Sony "revisiting" PS3 pricing/volume strategy

[Titanio]

Perhaps signs that Sony realises things may not have gone exactly as they hoped, and that they may be willing to react..

Two comments out of Sony, I guess, to consider:

Ryoji Chubachi, Sony's president, said yesterday: "We are re-examining our [PS3] budgeting process in terms of pricing and volume. Sales assumptions change and the market is competitive. We are in the midst of revisiting our strategy for the PS3." Mr Chubachi also said he thought Sony had hit its bullish shipment target of 6m consoles at the end of March.

http://www.ft.com/cms/s/0211e938-ee...-ee13-11db-8584-000b5df10621.html&_i_referer=

This seems to be a follow up from SCE, downplaying the prospect of an imminent price-cut (which one would expect they would do regardless of the truth of the matter):

"PS3 prices and shipment plans for the future should be determined by market trends and competition," Tokyo-based Sony said. "Sony currently doesn't have any specific plan to cut the PlayStatio 3's price," Mami Imada, a company spokeswoman said.

http://www.financialexpress.com/latest_full_story.php?content_id=161628

I think this does bode well for a cut this year, at least. I was getting worried that they might just increase value versus reduce absolute price, but I think they may be 'getting it' that they need to reduce the absolute dollar cost for the consumer.

 

[T Ghost]

Whoa! They are even admiting that they MAY have failed in the price strategy!

Does anybody think that a US$100 price cut on the PS3 would fix it's sales?

My opinion is that a minimum of a US$200 price cut is needed.

 

[StefanS]

And here's the follow-up:

Sony Corp., the world's largest maker of video-game players, said it currently has no plan to reduce the price of its PlayStation 3 machine, responding to a report in the Financial Times.

http://www.bloomberg.com/apps/news?pid=newsarchive&sid=aKz6XiGssaNA

Man, Sony's PR is a mess nowadays. Too much people talking without coordinating their statements.

 

[PatrickL]

They should stop talking in public for some weeks and solve the mess internally before going out and have a clear message.

 

[Titanio]

And here's the follow-up:



http://www.bloomberg.com/apps/news?pid=newsarchive&sid=aKz6XiGssaNA

Man, Sony's PR is a mess nowadays. Too much people talking without coordinating their statements.

I had this response in my OP. Their statements are coordinated. It's very carefully worded. The SCE statement reflects Chubachi's comments while saying they currently have no specific price drop planned..Chubachi wasn't saying they were planning a pricedrop right now. But they are looking at their strategy..and probably a plan will follow from that (which they wouldn't confirm anyway until the day of any pricedrop!)

The SCE statement is basically 'damage control' for Chubachi's comments as far as not scaring off near-term PS3 purchasers, while not explicitly denying what he said.

 

[Rangers]

Perhaps signs that Sony realises things may not have gone exactly as they hoped, and that they may be willing to react..

Two comments out of Sony, I guess, to consider:



http://www.ft.com/cms/s/0211e938-ee...-ee13-11db-8584-000b5df10621.html&_i_referer=

This seems to be a follow up from SCE, downplaying the prospect of an imminent price-cut (which one would expect they would do regardless of the truth of the matter):



http://www.financialexpress.com/latest_full_story.php?content_id=161628

I think this does bode well for a cut this year, at least. I was getting worried that they might just increase value versus reduce absolute price, but I think they may be 'getting it' that they need to reduce the absolute dollar cost for the consumer.

Umm, a price drop this fall on PS3 was always pretty much a no-brainer, for all kinds of reasons including sluggish sales and the fact Blu-Ray costs will fall fast just being two biggest. Microsoft will be cutting this fall as well. How is this news? Sony had even publicly aknowledged building a fall PS3 price cut into their profitability plans in an article some time ago.

The only way this could be any kind of surprise is if they announced a hundred dollar cut in the very near future, like tomorrow for instance, which, they really need to do just that. Things are getting really desperate for PS3. It's sales are hitting record lows every week in Japan, and USA isn't much better. I'm really not sure at what point third party support begins being pulled if this continues.

I think people have kind of gotten lulled by the 360 into not expecting price cuts. But the fact is that price cuts are the historical norm, and this gen will be following suit soon enough.

 

[PatrickL]

We will get NPD numbers later today and if PS3 sells more thant 200 K (5 weeks) I guess Sony will afford to wait this fall. If it is under 150 K, price cut should come faster.

 

[Rangers]

We will get NPD numbers later today and if PS3 sells more thant 200 K (5 weeks) I guess Sony will afford to wait this fall. If it is under 150 K, price cut should come faster.

That's exactly what I'm wondering..did Sony get the NPD's a few days early and it was very bad news maybe? Although I doubt such decisions are made in such a short term way.

 

[PatrickL]

No, I think that Sony knows better than NPD what they sold. The problem is NPD numbers make sales official and widely known. If a system is going well it gets a huge buzz boost, and if it is the opposite it is way way worse.

