Sub $200 pricepoint - When will next-gen get there?

[TheChefO]

Digital Cameras are ever in the same price range and year after year models with more improvements appear in the market. The same we can say with Cell Phones and MP3 players.

Since the consoles are electronic consumer hardware I believe that the better for all of us is fixing the price of all them to a reasonable price that everybody can pay but with a little more improvements, for example:

Xbox 360 Premium Pack Christmas 2006: 299$
Xbox 360 Premium Pack with 100GB HDD for Christmas 2007: 299$

The games are going to be the same, the motherboard the same but with some improvements that don´t hurt the final user.

The concept is good for making the manufacturer more money year after year but it will also limit the userbase in two ways:
1) some people won't buy a system unless it is under a certain price.
2) some people will be hesitant to buy the system in fear that next years model will offer better value.

Both of these userbase limiters will turn MS/Sony/Nintendo off of this idea as their business model is based on userbase/software sales.

 

[Arwin]

I think going back to the original question, it's very hard to predict when next-gen will get there - I mean we know that the Wii will start at that price pretty much. When the 360 gets there might actually depend on when the PS3 gets there. I doubt Microsoft is willing to invest another 4 billion into this market, although you never know. So they'll basically follow the PS3 price and try to stay under it at about 100$.

In which case it all comes down to the PS3. The PS3 can be expected to do about the same as the PS2: match consumer demand with production costs optimally. Lots of factors in here, as consumer demand may be dependent on how well the rivalling machines do, pushing the price down a lot quicker than production costs might warrant initially.

Part of this equation will amount to brand loyalty also. The PS1 and 2 did very well, and people may be willing to buy a PS3. Some are willing to do it on day one, others will do it when the PS3 costs $299.

The production costs depend on optimisations in the production process, moving plants to China, etc., but also on inflation and exchange rates in each different regions.

This goes to the value of the $200 price point also. I think any perception of the $200 price point maintaining the same relative value is nonsense. While it takes longer for people's perception of pricing to adjust to inflation levels, that doesn't mean they won't.

But in the end, the $200 level for me is totally meaningless. The console world is far too dynamic to think that a single indicator has any major value. In the forefront of electronics, it's all about offering the right thing at the right time for the right price. But what's right here, is hard to predict. You can't rely on previous experiences a whole lot. The iPod was a tremendous success for apple, through its combination of lifestyle and innovation. The DS was a tremendous success in Japan through a combination of innovation and brand loyalty, but at the same time the PSP did very well in the other two regions. The original Xbox did really well in the U.S. but failed in Japan.

The world is a big place, and I think that in itself means that there is enough space for Microsoft, Sony and Nintendo. The order in which they come doesn't matter - if they fail to make a profit, it's entirely their own mistake. If they don't make any basic mistakes, the only thing that can drive them off the market is a fourth player that does something miraculously right.

 

[scooby_dooby]

Digital Cameras are ever in the same price range and year after year models with more improvements appear in the market. The same we can say with Cell Phones and MP3 players.

I think you're missing a key concept in your comparisons. Functionality. How many hours of use does your average perseon get from their MP3 player or CELL phone? They are utility devices that are used every single day, and therefore higher prices can be justified. Also, only a very small portion of consumers pay full price for CELL phones.

Now, if you look at a console, it's a much more frivolous device. Most gamers hardly play it, they might play a handful of games in a year, and it takes up a very small portion of their time. It just doesn't hold the same value as these other CE devices, and won't sell at the higher pricepoint. While many people can justify $300 on an IPOD they user every single day, they won't spend it on a console they very rarely play.

That's why I think the $199 price is so important in the states, history has shown that this is where the majority bite. Maybe this is changing, we won't know until a few years from now, but I gotta think the safe bet is still $199 for mass market acceptance of a gaming console.

 

[OtakingGX]

This goes to the value of the $200 price point also. I think any perception of the $200 price point maintaining the same relative value is nonsense. While it takes longer for people's perception of pricing to adjust to inflation levels, that doesn't mean they won't.

