Sony dismisses price cut chatter on PS3

[hugh]

Some notes regarding the cost of the PS3.

When it first came out iSuppli's teardown analysis pegged Sony's "bill of materials" at $840 for the model that sold at the time for $599, and $805 for the starter model that sold for $499. In December 2008, iSuppli said the loss was shrinking with the PS3 now costing about $450 to build.

ISuppli estimates the Cell chip costs Sony $46, down from the $64 in 2007, and $89 in 2006. The Nvidia chip now costs $58, down from $83 last year, and $129 in 2006.

Add in Marketing, Shipping, overhead etc and Sony is likely taking a several hundred dollar hit on every unit sold today.

[Gord Lacey]

Originally Posted by eimaj

There has to be some cost for br movie playback. If there is no programming to run br movies, that would save time in production which must save money. Also, Sony would not have to provide updates to play future br titles which would also save money. In fact, Sony should get rid of dvd playback and upconverting as another cost cutting measure. Who the heck doesn't have a dvd player by now? The Wii doesn't have any of this and it certainly did not suffer in sales because of it.

But eimaj, the programming for BD playback is already done, and is part of the firmware. If they started shipping models without BD playback like you've suggested they'd still have to support the current models. Shipping two different firmwares for the two different machines would likely add to their support costs (right now there's only one version of the firmware for each PS3).

Getting rid of a software feature that currently works will not save them money, getting rid of hardware would, which is why the current PS3s don't play PS2 games (that hardware was removed).

Gord

[QuickSilver]

Well they need to do something. Playing catchup is not something Sony usually knows how to do. I am no marketing genius but I know that the market for video game consoles has changed dramatically since the the juggernaut called the PS2 was released. They need to adapt to the change in the marketplace.

[99semaj]

I don't think they want to go slumming all the way down to the 360's level, but they need to capture that downmarket share and try to re-establish some of their lustre.

A PS3.5 is not the answer because they are already so far ahead in terms of hardware capability. They need to take what money they have and invest deeply in software that the competitive consoles simply can not match.

That's a double-edged sword, though, because developers will be hesitant to develop titles that can't be ported onto less-capable consoles with a larger install base. Sony will have to bend over backwards to entice the studios.

[hugh]

Well they need to do something.

I don't think anyone is arguing with that sentiment but I for one don't think dropping the price of the PS3 one hundred or two hundred dollars is going to help Sony's bottom line and could make it a whole lot worse.

From what I understand, Microsoft is now making some money off the Xbox360 but still nowhere near enough to offset the few billion dollars its lost on the product.So the Xbox360 has been out now for over 3 and a half years and is still a few billion in the hole.

Can we really say that the Xbox360 has been more sucessful than the PS3 and should Sony really emulate the business practice of a division that is still losing money as its primary product enters the twilight of its career?

[hugh]

They need to take what money they have and invest deeply in software that the competitive consoles simply can not match.

That's a double-edged sword, though, because developers will be hesitant to develop titles that can't be ported onto less-capable consoles with a larger install base. Sony will have to bend over backwards to entice the studios.

That is where I am going. Give users a superior product at a superior price and don't drop your pants on pricing to match a competitor that is losing money on their product.

Sony doesn't have a cash cow called Windows or Office to subsidize their PS3 development.

[QuickSilver]

Originally Posted by hugh

That is where I am going. Give users a superior product at a superior price and don't drop your pants on pricing to match a competitor that is losing money on their product.

Isn't that what Sony is touting the PS3 as now? with $99 BD players to be found they have to stop riding the coat-tails of being a BD player and a game console. Those days are over. Are Sony not in a rock and hard place? Tout developers to make software for the PS3 only...which costs Sony money and they are still losing money on each console sold.

[dezzpayne]

Sony is making inroads with middleware and spreading the experience wealth as it were. All the Sony owned studios have helped each other. After Resistance 2 their guys shared what they learned with the folks developing Killzone 2, they in turn helped the folks developing Uncharted 2. This experience however needs to make it to 3rd party publishers. Sony could conceivable loan some of their talent out as consultants to 3rd party projects.

