Rpruett said:
Smashchu2 said:
Squilliam said:
Smashchu2 said:
Squilliam said:
Dodece said:
The problem for most on these forums no matter where they sit in the debate is a case of clear near sightedness. You simply must view Sony as a whole. Sony was able to aggressively price the PS3 due to the company as a whole making this possible. The gaming division was not self sufficient. You cannot view any division at Sony on a local level. Stringer talked about doing this, but there is no indication that it became a reality.
This is the reality at Sony. They are losing money. They owe a lot of money. They are in a economic recession. Which means it is taking longer to make money, and finally they are up against a poor currency exchange rate. The bottom line is this Sony is in no position to abandon profit, or look the proverbial gift horse in the mouth.
When a division any division begins to bring in a profit Sony is going to be using that profit to offset losses in other divisions. Pay down that debt load, and bring dividends to their investors. The gaming division alone has brought down has a billion dollars of debt on the shoulder of Sony in loans alone. Which is what a lot of members forget. Sony couldn't afford the manufacturing and launch of the console alone. They went borrowing against the console.
Frankly any consideration of price cutting on this console was idiotic once the economy hit the skids. The question is not what can Sony do to win. I am sorry the contest is over Sony has lost this battle. What matters now is not losing the war, and the number one way to do that is to survive to fight another day. The true fan must understand this, and actually be happy.
In a bizarre way if you find Sony cutting the price on their console that is when you should get upset. That has a greater then fifty percent chance of meaning they are abandoning the console. That would mean they have given up on the console being a profitable venture period, and have decided to do what it takes to liquidate stock.
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I don't really understand why you wrote that. It makes sense that at this point they won't abandon the console and if they do make any moves on the price of the console, it will be because such a move is justified and is productive towards their corportate goals which include improving profitability.
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But your wrong in the fact that a price cut will not help profitability, at least not dirrectly. What he is trying to say is that if Sony is not cutting price, they are trying to turn a profit. If they do cut price, then their goal is not to make a profit (as they will be selling the console at a loss). In the latter case, they are just trying to meet the depts.
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You're really just speculating here. They will make a cut if it makes sense otherwise they won't, and yes they can have a profit motive for cutting the price because the more consoles they sell the more 1st/3rd party games can be sold as well.
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Yes they will make a cut when they deside they can't turn a profit in the industry and must try to clear as much dept as they can. Someone mentioned that Sony borrowed against the PS3 which means they probably sold bonds (meaning they will have to pay interest). That means Sony can incure cost over time.
The problem is your assuming the company can make a profit from cutting the cost. They can't. If Sony drops the price by $100, they lose an additional $100 on every sale. They are still incuring interest on those bonds (or a loan). The division will be under more pressure to turn a profit. They can't meet the difference in game sales as the system doesn't sell many games. The reason for not cutting the price is becuase they are trying to get the console trun a profit on each sold and then clear out their debt.
Now, if they cut, then they are not trying to make profit. In this case, they have given up on profitability and have desided to simply meet the dept the best they can. If Sony cuts price, they are in survival mode.
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Sure they can. You are trying to simplify this WAY too much in your head. Have you forgotten everything else that is for sale for a console? Controllers? Memory Card Adapters? Controller Covers? Bluetooth Microphones? On top of the first party software that they have created (Many of which are some of the best games on the system).
The average attach rate for the PS3 is somewhere around 9 games. Trust me. 9 games sold (With about 3 to 4 being first party) would easily without a shadow of a doubt cover Sony losing 100 dollars.
Sony will not get into a cutting price war for one primary reason. They have a product that costs tons of money in actual cost. They are competing against two products that have cost a substanial amount less from day one with cheaper overall hardware. It makes zero business sense for them to get into a price cutting war and lose the ONLY advantage that the system has.
In the eyes of the consumer, the PS3 is a valuable item. By keeping the price high, you keep the demand high. Sony is nursing a price cut because it makes sense for them on a business standpoint as well as a marketing one.
If they cut the price on the PS3 they aren't in survival mode. That's utter rubbish.
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Let's use a little sence. First, the current amount of money from accessories and games is not meeting the cost of selling the system. Price cuts have also never made a long term impact. The longest this generation was Sony's first one, but this on eventually fizzeled out, and the cut was from $600. Another one will have less of an impact. The whole goal to cutting the price is to bring in people who wanted the console, but could not afford or want to spend the current (or old) price tag. So, with more and more cuts, the effect is less. I doubt another one will have a large impact.
Now the bold. THIS IS NOT HOW THE MARKET WORKS.
- Quality is determined by the consumer. The reason being is becuase if consumers are willing to spend money on it, then there must be some reason behind it. The Wii is a more valuable item to consumers. Between the PS3 and Wii, ask yourself which system was sold out for ~2 years, and which system was sold for a lot on Ebay for a long time.
- High Prices mean lower demand. Demand increases when price decreases. The demand curve is downward sloping. The relation is negative, not positive.
