3DS huge price cut... what does this mean for PSVIta?

[HappySqurriel]

o_O.Q said:

HappySqurriel said:
I don't know what is going to happen ... For the past several weeks I have been wondering how the eroding value of the American dollar (in comparison to the Yen) was going to impact the strategies of Sony and Nintendo.

I assumed that the 3DS was priced at $250 because the American Dollar fell from being worth 120 yen in 2005 to 80 yen in 2011 which ‘should’ cause a 50% increase in the price of Japanese goods in America, and Nintendo wanted a buffer against further exchange rate changes. If Nintendo had maintained this price I was envisioning Sony using a combination of their strategy with the PSP and PS3 to have the PS Vita at a higher price at retail (to compensate for a poor exchange rate) while still being able to claim that the system was $250; effectively, Sony wouldn't (really) manufacture the $250 PS Vita, and the 3G PS Vita would be sold in a manditory bundle for $350.

With the 3DS being sold for $170 it seems unlikely that Sony could be effective with a bait-n-switch pricing strategy because buying a system with more features than you want with a game you don't want for almost $200 more than your competition hardly seems like much of a value.


For those who don't understand ...

If Sony decided they could sell the PS-Vita at $250/$300 with an acceptable loss under the assumption of an average dollar value of 80 yen over the first year and the dollar falls to be worth (on average) around 75 yen for the first year Sony will lose around $16/$20 more per system than they initially anticipated; and if the dollar devalued even further to be worth 70 yen on average Sony would lose around $35/$42 more per system.

This may not sound like a lot of money but when you also included lost revenue from exchange rate changes across their entire product line including system sales, software sales, accessory sales, and licensing fees the net effect on the companies financials (which are the basis for projecting the loss they could accept on the system) the company may be in a position where they can't tolerate the loss they anticipated while facing a larger loss than they calculated.

how does 250 - 170 = 200 ?

furthermore weren't you the same guy arguing that the wii u controller is going to be far less expensive than people have been expecting?

On the price, you must have miss-read my first paragraph where I described the "bait and switch" strategy that Sony could use to sell the PS Vita for a higher price to compensate for foreign exchange losses. Effectively they take the strategy of the PS3 and don't manufacture the lower end PS Vita and discontinue it because of low demand, and on the higher end system use the strategy of the PSP (in some regions like Canada) where it was only ever sold in a bundle so its actually price to consumers is $350. The net effect to the average user who wanted the $250 PS Vita is they would be forced to buy the 3G PS Vita with features they don't want that only comes bundled with a game they may not want for $350, which would almost be $200 more than the 3DS; which is why I said this would no longer be a viable strategy.

 

As for the Wii U controller ...

Touch screen color ebook readers at a similar resolution to the Wii U controller are already selling for under $100 from cheap chineese manufacturers, and products like this are often only carried by retailers because their margins are relatively high, so their manufacturing cost is probably substantially below $50. On top of this, besides the touch screen the most expensive components in these devices (CPUs, Memory, internal storage, etc.) will not be needed in the Wii U controller because it is a dumb terminal where all the processing is handled by the system. Beyond that, most of the other components in the Wii U controller have been around for years and are readily available in cheap toys and electronics that are often sold for less than $10. And finally, there is a full 12 months between now and the release of the Wii U and these (already commodity) components are likely going to see further price reductions.

While I have no doubts the Wii U controller will probably be the most expensive standard controller released for a system, and it may end up selling for between $80 and $100 if Nintendo wants to maintain the margin that has become typical for accessories, I think the people who believe the controller will lose Nintendo money if they sell it for less than $100 because it has some loose resemblance to a tablet PC are just demonstrating that they don't have a clue what they're talking about.