jkimball said:
amirnetz said:
jkimball said:
good discussion, but noone mentioned the 600lb gorilla in the room...what the accountants refer to as 'industry exit'.
When a product is unprofitable but has positive margins elsewhere (ie it supports blu-ray, or helps pay the bills in a plant where other profitable products are made) you keep making it short term. Long term, if the product appears to have no chance of profitability you stop making it aka 'industry exit' (blu ray doesn;t need it, the lease on the plan expired and the company can move to a smaller plant...)
Sony needs to
A) Cut the price immedidately to build critical mass in the marketplace for the PS3. It does not have that now. It needs to be within 80% of the sales of the xbox360 to be relevant in the HD market. Today that means it needs ~ 23M*.8=18.4M It is already behind and falling away every week...
or
B) prepare on withdrawing from the home console market.
So in early spring of 09, look for a drastic price cut...or a fire sale...
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The price cut is not an option right now. They just cannot afford it. They are already losing $1B/year in their gaming division and $100 price cut on 10M consoles will exactlu double that loss. Since the company made only $20M in profit in the last quarter I doubt it will be willing to take a x100 of that in loses just for one product. The PS3 alone can sink the whole company.
The PS3 will need to become profitable without a price cut for the next 10-12 months. As long as it is profitable, Sony can stay in the market even if it is just for playing for 3rd place. With profitability they can justify making a PS4 and give it another go. If they continue to lose money then they will have to do the "industry exit".
They have no more than 12 months to go being either profitable or cutting down the loses and exiting the market.
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You are probably right about the price cut. But there is no way they have 12 months to think about this. No way. Decisions need to be made...now.
Let me put it this way: you don't want a price cut because it will cost $1B. but you are willing to wait around a year, which by your own math, also will cost a $1b?
if the world economy hadn't just collapsed, then they might have a year. But it did. So they don't have a year. They have to take a 1B risk by cutting the price, or get the heck out. And it will happen in early spring.
personally I'll wait for the firesale :)
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If they are exiting the industry, don't buy next spring. They will announce at some point that production has stopped. Dreamcast went for way cheap just a bit after it stopped being available. Buy then :D
But I don't think thats going to happen. What will they do with the games they are planning? What happens to PSP?
