The future of PS3 SKUs/ pricecuts, my predictions.

[Bodhesatva]

senatorpjt said:
Two predictions can be made here: What Sony "should" do, and what Sony "will" do.

What I think they "should" do is lower the price as much as possible. The cost of manufacturing a PS3 has come down quite a bit, and will likely come down even more. The price of manufacturing a new console drops logarithmically - quickly at first, then reaching a constant level. They should price it as low as possible while maintaining it above the expected manufacturing cost in the future, such that in the end, the profits on the console will equal (ideally) zero over the entire life of the console.

It may not make sense, but pricing the console to achieve zero total profits actually generates the most profit, since it maximizes the sale of the console without a net loss, and leaves the profits from licensing, which is where almost all of the money is made anyway, even on consoles sold at a profit.

What they "will" do is anyone's guess, from what we've seen from Sony, they'll probably just stop selling the 60GB for $499, and start selling the 80GB for $599 again.

Sony has already lost well over a billion dollars on the PS3 hardware, and they're likely to lose a good deal more over the course of the next year. There is a near 0 percent chance that they will make money on the hardware this generation (although it's within the realm of possibility that they could make a profit overall, thanks to software licensing). 

The big, big problem with this method, Senator, is that it often backfires awfully and expensively when you don't actually accrue much market share. Look at the Xbox. What happens if Sony spends billions now on vicious price cuts, then tries to make the money back in two or three years... but few people are buying a PS3 anymore? That's a very realistic scenario, as that is what happened to the two secondary consoles last generation: good sales spikes at the beginning, followed by gradual declines until the systems were selling quite terribly near the end.

http://vgchartz.com/hwcomps.php?cons1=GC&reg1=All&cons2=PS3&reg2=All&cons3=XB&reg3=All&weekly=1

As you can see, the PS3 is currently above Xbox/GC levels thanks to the price cut, but it's been flirting with GC/Xbox level sales for quite some time now. Your method makes perfect sense if the PS3 eventually increases its market share, but what if the PS3 uses your strategy and it ends up with the 10-15 percent market share it has now? Answer: Sony loses billions of dollars.

It's easy to gamble with other people's money. You can say that this is what Sony should do when you aren't involved in the financials and you don't have to answer to share holders. Sony does have to answer, however, and they can't keep viciously cutting their price in the hopes that their market share will noticably increase. Every one of these cuts is a gamble, and Sony's financial resources are much more limited than many seem to believe (they have more debt and less cash reserve than Nintendo, and their annual profits are approximately 1/10th that of Microsoft).