Might Sony go with a two-SKU strategy next-gen (like Microsoft did with Series S)?

[Kyuu]

ironmanDX said:

Kyuu said:

I don't think I'd have to wait that long to gather that Microsoft made a serious miscalculation. Actually the bolded pretty much shows why it's indeed misfired. MS thought this generation will play out like X1/PS4 vs X1X/PS4 Pro where the low powered/cheap SKU sees higher demand or sales. They kept the Series S a secret until not long before launch as if to checkmate Sony.

It seems that by design, the Series X was positioned to be their limited-quantity/enthusiast SKU that's just there to assist the Series S, their primary SKU. This would not pan out well in a long generation. Series S has very little room for effective long term pricedrops compared to PS5 and Series X (see Wii vs PS3), and it's underpowered right off the bat, meaning it will age rather poorly especially if a midgen upgrade is planned. When/if midgen upgrades are launched, a lot of AAA developers will push for fidelity high enough for base (by then cheap) PS5 and Series X to struggle in achieving 1080p+/40+ fps (You wanna go higher? Get the PS5 Pro, or the Xbox Series XL, or a capable PC!), Series S won't be able to adequately handle games with such high workload. We're not yet feeling the S limitations because we're still stuck in the crossgen period, the vast majority of console-grade games are souped up/upgraded Xbox 1 games.

If Series X meets demand and continues to sell less than the S, I'd blame it on Microsoft's marketing and people giving up and switching to PS5 or PC. As always, I may be wrong and Series S does manage to appeal to a new large dempgraphic, but so far I'm not feeling it and I don't think it'll happen.

The Series X and PS5 aren't priced as "hardcore gamer" consoles. With inflation in mind, they're priced in line with typical powerful consoles. I don't know why you're assuming demand will decrease over time in favor of the Series S. The only notably underpowered home consoles I can think of are the Wii and Wii U, one managed to find huge success by appealing to a new dempgraphic early in its lifecycle, but ultimately having weak legs because it aged poorly (I predicted that), and the other was a commercial disaster. It's less that PS5/Series X are "hardcore", and more that Series S is too cheap/underpowered. The existing console playerbase have no problem paying up to $500 ($400 for digital editions) for a powerful console, the Series S is trying to solve an issue that doesn't exist.

Na... We knew about Lockhart for ages. Possibly years before it was called the series s. 

It's clearly a winning strategy. Is it enough to beat Sony? No. Certainly enough to claw back marketshare though. 

We knew through rumors and leaks but Series S's existence was only made official some two months before launch. Series X on the other hand was announced like a whole year before launch.

scrapking said:

Kyuu said:

Well I apologize for misquoting you but you said Microsoft's (Phil Spencer's) assumption made sense so it looked like you shared their opinion. I don't think their assumption/expectation ever made sense. They underestimated the appeal of a brand new $400-$500 powerful hardware and overestimated the Series S based on poor analogies.

Idk about the Series X, but the PS5 physical edition (which is slightly less powerful) made profit a few months into the generation... until the economical shifts complicated things. I still think PS5 will follow a fairly similar price drop trajectory to PS4 from here on out, with the Digital Edition eventually costing as little as $250-$300 (vs $200 for the much weaker Series S). I think a mass-porduced Series X with two configurations would have been the better strategy for the long term, even if it required slightly lowering the specs in favor of higher quantities.

When the PS5 revision launches later this year, I expect Sony to drop the price outside the US back to its original price or lower, and to start pushing the new "Digital Edition" (namely the PS5 without the disc drive add-on). It looks to me that hardware wise, Playstation's approach was the correct one. Hence copying Microsoft would be wrong imo.

No worries.  :)  I don't share all of Spencer's assumptions, no.  But I shared his perspective as an FYI.

It's impossible to know what to make of the PS5 (optical drive edition) being profitable after a year or so, because we don't know how much of a loss they were taking up-front.  It's a big difference if it goes from costing $525 to make down to $475, than if it goes from $600 to $400, for example.  We don't know enough to draw strong conclusions from that.

I remain curious why you think Microsoft made the wrong call, when this is the strongest start to a generation Microsoft has had yet.  Seems like the market is embracing their decision.  It's entirely possible that Sony and Microsoft *each* made the right call, as perhaps each of them made the right decision for their respective market segments and brands, in fact.  COVID was a double-edged sword, increasing demand but reducing supply, so I'm not sure it had a huge net effect.

