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SWORDF1SH on 13 March 2015
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Intrinsic said:
SWORDF1SH said:

And I agree with most of what you say. I did say Sony have to find a balance. Not being anal at all. I used hyporthetical figures to show that price cut can lose you money and not always the solution and if Sony project to make more that they lose from the extra install base they will do it. If the extra sales can make up what they lose through pricecut they will do it. Let not forget that (using hyporthetical figures again) those 15M will buy ps plus games etc anyway, what they lose through the pricecut will have to be made up through the 5M customers they gain.

Bolded part. You say that Sony will lose $30 at $300 but the reality is that they lose $100. If your figures are right, they could of made $70 per console but instead lose $30. That loses them $100.

was joking abt the whole anal thing.

OK so this loss thing. You seem to be mixing up how much u could potentially make as if not doing so counts as a loss. That's like saying an iPhone costs $300, but if apple were to sell it for $600 there are still people that could buy it, so Apple selling it for $300 means they have lost $300. if they make a profit at $300, they didn't lose $300, they just didn't make an extra $300.

Closer to home; if Sony brings its BOM to $320 and sells the PS4 at $290 to retailers so they can sell it for $300 then all Sony has actually lost per console sold is $30. Yes, they could have been making $70 profit if they kept the price at $400 no doubt ($320 BOM + $70 Sony profit + $10 retail margin) but that completely defeats the purpose of the console business model.

Unlike practically every single other electronic product, with consoles, their business doesn't end when u buy the box, it begins. 

Simply put, a larger install base affords them the means to slash prices even if it means losing $100 per console sold. This is an even better proposition if they stand to lose only $30. if you want to talk about potential gains, then u should also consider the potential gains from the extra 5M people that buy the console.  just like you said in the bolded part. 

Again I agree. But Sony have to work out if keeping it at a higher price will bring them in more money than cutting the price. I'm not saying cutting the price will earn them less, I'm just saying simply cutting the price to get them more sales isn't always the best option.

Bolded part. I'm not mixing up anything.

Using your figures, Sony can make around $70 per console at $400 and sell about 15M, each consoles sold can make Sony an average (for argument sake) of $50 a yearthrough subs and software. That $120 profit x 15M = 1.8B in that year

Sony can lose $30 a console at $300 and sell 25M and make an average of $50 a year from subs and software sales from every unit sold. Thats $20 profit x 25M = 500M.

Maybe something in the middle. Sony can make $20 profit on a console at $350 and sell 20M and make an average of $50 a year from software and subs on each console sold. $70 x 20M = $1.4B

Which is better?

But then you have to factor in that those extra 5M/10M will continue to spend money year after and will go someway to closing the difference but that is when its starts to get a bit more complex. Using these rough figures a $50 pricecut could see them making more profit in the long run.

Again I'm not saying a price isn't an option to making more money but Sony will not cut the price by $100/$50 unless it will make them more money.