especially the promise of Uncharted and Ratchet & Clank Future are all on deck, a price cut with a marketing push could really let the PS3 stretch its legs for the first time.

All of the firmware improvements and such that Sony have been providing is just laying a good solid groundwork for the fall push, as has their component price reductions on the 405nm laser diode, the 65nm production of Cell (and RSX?), the European emulation solution for EE, and etc.

 

[Cheezdoodles]

Even at $600 I anticipate that production capacity will be the limiting factor in sales.

What kind of math are you putting behind this?

The PS3 production is solid, according to sony close to 1million\month. The PS3 sales, are not. There is a big surplus of PS3 consoles on shelves and wearhouses, the PS3 would magically have to sell 5-8million consoles in the holiday month before sales would get bottlenecked by supply.

Supply is good for the PS3, the demand however, isn't there. Demand would have to magically increase 50x world wide (and thats assuming rather generous PS3 sales in europe atm) during the holiday season in order to make it supply limited.

Lets be very generous here and say the PS3 will average 400k per month worldwide until november 2007. Sony has more or less said that the PS3 production rate is 1mill\month. This means that there are roughly 3-4 million unsold consoles sitting in wearhouses\store-shelves today.

Now lets do some math:

Until november we still got 4 months, meaning another 600k*4= 2 400 00 consoles will be unsold before the holidays.

The 1mill\month number will continue tru the holidays, meaning that Sony would have to sell 3 to 4mill+2.4mill+2mill(production during holidays) in order to get supply constrained.

Sony would have to sell between 7.4 million and 8.4 million consoles in 2 months, in order to be supply constrained. This would pretty much brake or be on par with any holiday season sales record ever and this at 2x the price. I'm sorry, but not even a marketing god could pull this off.

 

[DuckThor Evil]

Historically, I believe, the increase in sales over the Holliday period is dramatic. Mind you, I'm referring specifically to the Christmas period, and not anytime over the next 3 months.

Ummm...
Sony currently has something like 3 million manufactured units sitting on warehouses and store shelves, also their production capacity is huge compared to the demand ATM. There is NO WAY that Sony will run into shortages this holiday season unless it's artificially created by them and it's safe to say that ain't going to happen. Now I don't know what sort of sales numbers you were speculating, but imo they have to be wrong, especially when you mentioned 600$. Now if they drop it to 399$ or 299$:smile: then shortages might happen.

edit: well Ostepop beat me to it didn't he...

 

[Todd33]

I think you guys have jumped on Gradthrawn enough, you are all repeating yourselves and Laa-Yoosh made the point already more succinctly and diplomatically.

IMO Sony is going to relaunch a low end SKU with all the price reduction advances for $399 in before the holidays. They know they cannot sit at $600 for long and any missed profit in hardware will be offset in software/BD/peripherals/DLs profit.

 

[Zaphod]

IMO Sony is going to relaunch a low end SKU with all the price reduction advances for $399 in before the holidays.

Well that makes even less sense. If they do that, they'll need to divert significant production capacity to build up stock for the holiday. Such news are bound get out and whatever sales they currently have will dwindle. What do you imagine is going to happen to those millions of unsold 'expensive' consoles currently sitting on store and warehouse shelves then?

 

[NERO]

The BR cut seems to imply that Sony will price cut before the holidays. Dunno and don't care to guess how much, but I thought a main point of PS3 to BR strategy was making sure that the PS3 was the cheapest BR player available.

 

[Todd33]

Well that makes even less sense. If they do that, they'll need to divert significant production capacity to build up stock for the holiday. Such news are bound get out and whatever sales they currently have will dwindle. What do you imagine is going to happen to those millions of unsold 'expensive' consoles currently sitting on store and warehouse shelves then?

I never said kill off the 60GB and replace it, I said re-introduce the low end SKU. What "significant production capacity", they only need like 1m units tops and they are already making cheaper units, the Korean one for example. All they need is to swap in a cheaper HD. They can sell the 60GB with any price tag they want (say $499), people will still buy it for the larger HD, Wi-fi and full BC.

 

[Zaphod]

I never said kill off the 60GB and replace it, I said re-introduce the low end SKU. What "significant production capacity", they only need like 1m units tops and they are already making cheaper units, the Korean one for example. All they need is to swap in a cheaper HD. They can sell the 60GB with any price tag they want (say $499), people will still buy it for the larger HD, Wi-fi and full BC.

Segmenting the market again won't make sense unless the new SKU is intended to be high volume. To sell a lower specced version it will have to be perceived as better value in the marketplace than the higher end one, and the things that are 'easy' to cut to proceed as you're suggesting would cost less than the price differential. And what do you mean cheaper PS3 for Korea? AFAIK, they're only getting the 80GB version over there.

 

[tongue_of_colicab]

I never said kill off the 60GB and replace it, I said re-introduce the low end SKU. What "significant production capacity", they only need like 1m units tops and they are already making cheaper units, the Korean one for example. All they need is to swap in a cheaper HD. They can sell the 60GB with any price tag they want (say $499), people will still buy it for the larger HD, Wi-fi and full BC.

But how much do you expect they can drop in price cutting out some parts? not alot. Sony was actually losing more money on the 20gb ps3 than the 60gb one even though the 20gb had cut out just about anything you can cut out while still being able to play ps3 games. Even if they cut stuff out than they'll again have a 500dollar SKU and a 500dollar SKU still isnt going to make a decent impact (why do you think sony builds so little 20gb ps3's?).

New SKU's arnt a solution because it just isnt possible to get to a 350/400 dollar pricepoint unless they are willing to take even bigger losses. Sony just needs to figure out a way to make the main parts cheaper. HDD, wifi and stuff like that are only making out for a small part of the total cost.

 

[Todd33]

But how much do you expect they can drop in price cutting out some parts? not alot. Sony was actually losing more money on the 20gb ps3 than the 60gb one even though the 20gb had cut out just about anything you can cut out while still being able to play ps3 games. Even if they cut stuff out than they'll again have a 500dollar SKU and a 500dollar SKU still isnt going to make a decent impact (why do you think sony builds so little 20gb ps3's?).

Well no one besides Sony ever knew the cost of the 20GB, despite the rumors. Those rumors were also for launch prices, I suspect the old and new parts are all cheaper now. We have no idea how much a new 20GB unit with the BC, 65nm Cell and cheaper BD parts cost for Sony, but $400 is not unreasonable.

New SKU's arnt a solution because it just isnt possible to get to a 350/400 dollar pricepoint unless they are willing to take even bigger losses. Sony just needs to figure out a way to make the main parts cheaper. HDD, wifi and stuff like that are only making out for a small part of the total cost.

I think a new SKU is almost guaranteed if they ever change the BC, which is a cost reducing move in itself. If they are going to do that they might as well change everything else they can to lower the price including the HD.

 

[Todd33]

Segmenting the market again won't make sense unless the new SKU is intended to be high volume. To sell a lower specced version it will have to be perceived as better value in the marketplace than the higher end one, and the things that are 'easy' to cut to proceed as you're suggesting would cost less than the price differential. And what do you mean cheaper PS3 for Korea? AFAIK, they're only getting the 80GB version over there.

The Korean model has the EU cost reductions, bigger HD and it's only $550. If they can sell more for less, then clearly they can sell less for less.

Who cares about market segmentation? MS has three console SKUs, two HD SKUs, three controller SKUs, etc. How does it hurt them?