You bring up and interesting point about inflation. Inflation is measured using the Consumer Price Index. That's a weighted average of prices of a grab bag of consumer products. Right now, and well into the foreseeable future, energy prices are pushing the CPI ever higher and higher. As everything a person buys becomes more and more expensive, her or she becomes more and more conscious of the amount of money they spend on entertainment.

I think the $200 barrier will be more of a consideration for people who are paying $3+/gallon for gas. Especially those who work at companies that have had pay raise freezes.

 

[TheChefO]

I think going back to the original question, it's very hard to predict when next-gen will get there - I mean we know that the Wii will start at that price pretty much. When the 360 gets there might actually depend on when the PS3 gets there. I doubt Microsoft is willing to invest another 4 billion into this market, although you never know. So they'll basically follow the PS3 price and try to stay under it at about 100$.

Agreed ms doesn't want to lose any money on 360 (in fact they're looking for profit in a few years). But the system was designed to meet low cost and profits. They will most likely be profitable on the hardware by the end of the lifecycle at ~$130. With that said, I think you can fairly reasonably look at previous cost reduction timetables and forecast within reason future cost reductions for all consoles. Ps3 throws a bit of a monkey wrench into the mix but we can still figure likely outcomes.

The likely outcome for ps3 hitting sub $200 is at the earliest 2009 based on yearly $100 price drops. This is assuming a very aggressive ramp with cost reduction, vast Bluray adoption, and Sony dipping into the bank initially to enable these yearly cuts. At the latest, I would expect 2011 for sub $200 price. By this time, a flash drive should be feasable along with two die shrinks on a fairly muture process and mass bluray drive availability/stability.


The likely outcome for 360 hitting sub $200 is at the earliest May next year. If they follow the same pricing scheme ps2 did last gen they should be able to hit this mark with perhaps a small amount of subsidizing to ensure strong system sales through the 2007 summer. At the latest I would expect May of 2008 for a sub $200 360 core. Perhaps the most likely scenario is a $250 core (sold at cost/slight profit) May 2007.

 

[TheChefO]

You bring up and interesting point about inflation. Inflation is measured using the Consumer Price Index. That's a weighted average of prices of a grab bag of consumer products. Right now, and well into the foreseeable future, energy prices are pushing the CPI ever higher and higher. As everything a person buys becomes more and more expensive, her or she becomes more and more conscious of the amount of money they spend on entertainment.

I think the $200 barrier will be more of a consideration for people who are paying $3+/gallon for gas. Especially those who work at companies that have had pay raise freezes.

Pleeeeeease don't bring a potential economic recession into this equation as that will screw the whole market up!

 

[one]

I don't have specific numbers but any look at a typical game store shows ps2 had a lot more games than xbox and justifiably so. The majority of the "exclusives" weren't so much paid by Sony to ensure "system sellers" but simply devs choosing the system which had the vastly larger installed base. Many nitch titles and a handful of AAA exclusive titles.

I think the AAA titles will see a major shift away from exclusive (time perhaps) and the nitch games will also have a shift. Some will shift to multiplat while others will shift to target the games to their core audience (whever/however that shakes out next gen).

Google could lead me to a convenient website.

PS2 exclusives = 121 games
http://www.in5ane.com/platform/PS2/exclusive
XBox exclusives = 89 games
http://www.in5ane.com/platform/Xbox/exclusive
GC exclusives = 62 games
http://www.in5ane.com/platform/GC/exclusive

But these lists include 1st-party games, and apparently SCE releases more games than others do.

 

[TheChefO]

Google could lead me to a convenient website.

PS2 exclusives = 121 games
http://www.in5ane.com/platform/PS2/exclusive
XBox exclusives = 89 games
http://www.in5ane.com/platform/Xbox/exclusive
GC exclusives = 62 games
http://www.in5ane.com/platform/GC/exclusive

But these lists include 1st-party games, and apparently SCE releases more games than others do.

I can't find the source but I was looking for a total number of titles available for each system to illustrate what I meant by "exclusive". From what I recall ps2 was upwards of 1000 titles and Xbox was in the neighborhood of 600. I don't have any hard numbers though. This descrepency is what I was refering to as the "nitch titles" that were exclusive on ps2 by default for it's vast userbase and small-ish dev teams working on nitch/experimental/unpopular games. These are the games I'm thinking will shift away from ps3 to Wii/360/ps3 depending on their demographic/userbase. With ps2, the question of what system to dev for was answered before they asked it. There realistically was only one answer if you were in those ^ shoes.

