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heprof00 said said:
I doubted the production cost increase is that low, not the HDD size increase cost. If the profit increase was so substantial, you would think Xbox would of jumped on the HDD increase 'trick' many SKUs ago but instead, they stuck with their 120gb for 2 years before releasing their 250gb 'super elite' model which is priced at $400.
They do the exact same thing. The entire idea of "elite" or "pro" models does exactly the same thing. In fact, Sony probably took the idea from MS in teh first place!
Granted, that their HDD is not standard but it is conceptually the same and doubling the space shouldn't be that much more expensive. At this point, PS3's sales is slowly overtaking Xbox, if the there is such a big profit margin, you would think MS would be slightly more price compettive and undercut PS3's 250gb model?
Do you even know how much MS has lost? If you think Sony has lost a lot of money, MS has lost double that. And FYI, MS DOES infact drop price whenever ps3 drops price. MS is trying to get profitable. They have the Arcade at 200$ and there is literally no reason they should drop the elite's price. They will, eventually, but right now they have no good reason to do so. They have the price advantage on the competition. In order to play that game, there needs to be balance on the scale. They charge 100$ for 30$ XBOX360 Sold seperately hard drives. 100$ for 20$ wifi adaptors, etc etc... and they STILL lost more money. They do enough. They don't have to match every price point either, the price of the adaptors and seperate peripherals are what makes the consumers buy the elites over the arcades. However, Sony is not in the position to do that because as soon as they start doing it, they have no value benefit over the 360. The whole concept of the ps3 is as a complete package. So while that would be a great way to move demand over to a more expensive console (ALSO a much better idea than to simply "lower the price"), if done with the PS3, it would have dramatic repurcussions.
The benefit of lowering the 250gb price is to remove the excess supply of 250gb and tap into the demand for the 120gb (which they are currently not producing enough of ) and other consoles in the market. They lose a lot of money for not meeting demand, and they lose a lot of money for having excess supply both scenerio is occuring on the 120gb and 250gb respectively. Lowering the Price on 250gb is like kill 2 birds with 1 stone. You potentially fix both problems. Yes, the profit margin on the 250gb will greatly decrease but they are getting more console sold which in your logic is more important than profit on console.
BTW: "we are losing 18 cents per console and making 20$ per game and peripheral" sounds a lot better than "we are losing 6 cents per every dollar of hardware sold, PLUS we make 20$ per game and peripheral sold"
That was a typo, it was supposed to say "18 cents per dollar per console". That sounds a lot worse, which is what you are suggesting. Yes, they potentially lose money for not meeting demand (to an extent), but they lose money in totality for lowering the price. They do not lose money for excess supply, because they are already sold, and like I just said, they do not produce as many 250s. The excess in the retailer pipelines costs them virtually nothing.
That just means they are just stocking up on 250gb, which further indicates that 250gb is not making money. If only 30% of the 250gb is sold, it doesn't matter if they make money off the 30% because they lose a lot more on the 70% of un sold consoles. The 6cent/dollar assumes all console are sold.
THEY ARE SOLD. Sony sells their consoles to the retailers, and it is the retailers who have the excess supply. As soon as the retailer has the product, it is sold, which is why Sony and MS and N all track "shipped" versus "sold".
It wasn't really out of the norm, the blackberry keyboard lawsuit was a similar case and that went over the millions of dollars as well. Technology License do cost around that much.
That's the same thing. A lawsuit over integral parts that had cost implications which greatly increased the settlement price. Regularly licensing does not cost that much, but when you make a technology one of the key requirements for you device, and you never claim a license on it, then that price explodes into insane costs. If you license a product beforehand, you pay less than 1 percent, and it costs you only that much. When you get sued during production, you have to halt sales, stop production, excess supply builds up to monstrous levels, you lose sales, you give competitors an open market segment, since your in a production contract, you have to keep paying for supplies even though you're not building anything, you have to pay their lawyers fees on top of your own lawyers fees, court fees, you need to settle (pay more) so that the trial doesn't go through and make your company look like a bunch of assholes...etc etc etc. It is substantially more costly to get sued over a royalty or license than it is to license the product in the first place.
I did some quick google search on it: http://www.inventionstatistics.com/Licensing_Royalty_Rates.html
I think Sony fits in the "Well known brand category" so its about 8-12% and "up to 15%" for video game invention. Yeah, our guesses are way off but ~15% is still pretty substantial.
"For example, he said, the rate for a plastic flip top might be a fraction of a percentage point, but a video game could be up to 15 percent.” Fliptop. Video game inventions" -from your link.
The 15% does exist. It is paid TO Sony, that is where I said they make 20$ per game. Other than that, the 15% may exist in licensed games, like Disney based games or the like...franchise licensing. Not the games or the hardware. Did you see the quote? "A fraction of a percentage point (for a piece of hardware)".
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