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Forums - Gaming Discussion - My opinion - Sony's big mistake = PS3 launched too cheap

Goddbless on 20 July 2007
Biggerboat said:
I see what the OP is getting at but think that all that tactic would acheive is trading some profit for marketshare. The PS3 as a product is the problem and no (feesible) price point can save it. For it to dominate Sony would have simply needed to put in a bog standard gaming CPU, a beefier GPU which would have been able to show the 360 up from day 1 and a basic motherboard (the one they actually used is the single biggest culprit for the big cost of PS3). Hell I think BR would have been a welcome addition if they had cut corners on the things I've mentioned as a competitive price would have been possible from launch.

 I like your idea better than this $1000 PS3. I do think initial sales would've been high for the 1K model. The ebayers would've saw gold, but then no one would buy it from them. So there would be a surplus of used and new PS3's in stores everywhere.



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davygee on 20 July 2007

If Sony weren't piggybacking the BR drive sales on top of the PS3 sales, then we quite possibly would have seen a DVD enabled PS3 for half the price of the PS3. Also, it was the integration of the BR player in the PS3 that was the primary cause for the delay as well.

There is no way the PS3 could have been sold for $999, I doubt there would have been more than 1m WW sales at this point.

Yes, the PS3 did come out at a high price $599, and at launch was costing more money to build than they were selling them at. But with the reduction of costs with the chips, removal of the EE and extra RAM as well as the huge reduction of the costs for the BR parts will mean that the PS3 will have been making money for Sony before the $100 pricecut.

The PS3 now needs to get to a price point where it is a viable purchase for gamers other than the "must have" crew. Unfortunately, this point is still another $100-$200 away and IMHO at least 18 months away.



Prediction (June 12th 2017)

Permanent pricedrop for both PS4 Slim and PS4 Pro in October.

PS4 Slim $249 (October 2017)

PS4 Pro $349 (October 2017)

Explosivo on 20 July 2007

If you convert the value of the PS3 here in Sweden from crowns to dollars the PS3 would have cost ~$887 so it's pretty close to the 1K :P



Predictions for December 31st 2008:
Wii 38,000,000
DS 84,500,000
PS3 17,000,000
PSP 41,000,000
X360 23,000,000

NorthStar on 20 July 2007

Holy $hit $999.99? you have got to be kidding. not only would they not sell any consoles to make development money back ,but then there would never be a million seller game to make them money either.

In my opinion Sony could sell a non EE PS3 60gb at 399.99 and sell a shit load. There is no contest between a 60 gb PS3 and a 20 Gb 360. The PS3 has way more features for your money. Nearly all the $ Sony will lose on System sales will be made up by the large amount of 1st and 2nd Party games sell 2-3x as many units due to a installed base of at least triple of what they have now. Hell Resistance and MotorStorm alone would have sold almost 3 million if sales would triple and everthing after 1 million is profit .

With the focus Sony has this gen on First party titles I would have sold the system as cheap as I could . to sell as many of my games as I could. The game will make the PS3 profitable but they need more machines in peoples hand to push those game. Sony definitly hit a price drop at the right time though many 1st party games are coming out and coupled with a price drop. Could be a good time for them



stof on 20 July 2007

Sorry Shams, but I'll join the masses on this one.

Yes, the PS3 would have already seen price cuts by now. But that isn't a good thing. Price cuts work because the new price is more in line with what people are willing to spend, not because "hey it costs less now!". With a 999 starting price, even 3 or 4 price cuts wouldn't bring it down to acceptable levels. Those cuts would however give people the feeling that the PS3 price will keep going down, so they should just wait. And the last thing you want is for people to just wait.



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StarcraftManiac on 20 July 2007
shams said:

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

...

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.

...

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). 

...

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)

 


Well my thought: HAHAHAAHAHAHAHAAAAAAAAAHAHAHHHHHAHAHAHAHAHAHAHAHAhahahahaah

hahaha

 ''

'

hhe... That was a laugh!

 



THE NETHERLANDS

HappySqurriel on 20 July 2007
TheBigFatJ said:
There's a lot more to the strategy than short-term profit. In fact, short-term profit isn't even a goal of Microsoft or Sony when they release a console. The goal is to make money through the life-cycle of a console.

Sony's mistake was that the PS3 was too expensive to manufacture and the technology they were developing didn't pay off. I believe they underestimated two things:

(1) The progress technology would make before the PS3's release and

(2) How long it would take to release the PS3

Technology is beyond the Cell in every way right now -- video cards can do many times more more pure math than the Cell and general purpose processors are faster than the cell. The Cell is basically a PPC970 -- the same processor Apple abandoned last year to upgrade to Intel processors -- plus the SPUs which, combined, are much slower than ATi's recent GPUs at crunching floating point numbers. It's not perfectly analogous, but for games it is close enough and CPUs and GPUs should be looked at together when considering game performance.

