| Bodhesatva said: Uh... well I agree that single-SKU software sales are often initiated by individual retailers, precisely because they are high margin product. But since this specific sale we're talking about in this thread is about nothing but hardware, I'm not sure how that's relevant. Someone is losing exactly 100 dollars more (than usual) every time a PS3 was sold in the last week at Wal Mart. Who are you ascribing that loss to? Edit: Ah ha ha, Milfey, come on. You think Wal Mart is willing to lose 70-80 dollars per PS3 sold last week just to increase hardware market share? And just for Sony? Don't be ridiculous. If that was their goal, why not have a sale on the 360 too? Why not the Wii? Why not just drop the prices all the time?
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Yep. Wal-mart. I know it sounds out there -- I hear where you're coming from. But... yeah, Wal-mart stands to gain alot by liquifying those 40GB unbundled models and increasing the market share. They weren't movin fast enough, and the deal isn't a sustained one. I doubt they'd do such a thing for a sustained period, as I mentioned above. Clearing the shelves and making room for the more expensive 80GB models is a big deal -- especially since Sony has very likely cut the costs on these units enough to begin offering them at lower prices to retailers.
When the PS3 came out, the yield for 7-SPU functional Cells was pretty low -- probably around 20%. Now its probably closer to 90-95%, and the process for making them has gotten cheaper across the board. That Sony is "losing money" on HW is pretty old news, as far as computer hardware goes. They aren't raking in all the bonus $ that Nintendo is on the cheap Wii, but I'd be surprised to see a current report stating they were actually losing money on PS3s, and that retailers didn't get some small profit as well.
The benefit gained from selling a Blu-ray player to a customer who has only you to come to for Blu-ray movies is titanic. This alone explains why the Wal-mart deal was so much better than the other retailers, who were only offering like $50 gift cards. This isn't a big gift season, so its very likely that the first use of those cards were on a high-margin item, like a game (or two, in wal-mart's case). If you purchase 2 games at $80 (40x2) from a distributor, and sell them for $120, you made a $40 profit, obviously. If you sell a piece of hardware at cost, and a gift card at cost ($499 for $399 revenue), you post a $100 loss. (100-40) == $60 loss remaining to be recovered from someone who now owns a brand new Blu-Ray player, and potentially a PS3. That's like 4 Blu-Ray movies, or 3 games, tops. Some games rake in closer to $25 or $30 profit for the retailer, so honestly it could be as low as only 2 more games or three movies.
I think if you dig through some studies on console owners, you'll find that they own at least 5-6 games AND a bunch of movies before the console's lifespan is up. During the PS2's lifespan, NPD posted a study claiming that some 70% of all PS2 owners in America purchased it and used it primarily as a DVD player. You can bet a heckuva lot of the DVDs they were playing, were purchased at Wal-mart, and Wal-mart is (safely, IMO) gambling that HD movies, and the growing HD games indsutry, will result in the same. This helps explain the Blu-Ray part of the Wal-mart deal as well.
Yes, they are willing to take a loss in the short-term, for a large benefit from their monopolized customer base in the long term. It's worked for them many times in the past, and will continue to do so.