 

[Platon]

It will depend a lot on whether they can afford it or not, remember those 5%. I wonder what they would rather go for, the 5% or PS3 marketshare?...

 

[Ben-Nice]

My opinion is that a minimum of a US$200 price cut is needed.

That's likely

 

[AlNom]

I agree that there may be a price-cut by the end of the calendar year. After the early adopters, they're probably finding that the current price is just too much for the "average" consumer despite any and all attempts to convince them that it's a good deal. At the same time they might as well convince them all to buy Sony HDTVs

he thought Sony had hit its bullish shipment target of 6m consoles at the end of March.

For a second, I thought that said "bullsh-"...

...






What's the total current # of PS3's sold according to NPD and overseas?

 

[Carl B]

Sony had even publicly aknowledged building a fall PS3 price cut into their profitability plans in an article some time ago.

Do you have a link to said article? I think you're mistaken on this; Sony has made no allusions to a price-cut this year whatsoever. Whether one comes or not who knows, but there's been no official statements to that effect, so any articles on the matter would have been doing their own extrapolation... or just simply misunderstood Sony's PS3 cost-reduction as something that translates directly to the consumer.

Sony's PR aside - which is a broken effort for sure - I think it would be wrong to see a Sony exec say they're evaluating the situation and use this as evidence that they "get it," or that now they're evaluating the situation. Of course they get it, and they've been evaluating for months. But just because you're evaluating doesn't mean that the popular decision is the one you readily come to. The cut of the 20GB (and the division restructuring) shows that profits are of paramount concern, and we all know that they have a profitability target by end of March '08 - so let's not proclaim pricecuts until they actually arrive.

 

[NERO]

Sony, also world's second-largest consumer electronics maker, in January forecast a wider-than-expected loss at its PlayStation business for the fiscal year just ended because of price cuts to fend off Nintendo Co's Wii player.

I don't understand this statement. There were price cuts in Japan before launch but I don't recall any further price cutting. Also, how can Sony mention a "wider-than-expected loss"? I take they mean revenue loss because their shipments haven't sold out, not because of these non-existant price cuts. They seem to be in denile that people aren't buying the things

 

[Carl B]

I don't understand this statement. There were price cuts in Japan before launch but I don't recall any further price cutting. Also, how can Sony mention a "wider-than-expected loss"? I take they mean revenue loss because their shipments haven't sold out, not because of these non-existant price cuts. They seem to be in denile that people aren't buying the things

Nero, ok I'm going to assume here that you don't watch and/or read financial news too often.

The wider than expected loss refers to the losses the gaming division posted vs what was expected earlier in the year, and indeed the "price cuts to fend off the Wii" statement refers to the Japanese pricecut alone. And no, they're not refering to revenue losses due to reduced sales volume - they're refering to the costs to manufacture the consoles they have thus far, along with the hit from unrealized revenue (in this case costs mitigation) from consoles sitting in a warehouse vs being shipped to retail.

 

[Titanio]

Do you have a link to said article? I think you're mistaken on this; Sony has made no allusions to a price-cut this year whatsoever.

I think someone at Sony said something along the lines of "the issue of price cuts is built into our forecasts for the next fiscal year". But strictly speaking that didn't tell us if they were assuming there would or would not be price cuts when doing their forecasts, just that they had considered that one way or the other.

 

[Shifty Geezer]

Does anybody think that a US$100 price cut on the PS3 would fix it's sales?

Not if they lose the 20 GB model at what would then be $400. To sell the 60 GB in significant quantities, I think $150 needs to be taken from the pricetag along with the software and services.

 

[PatrickL]

You need to have a huge game coming and add a price cut same time. That should launch really the console. Lair is the only game that could do that before september no ?

 

[Carl B]

I think someone at Sony said something along the lines of "the issue of price cuts is built into our forecasts for the next fiscal year". But strictly speaking that didn't tell us if they were assuming there would or would not be price cuts when doing their forecasts, just that they had considered that one way or the other.

Yeah, that's the article/news I thought Rangers was refering to, but FYI, it was a misinterpretation of Sony's statements. It's *cost* cuts that have been built-in to the next fiscal year strategy, not price cuts. The usual Western game media sources botched it up of course, but if you follow the trail back to the original source (I believe it was a Sony conference call), you'll note the references are all to Sony's internal costs.

 

[Gubbi]

Not if they lose the 20 GB model at what would then be $400. To sell the 60 GB in significant quantities, I think $150 needs to be taken from the pricetag along with the software and services.

I agree, but this won't happen until they reduced the manufacturing cost of the console.

Assuming PS3 is already sold at a loss, lowering the price by $150 and then selling 10 million units would put SONY 1.5 Giga bucks further in the red. It's a tough choice: hemorage $$$ or hemorage market share.

Cheers