The Yen is Killing Sony - Is a PS3 Price Cut Even Possible for 2009??

[gebx]

Dollar falls to 13-year low against yen

http://www.washingtonpost.com/wp-dyn/content/article/2008/12/12/AR2008121200241.html?hpid=topnews

 

TOKYO -- The dollar plunged to a 13-year low against the yen Friday, following the collapse of a $14 billion government bailout for U.S. automakers.

The dollar sank to 88.16 yen in afternoon trading in Tokyo, its lowest level since Aug. 2, 1995, when the U.S. currency was at 88.02 yen.

The greenback later recovered to 89.72 yen, but remained well under the 91.43 yen mark from late Thursday.

A senior financial ministry official described foreign exchange fluctuations as "too volatile," according to Kyodo news agency.

The rescue package sought by Detroit's ailing automakers was earlier approved by the House of Representatives but unraveled in the Senate. Bipartisan talks broke down over Republican demands that the unions agree to steep wage cuts by 2009 to bring their pay into line with Japanese carmakers.

The news also extended losses in Japanese stocks. The benchmark Nikkei 225 stock average shed 5.6 percent to 8,235.87.

A strong yen is the last thing Japanese exporters need.

Major manufacturers including Toyota Motor Corp. and Sony Corp. are already reeling from slumping global demand. Yen appreciation erodes overseas profits when repatriated to Japan and makes products more expensive abroad.

 

 

 

 

Now how bad is it for Sony?? Answer - BAD!

Look at the history of the Yen. When the PS3 was launched in the U.S. the Yen compared to the Dollar was in the ¥117-¥118 range, today its at ¥89!!  Representing a whopping 25% drop!!

Sony is making 25% less money on every PS3 sold in the states since launch, that doesn't even include the official price drops.

 

PS3 - 40% Price Cut Since Launch

Now what happens if we take into account the official price cuts?

Nov 2006 - Sony made ¥58,882 from every 20 gig PS3 sold ($499)
Dec 2008  - Sony makes ¥35,511 from every 80 gig PS3 sold ( $399)

That's a 40% price cut since launch! Do we really expect Sony do cut another $50 off the console? That would amount to a 49% price cut from launch!

How much further can Sony go? Can the U.S. dollar rise back up against the Yen and how long will it take? No one really knows.. but the Yen is at a 13 year low and this will lay heavily on Sony's decisions to cut the PS3's price here in NA for 2009.