This has probably been banded around for a while, but I was thinking about this today and wanted to share my thoughts...

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Sony's big mistake with the PS3 was launching it at too CHEAP a price point!

a) The current situation: Sony are stuck in a difficult position 

The PS3 is losing money, and sales aren't great. They have already put in a price cut - which would stop them from being able to price cut again soon.

They lose money on each unit. The more units they sell, the more they lose.

The cheaper the units are - the more they lose per unit AND the more units they sell. So overall, they lose even more (extra cost / unit x number of units sold).

b) What Sony should have done: Launch the PS3 at $999 US (maybe with 1 game + 1/2 controllers + HDMI cable?)

Sony would have made a good amount of money per unit. Every unit sold MAKES them money - rather than losing it.

Initial sales would have still been strong. PS fans would easily still spend $1kUS on a PS3. It doesn't matter that sales would be lower - Sony is making lots of cash, and they can ramp up production slowly as needed.

Gives an impression to consumers that the PS3 is really something special - and that owning one is something special. At the current price point, it feels like a 360 - with a BluRay drive (regardless if this is almost what it is).

This also gives Sony LOTS of room to move on the price point. They can drop the price at will - and regularly. And rather than finding themselves in a position where their LOSS increases each time they drop the price - they can keep their profit margin, gather lots of positive press (each time the price was dropped) and boost sales each time.

This also falls more into line with their strategy of a "10 year" timeframe - and their "quality console" push.

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The main danger I can see, is few other companies would support the PS3 software-wise at this price. Sony would have to initially drive software themselves (not a bad thing - with some quality titles), but it would also give companies a couple of years to develop a "quality" PS3 title.

If Sony had taken option#2 - they would be further behind in terms of WW sales - but they would be racking up a significant profit (say 2m sold --> 500m profit, rather than 600-700m loss). 

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Thoughts? Should Sony have considered this approach, rather than undercutting themselves as they have? (Consider they still have the PS2 selling well - as a low cost alternative to the PS3)

hell no. if they had done that, even with the hdmi (10dollar) and a game(60) and an extra controller (40).... they'd be making money on every console sold yes...

buy they would have sold SIGNIFICANTLY less consoles through to this date...by atleast 1/3rd to possibly 1/2...

Hahahhahaha.

That's a good one, good to see we're keeping up with the jokes.

HAHAHAHAHAHAHAHAHAHAHAAHAHAHAHAHAHAHAAAAAA.... heh.

Good one.

Publishers and fans were dumbstruck at the $600 price tag. If it launched at $1000, almost every last one of them would have walked away from Sony.

ummm, i don't really see a reason to spend 1k on a console system.
I think the production cost could have been reduced if Sony didn't try to top xbox360.
Technology wise, it's too early too soon.
BD inclusion is definitely killing ps3, but it pays off in the media area. Perhaps, Sony is trying too hard to win over HDDVD. PC games aren't over 1 disc dvd that often, and in term of horse power etc, PC will always be ahead. Hell, even a double layer DVD drive for ps3 would have cut the cost a few hundreds.

Thats a good plan........for the competition.... if anything they should have waited with the PS3 till Wii hype is a little smaller and Bluerays cost less, then release it at a price close to the 360 for Christmas 08 with lots of great games, your plan has that crazy scientist touch to it .

They probably would have sold a few 100k units in the US and Japan during launch, but after that sales would have completely died. I don't think they would have gotten to 2M units WW yet and the last few months forum threads would have been labeled as "Gamecube outsold PS3 again!" Besides software sales of the PS3 would have probably been lowered by 50% as well, so Sony would have lost quite some money on that side as well, not to mention not a single publisher announcing new PS3 games and any previous announced PS3 game would have gone multiplatform, going to another platform altogether or being postponed for a long time until PS3 will have a normal price point. Also PS3 would not have been a cheap BluRay alternative, so it wouldn't have supported Sony on the BluRay front.
Besides, consumers are not stupid. Just making it expensive doesn't automatically makes something special. Certainly not when the games released show no sign of having better graphics than XBox 360 which would be 60% cheaper!

Sony could have cleaned up had they just used the PS2 model. Cut the blue ray out but release at around the same time as 360 with a bit less power but a single SKU at $300. They're brand power would've won out in this scenario and this imaginary PS3 would've had an interesting war with the Wii.

Instead, they got bored of dominating the industry for some reason and got really, really ambitious.

And yeah, a 1K PS3 would've been a disaster of epic proportions. PS3s only sold for over $1000 for a month or so on ebay after they launched.

 fixed

There is absolutely no way Sony would have survived putting out the PS3 for a retial price of $999. No fucking way. They would be up shit's creek right now, if they tried to make a profit at launch.