As for my PS3.5 comment the intent was that the $3B investment will be spread over at least 2 generations. Personally I think it's hard to say where Sony's break even point is. For one it is commonly accepted that Sony won the high definition war thanks to the PS3. Blu royalties are not going to go to the Playstation division but what was that worth to Sony as a whole? Also when they make the PS4 my main point was they won't need to spend anywhere near 3B to make it. They already have the groundwork, they simply need to upgrade it.

BR-50GB double sided discs will be fine for PS4
Cell-Highly scalable and cheap to produce. No brainer

Those 2 items alone account for a gross chunk of that development money. I am confident for a Playstation breakout holiday season on the heels of a cheaper console, slim or fat.

[asif9t9]

Sony lost this generation, in terms of sales of their hardware, so they're going to take it on the chin and accept it. For now. Makes sense. Are they going to sell more than the 360 or Wii by lowering the price? Probably not. The race was over. Better to save their pennies and be ready for the 4th generation.

[eimaj]

I agree that the ps3 is not going to catch up in sales with the wii and 360, but with an imminent price cut and the incredible exclusive software line-up for the next 2 years, the ps3 is going to move a lot of units.

Also, on one of the game sites one of the commenters mentioned that he has a back-up 360 for when his primary dies so he doesn't have to go for weeks on end waiting for the repair. I wonder how many "back-ups" are out there and what number they account for in sales. As well, how many have upgraded to the newer version that is less prone to failure just out of fear of the rrod. Another item that would skew the numbers.

It still baffles me that people think it is a hundred dollar difference (pro vs. 80gig) when you most likely still have to pay for xbox live and a wireless adapter.

And remember, the ps3 is ahead of the 360 over the same amount of time (at over 2.7 million consoles according to http://vgchartz.com/hwlaunch.php?con...=All&weeks=140).

[rsambuca]

Originally Posted by eimaj

Also, on one of the game sites one of the commenters mentioned that he has a back-up 360 for when his primary dies so he doesn't have to go for weeks on end waiting for the repair. I wonder how many "back-ups" are out there and what number they account for in sales. As well, how many have upgraded to the newer version that is less prone to failure just out of fear of the rrod. Another item that would skew the numbers.

I too have wondered how much of an effect the double purchases and re-purchases to replace dead units comes into play, but if you look at the attach rates of games per console, then the XBox is still doing very well, so I don't think these numbers are as big an issue as you might think.

Also, just want to point out that I didn't purchase a wireless adaptor for my 360 - I have a direct hardwire connection.

[eimaj]

Attach rates are a little hard to follow as a few multi-platform games actually sell better on the ps3, res evil 5, blaz blue, street fighter 4 and even ghostbusters come to mind. But these types of games could just be anomalies due to the japanese factor and their love for them.

I'm guessing you have live gold though and after 2 years that puts you above the cost of the ps3. Real cost in the long run is a few bucks more.

[dezzpayne]

360 Attach rates are better in NA yes but I find it odd. The 360 isn't beating the PS3 into the ground or anything. The lead they have is a simple product of a year head start. The media as a whole have really just been brutal to Sony this gen. Articles like "Should Sony exit the hardware business" just add fuel to the fanboy fires. The PS3 is in 3rd place but they have 20M+ consoles out there at a much much higher price point than the competition. People are short sighted. The "war" as it were isn't over yet.

[Professor Frink]

The problem as I see it is the console arms race itself has created a monster - consoles that are incredible in their performance and ability but even when significantly subsidized still priced above what the market will accept.

At the same time, Sony is confronted by their own insane competitor in Microsoft who is willing to win at any cost. Except unlike Sony who had to inflict tremendous pain on itself to advance Blu-ray and kill off HD-DVD, Microsoft can turn up the pressure on the PS3 at their leisure drawing on their billions in idle cash.

For Microsoft to consider the Xbox platform a success, they only need to have made life as difficult as possible for Sony.

Then you have Nintendo who is kicking ass with the Wii which is sporting a nearly decade old PowerPC G3 processor and some ultra-basic ATI chip. And then there is the DS, which is less powerful than the average cellphone.

[Tezster]

I think the PS3 still has a pretty long shelf life, considering its feature-set. It will never be the market leader in terms of units sold, but it's certainly not going to go away.