 

[Arwin]

Pleeeeeease don't bring a potential economic recession into this equation as that will screw the whole market up!

It already has. For instance, when the PS2 was released, the dollar was at its 10 year peak, and now when the PS3 is announced, it's very much down. It means that for us, the PS3 is about the same price as the PS2 was when released (cheaper if you count the memory card), but for people in the U.S., its price has gone up 66%.

But people fail to recognise these things. So in the U.S., and among Europeans who either forgot, or didn't pay attention during the PS2's launch, there's a big fuss about the price. Japan is about halfway between the U.S. and E.U. in this respect, but with greater brand loyalty.

 

[TheChefO]

It already has. For instance, when the PS2 was released, the dollar was at its 10 year peak, and now when the PS3 is announced, it's very much down. It means that for us, the PS3 is about the same price as the PS2 was when released (cheaper if you count the memory card), but for people in the U.S., its price has gone up 66%.

But people fail to recognise these things. So in the U.S., and among Europeans who either forgot, or didn't pay attention during the PS2's launch, there's a big fuss about the price. Japan is about halfway between the U.S. and E.U. in this respect, but with greater brand loyalty.

Agreed - on that note I've said before, in Europe they will be getting a great deal with ps3 as you've illustrated. How it's price compares to 360/Wii I don't know. I don't have specific sales numbers for Europe. But I do have worldwide sales which I listed previously in this thread which show a significant uptick in sales after the US $200 pricepoint. I don't know if that was driven strictly by US sales or if EU/Japan also had a price drop at the same time. All I can vouch for is the history of price acceptance of consoles in the US and worldwide/US sales over the same periods.

 

[scooby_dooby]

But people fail to recognise these things. So in the U.S., and among Europeans who either forgot, or didn't pay attention during the PS2's launch, there's a big fuss about the price.

Yes but PS2 got a 100 quid pricedrop within 10months of launch, 1/3 of the launch price. Within a year of that they dropped it again to 170 just over half the initial price. If europe wasn't price sensitive I doubt sony would've been so aggressive with their price cuts, it was reduced much faster than the US sku.

North America

• US$299.99 (October 26, 2000, Launch Price) (CAD$455.99)
• US$199.99 (May 14, 2002) (CAD$311.99)
• US$179.99 (May 13, 2003) (CAD$249.99)
• US$149.99 (May 11, 2004) (CAD$207.99)
• US$129.99 (April 20, 2006) (CAD$147.99)

(Note: Canadian prices based on direct conversion from USD using the nominal rate from the dates specified)
Japan

• JPÂ¥39,800 (March 2000, Launch Price)
• JPÂ¥35,000 (June 29, 2001)
• JPÂ¥29,800 (November 29, 2001)
• JPÂ¥25,000 (2002)
• JPÂ¥19,800 (November 13, 2003)
• JPÂ¥17,800 (June 2004)

United Kingdom

• GB£299.99 (November 24, 2000, Launch Price)
• GB£199.99 (September 26, 2001)
• GB£169.99 (September 1, 2002)
• GB£139.99 (October 1, 2003)
• GB£104.99 (August 18, 2004)

http://en.wikipedia.org/wiki/PlayStation_2

 

[assen]

As everything a person buys becomes more and more expensive, her or she becomes more and more conscious of the amount of money they spend on entertainment.

It also has the inverse effect: when is a console more expensive, when it's the same price as one tankful of gas, or two tankfuls?

 

[Urian]

The people pays between 199 and 299$ for an iPod or a Motorola V3, I believe that the better for the industry is erase the stupid royalties and fix the price of system in a reasonable price range all the generation.

 

[Acert93]

The people pays between 199 and 299$ for an iPod or a Motorola V3, I believe that the better for the industry is erase the stupid royalties and fix the price of system in a reasonable price range all the generation.

