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Imnus on 15 February 2015
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BHR-3 said:
Mikmster said:


Why you think sony went with of the shelf parts for PS4 ? maybe so they can hit such pricing quite fast since it clearly worked well proven by PS and PS2


thats why there competition dropped there price by 150 in a yr while there off the shelf parts did nothing to give sony a holiday price cut or deccent bundle to combat them losing 50% lead in the US

 

ps4 will never sell for less than 200 and they wont go below 299 till at least 2017

That's easy because they would have sold pretty much the same since they wouldn't be able to meet demand, after all despite how much it has improved over the years, manufacturing still have it's limits, you need to plan from 6 months to a year in advance, research which companies are available and with how much capacity, if they're up to the task and required quality, negotiate the terms, etc. So a price cut would have significantly reduced their profits while their userbase would have been 0.5-1M more at best.

Also Sony will lower the price of the PS4 when it works for them, not as reaction to what MS is doing. When they think they'll get more profits selling to a higher number of consumers by selling at lower price than selling to less consumers at higher price, they'll lower the price. Remember that the meat of the console business is actually selling games, services and peripherals to your userbase, not actually in selling consoles:


PS4 ($300 vs $400)

First let's assume the PS4 BOM is $350.

Then the PS3 as far as I know had a 8.5 Attach Rate a couple years ago, it could be more, but let's say the PS4 will have a 6.0 Attach Rate and assume Sony profits $30 per game. Now with PS+ let's say it sells at $40 on average, nets Sony $20 on average profits, and the average user subs for 5 years. Finally let's add $100 more on profits from accessories (controllers, headsets, cameras, etc).


$400 Price Point
$400 * 15M (Console Revenue) = $6B
$6B - $350 * 15M (Console BOM) = $750M

Profit ($400 Price Point)
$750M (Console) + $180 * 15M (Games) + $100 * 15M (PS+) + $100 * 15M (Accessories)
$750M + $2.7B + $1.5B + $1.5B = $6.45B


$300 Price Point
$300 * 20M (Console Revenue) = $6B
$6B - $350 * 20M (Console BOM) = -$1B

Profit ($300 Price Point)
-$1B (Console) + $180 * 20M (Games) + $100 * 20M (PS+) + $100 * 20M (Accessories)
-$1B + $3.6B + $2B + $2B = $6.6B

So in conclusion if the sales improve from 15M at $400 to 20M at $300 with the BOM at $350, the price reduction results in better profits. Obviously the lower the BOM the lower the sales increase needed to bring better profits with a pricedrop.

See? But they need to be able to manufacture over 20M in a year to begin with.