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Squilliam on 14 June 2009
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Seihyouken said:
Squilliam said:

Any price cut on the PS3 loses Sony the money that people would have otherwise willingly given them. Say 7,000,000 people would buy PS3s at $400, 10,000,000 people would have bought a PS3 at $350 and 14,000,000 people will buy at $400. A $100 price cut loses $700,000,000 in revenue from the first group, $150,000,000 extra from the second group. So the total revenue gained from the $100 price cut must offset any hardware losses and the opportunity cost of $850,000,000 that they could have gained otherwise from not cutting the price. Its quite an involved calcuation.

At one point marketshare is going to come into play in the equation. I'm not so sure it's all just about profits, Sony also has marketshare goals to be met. If it comes down to the point that they can't completely balance the calculation toward the more expensive of the three price points, Sony may feel that the substantial increase in marketshare may be worth a relatively minor loss in direct revenue. Especially if substantial third-party support is on the line.

I'm not sure how Sir Howard Stringer or Kaz Hirai will be able to get shareholders on board for such a plan, but if Ken Kutaragi can convince them to launch a $840 console at a $240 loss per sale, then I don't think they should have too much of a problem. Then again, I'm comparing apples to oranges with the state that the company is in right now.

It seems crazy to me that they would deliberately choose a price point for the PS3 which was unprofitable in the long term. So any price point they choose would have to meet the criteria that its most profitable price point they can select. Third party support isn't going anywhere any time soon, they ported to the PS3 when it had very low relative share with the Xbox 360.

They told their shareholders that they were aiming for profitability with the PS3.

@Sam: What about the direct download kiosks, PSN servers, software etc to allow people to download their games into the PSP?

@JEDE3: The thing is that a PSPGO owner may be able to completely bypass retail for games/movies etc. They have to give them more compensation for stocking the PSP. PSN cards aren't enough, most people in the target market for the handheld would have a credit card.



Tease.