“Hello, I’m the editor of a small multiplatform video game blog and I’m still in high-school.” — these are not the words of this particular mystery columnist known as Twiggy, more the words of every other no-name blog I seem to stumble upon. Such words are usually penned in invisible ink prior to the radically uninformed, but nonetheless factually presented, “Sony need to cut the price of the Playstation 3 because Sony need to make more people buy one because Sony need more developers because Sony need…” — you get the idea, valued reader.
I beg the question - do any of these self-titled digital rag tappers have any understanding of the inner-workings of Sony as a company?
I don’t. And I’d bet my anonymity on the belief that they don’t either. Why should any of us know anything about what goes on in Sony’s boardroom — we’re here to play games and talk about our experiences, not assume business practices.
Y’see, such hit-seeking blog entries are crafted by a minority of nobodies without the first clue of business. They see the Playstation 3 last on a pile of hardware sales and think they’re losing adopted ground in a fictional video game war that has absolutely nothing to do with video games whatsoever.
Reader, if you don’t mind me straying into the simple nuances of basic maths for a paragraph or two, allow me to explain as promptly as possible why no price cut is actually a good thing. If you may picture in your minds for a second or two a Playstation 3 system; it retails at a consumer price of $399.99 and costs $440 to manufacture (correct as of December 23rd 2008). A simple mathematic solution (399.99 - 440.00) concludes that this leaves Sony with an offset of (negative) -$40.01. Wake up at the back!
With our offset calculated, we can conclude that based on current figures, every Playstation 3 loses Sony (as a corporation) $40.01. Imagine we were to drop the price of the Playstation 3 to something reasonable, let’s say $349.99. “Huzzah,” call the mass of bloggers, “The system we already own is now a little cheaper. Brilliant!” — wrong. It’s not brilliant at all. If we repeat the same arithmetic as earlier, with our “improved” figures (349.99 - 440.00) we come up with a new negative figure, (negative) -$90.01.
“But $90?” I sense you trainees claiming, hands wiggled poignantly in the air, “$90 is nothing and it’s going to increase market share tenfold.” — thus we reach the crux of the problem.
In February 2009, Sony sold 276,000 Playstation 3 units. Let’s assume that our speculated pricedrop came into effect on the first of April, backed by a substantial (and successful) marketing campaign. We’ll suggest that Sony managed to shift 600,000 units the month of our speculated pricedrop, a substantial growth of both market share and presence. But aside from blog-bragging advantage, what would this mean for Sony? One final equation will give us the solution: $90.01 (the offset between sales price and manufacturing cost) * 600,000 (number of systems sold) = a staggering (negative) -$54,006,000. Just to clarify: that’s fifty-four-million-and-six-thousand dollars lost.
Sony is a big company, but in this economical climate, no one wants to be looking down the barrel of a big fat negative sign prior to the number 54million. It’s potentially crippling. I’m not even a business analyst and I can realise that.
So here’s the thing no-name bloggers; your pleas for a pricedrop are falling on deaf ears, because even this anonymous columnist can do the sums that make a Playstation 3 pricedrop unfeasible at the moment.
That’s not to say the price won’t lower eventually — the maufacturing costs cited earlier are half of what they were in 2006 and they’re dropping all the time. As prices come down, there’s no reason to doubt that Sony won’t pass that saving onto the consumer. Of course market share is being lost, but it’s not so substantial that Sony’s closest competitor is gaining daylight between the systems — in fact you must acknowledge that Sony have done extremely well pushing systems as it is.
And reader - if you are still reading of course - let’s not pretend that the Playstation 3 doesn’t have the longest potential system life-span of the three available. Interchangeable hard-drives, Blu-Ray discs, firmware updates, the potential of the cell chip and reliable hardware mean that the Playstation 3 could easily outlive its proposed ten year lifecycle. In the year 2012, when Microsoft and Nintendo ready their new systems at an early-adopter price point, which console do you think is going to be the cheapest on the market, with the biggest games library and a gaining market share?
“This is why the Playstation 3 didn’t need a pricedrop in 2009″ - will be the headline on a collection of no-name blogs.
“Twiggy” is an anonymous PushSquare columnist who has been spotted in three major cities across the globe. It’s rumoured he’s on the run from the British monarchy who accused him of treason for voicing an opinion.
http://www.pushsquare.com/1402/a-playstation-3-pricecut-could-cripple-sony-so-stop-begging-for-it-twiggy-the-pushsquare-opinionator/
How do YOU feel about this?
Please discuss!