As for long-term pricing, time will tell.  Perhaps in several years one of us can come back to this thread and comment.  However, I don't see why a PS5 slim would drop as low as $250, yet you think the Series S is only likely to drop down to $200?  Can you explain why such a small delta between them?

I'm skeptical of any PS5 variant dropping as low as $250.  Heck, the PS4 slim's MSRP is still $299.99, and it's been over 9 years.

I think $300 is guaranteed for PS5 "Digital Edition" as this is shaping up to be a super long generation. $250 is also possible during holidays (if not, then $300 with a free game). Depending on how long Microsoft will actually l support the Series S, I can see it going down to $200 (+ a free game in the holiday season, or an additional controller, or several months of free GamePass etc) but I don't see it going lower.

1. Sony can choose to reduce the SSD capacity, saving a few $. Series S can't match because the capacity is too small as is, and GamePass (the main selling point) skews to higher capacity demand. Do keep in mind that game sizes are also generally smaller on PS5.

2. PS5 selling a lot more than Xbox can enable Sony to pay chip makers less for more. Xbox reportedly never made money from hardware.

3. GPU and RAM are the main cost differentiators between PS5DE and Series S. The initial gap in price was only 25%. In a hypothetical scenario where MS and Sony intend to have similar profits/losses per unit sold, this percentage should drop over the years. Series S only dropped in price because MS is willing to take greater losses to maximize sales. Sony currently doesn't need that, because they're selling all they're producing. But they may pull the trigger when production exceeds demand.

4. Sony are transitioning to smaller die sizes quicker than Microsoft. They've already switched to 6nm months ago, and are reported to go 5nm and launch a cheaper and smaller model in September. This saves costs and improves production. Microsoft is yet to transition to 6nm. I'm aware that there are more complications, but it is something to consider.

5. Sony is reported to produce over 30 million PS5's for the next fiscal year, 18.5 million of them are the revised units for the 2nd half. Pretty sure that would be a record breaking 2nd half for any console. Who knows how many units they'll be able to produce in fiscal year 2024 (GTA6's year)?, but no matter how many, they will NOT be able to sell them without pricedrops + a push for the new "Digital Edition". 25 million+ could be a tall order even with prices drops. Production reports are factored into my price expectations.

As for Microsoft's decisions. I'm conflicted about this because the pandemic did wonders to the Series S, so in that sense they did make the right call. But I think the worst for them is yet to come because PS5 might soon be available in very large quantities, and the transition to current gen only games will gradually introduce problems for Series S and make moneyhatting easier for Sony ("You're having trouble making this work on the Series S? Don't fret! We'll pay you for the uncompromised version! In return, skip Xbox and put it on PC") which may very well be the case for Silent Hill 2 Remake whose minimum PC requirements (not final I'm assuming) show that it's thee most demanding PC game of all time. There will be more and more cases like Silent Hill 2 unless Microsoft drops the Series S as a requirement. This is speculative on my part but it's difficult to discuss this without venturing into speculations and assumptions. I hope no one mistakes this as me saying SH2R "definitely" isn't coming to Series X/S.

Now I'm not denying the chance that when all is said and done, this could still end up in Microsoft's favor (compared to if they had gone for a PS5-like "one model, two configurations" strategy). Too many scenarios and possible outcomes to go over. For example: even if Microsoft decides to eventually ditch the original Series S in favor of an improved Series S+ with more RAM and GPU power, it's possible that the majority of Series S owners would be okay with this, accept Microsoft's apology and upgrade to the Series S+/X/X+ etc because GamePass is just too good for them to pass up. If anything, this could make Xbox ownership per user notably higher than PS5's.

I initially thought the name "Series" suggested an end to the concept of generations for Microsoft (which lined up with a Microsoft representative laughing at the term "generation" shortly after One X's launch), and that they were taking a PC-like approach where they don't force developers to support their weaker/older consoles in the "Series" family. But then Micorsoft insisted that the Series S would be fully supported/required throughout the entire "generation". It's hard to see where this is going but personally, I predict Microsoft will eventually make the difficult decision to ditch (as in "not mandating") the Series S before the generation ends, because not ditching it would put them in a more difficult situation.

Anyway... 2023 should answer a lot of questions and will probably change a lot of predictions including some of my own.

Last edited by Kyuu - on 09 January 2023