Vita is doomed, Sony doesn't get gaming, PSP/PS3 losing money

[Alby_da_Wolf]

HappySqurriel said:

curl-6 said:

Alby_da_Wolf said:
About possible price cut and profitability: PSV's estimated BOM was $159 for the 3G version in January 2012 http://www.destructoid.com/ps-vita-3g-teardown-puts-sony-s-cost-at-159-220036.phtml , in September it should be a little bit lower, and in January 2013, when on top of more time passed, Xmas will have boosted production, it should be considerably lower. So a $50 cut this Autumn won't be too painful (it will surely be, but not too much), and if they resist until next January, or even later, after clearance sales end in most countries, it will be totally painless.
This means that with very good reasons a cut could happen soon, otherwise a cut in Q1 2013 will be very likely.
In any case, it must happen after the initial boost and buzz of 3DS XL and NSMB2 settle, not before September, because they are currently monopolizing the spotlight for the portable market, and they'll do it for the rest of August, thanks to the staggered releases, and synergy with games releases and other circumstances favourable to Sony must be carefully planned: Sony's marketing cannot afford wasting it with clumsy behaviours, it must extract every possible benefit from it.

Once you add the profit they must be making on the memory cards as well, there should be more than enough room for a $50 cut anytime from here on in.

The main complaint I hear about the Vita is its cost, just like it was for the 3DS at first, so once they remove this barrier its sales should surge.

Realistically, for Sony to mount a "come-back" for the Vita and get it on track to sell like the PSP they need a $50 price cut and to bundle the memory card with the system. Being that the upper management is under extreme pressure to return Sony to profitability, it is extremely unlikely that Sony will be willing to lose between $500 million and $1 billion at this point in time for a price reduction like this to take place.

To make matters worse, if Sony plans of releasing a next generation console in 2013 (which is likely), Sony will likely see a massive increase in costs within their gaming division in the next year. If Sony cuts the price of the PS-Vita the gaming division will (likely) already be seeing substantial losses before these costs 'appear', and when they begin to ramp of for the launch of the PS4 the gaming division will be in a deep hole; and become a massive target in a company where executives are desperate to reduce losses to return the company to a profit.

Your estimate of losses by cutting price early could be quite excessive. Losses by doing it depend on two things: how many more units will be sold with the lower price compared to cutting later, at the originally planned time, and this provides the maximum possible  loss (or missed profit, if the system was already profitable and stays so, SW and peripherals included, after the cut too), but it's not so simple, early cut before Xmas could mean increased SW sales and also persuading publishers to release big titles earlier, so it could increase lifetime SW sales, and you should subtract them from the losses.
So for example, if the cut was originally planned for Q1 2013 and it happens instead during September or Q4 2012, the loss will be AT MOST $50*number of units sold between actual and originally planned cut time. For this maximum possible loss to be $500M to $1B those sales should be between  10M and 20M, and this not counting additional profits from SW (and cutting HW price BEFORE Xmas instead of AFTER there would surely be increased SW sales).
Oh, I almost forgot it, another factor decreasing losses compared to their theoric maximum, is that increased production accelerates the economies of scale and cost reduction of components.
This said, cutting too earlier, meant as earlier than really necessary is bad, botching the cut with bad advertising and missing synergies with big and profitable SW releases is bad too, but even if things aren't going well and you can't choose a good, but just a lesser evil, the key is cutting "at the right moment".
About PS4 launch, its best possible date depends, amongst many factors, also on how Wii U will be received and how much PS3 HW and SW sales will be affected by it.