Royalties is what pay for R&D, Marketing, Platform development and Evangelism, and unit subsidization--not to mention profits for the console maker. If they fixed the price at cost we would be easily looking at at least one console exceeding $700--and that does not begin to figure in marketing and R&D (e.g. Sony spent a ton on CELL).

As for iPods and what not, music obviously has a higher market base to appeal to. I don't follow them (far to freaking expensive) but has the iPod broken 100M sales yet?

As for reasonable price range, a lot of consumers still buy the consoles after they get to the $149 price point. Everything is relative as well. A $600 PS3 with Blu Ray, HDD, and cutting edge technology in 2006 could be considered a good deal. $299 would be crazy cheap (not to mention kill Sony). But in 2011 this same model at $299 will be very outdated and extremely overpriced. By then MS and/or Nintendo could already have a new "next-gen" console out degrees of magnitudes faster at the same price. And in the 2010/11 time frame a 60GB HDD will be small, Blu Ray WRITER would be expected, the graphics will look very outdated compared to the PC and the new consoles, etc

Price drops, in some ways, represent the progression of the market and manufacturing. And it does not hurt enthusiests and early adopters are willing to pay crazy high prices early on (and think people are nuts for waiting for much lower price points) to help cover the launch costs and the expense of launch hardware.

So I don't see an "even" generational price anytime soon. Now a low entry price with a monthly payment type situation, especially as they move online, I can envision that. Instead of a $399 Xbox 720, maybe a $199 one at launch with a 2 year contract at $19.95 a month for Live Services and X Games. I could see such a model as a subsidization of the console price if they can make their launch quota.

 

[Gradthrawn]

Going back a few weeks ERP answered the question of how long it takes to swap a title from one target to another. This was also a serious consideration I had was how many devs were "betting the bank" on ps3 and potentially sticker shocked at the announced price and consequently "stuck" developing for something which might not sell as well as they initially thought which may be a big impact on their bottom line.
ERP answered that he can typically take a title and get it from one platform to another in less than six weeks. While I agree this will have some affect on initial title availability, I think any dev making a game at this point has to have a devkit for a 360 and Wii to ensure financial stability. While there may be a few exclusives in 2007 I think anyone making one of those exclusives is concurrently having a team working on the other devkits to get up to speed for smooth porting of the game to multiplat asap.

This is good information that pretty much destroys the scenario I referenced earlier. Not that I would know better than ERP (I don't) but I would guess that the time needed to switch production would depend greatly on at what point in production development is in? Then again, with the PS3 and 360, assets are likely to be very similar, hence easily adapted and reused. That cuts down on a lot of time. Given the similarities between the controller, online experience (at its root), and user profiles (multi user environments) the overall design could probably remain, by and large, unaltered as well. And if they already had 360 dev kits, they likely had a technology team working on them. On 2nd thought, I guess it wouldn't take as much time as I had originally assumed. The biggest possible delay coming from proprietary code that needs to be ported, assuming they're not relying heavily on middleware.

That'd be the trend for a while, third parties have to earn money and experiences for next-gen big budget production and next-gen R&D in the first place.

Out of curiosity, how many third-party exclusives have PS2/Xbox/GC got for recent years? AFAIK most Japanese games are on PS2 naturally but how about others? Xbox/GC got exclusive games too, did PS2 get significantly more exclusive games for it after those consoles got to sub $200 in 2003? Now, back to next-gen, if you think there'll be less PS3 exclusive games, what's your prediction about the number of Xbox 360 and Wii exclusive games?

I wish I could provide you with more hard data than what's already been provided about exclusives (for the PS2/Xbox/GC). If memory serves me, I distinctly remember more exclusive PS2 releases , even late in its life span, than on the 360 and Cube. Later on I think I'll go through the 2003,4,5 release list and look at any exclusive title at or above 80% on GameRankings. That won't really give the numbers you're looking for, but I think it might show how many quality exclusives were released when they were all at and below $200.

As for my predictions, I'm not sure about a great many things. A year ago, I would have said with confidence that Rev exclusives will be just as they were with the Cube and N64, mostly 1st party, and few and far in between. I would have been confident about that in no small part due to the technology used and the "quirky" (for lack of a better term) control scheme used. But we all know how "badly" things turned out for the DS which is in the same position (albeit in a different market) . Which is why, now, I would say Nintendo could be a wildcard.

However, what's still going against the Rev, as illustrated by the DS (as I see it at least) is that, for the most part, Nintendo seems to be the one truly making the best use out of the innovations it brings. Basically, the uniqueness of the DS seems to be almost lost on the majority of 3rd party devs. Looking at sales for the DS, what's hot and has been hot seems to be 1st party titles. Looking at the avg. ratings for DS games, that also seems to hold true. Out of the top 20 rated games, only 6 are from 3rd party devs! I feel the same could possibly hold true for the Rev. Nintendo knows the direction to takes it platforms, and is willing to put forth the R&D to make the best use of them. Which can probably be said for SCE and MS though, too, right? The biggest difference being N's direction for the Rev and DS is significantly different from the competition, so simply bringing over an existing IP without a considerable investment put into the design and adaptation process, will likely net poor results.

I think I started to go way off topic there, but long story short I predict that the Rev exclusives that truly matter, the ones that are truly exclusive because they can't be done on another platform, will primarily come from Nintendo. How 3rd parties handle it, I'm not sure, but I would guess there will be a lot of derivative titles, that take existing concepts, designed around the standard controller, and simply map motions to them. That might not necessarily be a bad thing, but personally I don’t feel that said titles will hold up to games like Smooth Moves and Sports. For the 360, I think its going to enjoy less exclusives showing up on the Playstation compared to last generation, while still maintaining its grip on the majority of PC ports (I’m guessing due to development environment now, more so than because of architectural similarities). One of the biggest announcements out of MS' camp at E3 was that a 3rd part title would be coming out at the same time as it does on a competing platform. Just to clarify, I don't view having PC ports as a bad thing, in my book its a really good thing. Personally, I bought a 360 to do just that, play the games I can't on my PC because I don't feel like upgrading and/or out of the desire of simple plug and play friendless (although Oblivion has greatly shaken that feeling, but that's another story). I suspect many others unwilling to drop the cash they need to into their PC to play the latest and greatest will do the same, while also enjoying some strong 1st party efforts.

In short, I would guess that exclusives for MS and Nin will largely remain the same, while the breadth of 3rd party titles increases (for MS, at least). I would like to say that's a good thing, and on a certain level I think it is. For those gamers unwilling to purchase multiple platforms, it means they won't be missing out on as many games as they would have in previous generations. It also opens up more venues for revenue for publishers and developers. But, personally, I'm not too thrilled about the prospect of multiplatform development, since, in the past, such efforts have rarely ever taken advantage of a platform the way games designed from the ground up for them do. I don't particularly care about 1 platform having a game the other doesn't, I have all them from the current gen, and I'll do the same for this one too. Maybe the state of middleware has changed to the point where this will be less noticeable. The Unreal3 engine seems to be used quite extensively (for 1st and 2nd gen titles, at least) and I've been pretty impressed so far with what's been done with it. So, maybe things are looking better already. However, I've got to wonder how long such middleware based titles will be able to hold their own against platform specific developments.

 

[TheChefO]

This is good information that pretty much destroys the scenario I referenced earlier. Not that I would know better than ERP (I don't) but I would guess that the time needed to switch production would depend greatly on at what point in production development is in? Then again, with the PS3 and 360, assets are likely to be very similar, hence easily adapted and reused. That cuts down on a lot of time. Given the similarities between the controller, online experience (at its root), and user profiles, the overall design could probably remain, by and large, unaltered as well. And if they already had 360 dev kits, they likely had a technology team working on them. On 2nd thought, I guess it wouldn't take as much time as I had originally assumed. The biggest possible delay coming from proprietary code that needs to be ported, assuming they're not relying heavily on middleware.

Great post!

Agreed the state the game is in when making the switch would likely have a direct affect on total time to switch platforms as well as familiarity with the new target platform. But perhaps someone (ERP?) with more experience on the matter can shed some more light on the situation.

Regarding the original topic, Is there anyone on these forums that can give some insight into specific cost reductions of ps2/xbox/gc that may be relevant to this discussion?