Sony knew things would be costly at first if they released their console with a BD drive as well, but I think they underestimated how much other components would end up costing and how fast Microsoft would be able to make their console a year earlier. They're lucky MS didn't launch along side with them -- it's likely they would've switched to faster processors making the PS3 look downright old on release.

What gets me is that it must have been obvious at Sony that they weren't going to hit a 2005 release back in late 2004 or early 2005, and later they kept saying they were going to release in March '06 until March '06 arrived. Why insist on lying to the consumer like that when it will be obvious you were (games weren't even ready for the system in November '06).

Actually, the Cell is essentially a PowerPC 750 (G3) which is the same core as the Broadway/Gekko processors (Wii/Gamecube), without the added SMID fuctions of the Broadway/Gekko, with 7 SPUs. The reason Nintendo used this core with the Gamecube (and why the Wii, XBox 360 and PS3 all use this core) is because it is small and reasonably powerful which makes it very powerful for the price.

I do agree that the Cell was the wrong direction but my personal belief is that the Cell was designed for the greatest ammount of theoritical FLOPS rather than what could be achieved in game. Personally, if I was designing a gaming console for high performance I would have used a PowerPC 970MP running at 2.5 GHz (its dual core, reasonably small, energy efficient and should be fairly inexpensive) and had a physics co-processor. Ultimately, the system would (potentially) have less theoritical processing power but would probably achieve far greater real world performance.



shams on 20 July 2007

Ahh well - like I said, it was a thought. And I don't think it would be as bad as you all make out.

There would have been 2 - maybe 3 - price drops by now - and I think sales would have reached 2m. Everyone would be laughing a lot HARDER at Sony than they are now - except for the shareholders, with Sony 1bn better off.

...

If Sony's tactic is selling MORE hardware, and making money off software - why isn't the console cheaper? Surely their current position not only doesn't let them sell much software, it makes them a loss - and makes them non-competitive versus the competition.

This is Nintendo's strategy.

Sony's is to "create a kick-butt piece of hardware", "that lasts 10years+" and "dominates the competition in the long term" - "creating a profit for the company". Problem is, they aren't doing any of this at the moment. Sort of stuck in the middle (just like the GC was last gen).

The iPhone is what, $599US? And its selling like hotcakes? The N95 (Nokia) costs about $1k US? Surely Sony should be "positioning" the PS3 to be superior pieces of hardware than either of these?

...

What would a console *need* to have in it, for you to consider a purchase - at $999US? What about something like the MS surface - would you buy one of those "as a console" (assuming it was) if it was priced at $999?

 



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TheBigFatJ on 20 July 2007
HappySqurriel said:

Actually, the Cell is essentially a PowerPC 750 (G3) which is the same core as the Broadway/Gekko processors (Wii/Gamecube), without the added SMID fuctions of the Broadway/Gekko, with 7 SPUs. The reason Nintendo used this core with the Gamecube (and why the Wii, XBox 360 and PS3 all use this core) is because it is small and reasonably powerful which makes it very powerful for the price.

I do agree that the Cell was the wrong direction but my personal belief is that the Cell was designed for the greatest ammount of theoritical FLOPS rather than what could be achieved in game. Personally, if I was designing a gaming console for high performance I would have used a PowerPC 970MP running at 2.5 GHz (its dual core, reasonably small, energy efficient and should be fairly inexpensive) and had a physics co-processor. Ultimately, the system would (potentially) have less theoritical processing power but would probably achieve far greater real world performance.

 

Why would you choose a PPC970MP instead of a (much faster for the power consumption) core 2 architecture from Intel? That's why Apple abandoned on the PPC970 architecture for their new Macbooks, you know -- because the Intel processors are faster for the power consumption and faster overall.

Further, your system would be slower than the 3x 3.2Ghz power architecture based cores that the 360 has.



MikeB on 20 July 2007

To take this opinion seriously, there are some things to take into consideration,

1) Software developers, obviously there wouldn't be an install base of around 4 million users right now. This will hamper software developement. Development costs have gone through the roof (more complex games), so developing companies need to re-earn the costs.

2) A much smaller PS3 install base would also mean a much smaller Blu-Ray install base. Winning the high definition movie war is worth "losing" a couple of billions as an early investment by itself.

3) There would be less motivation to create software which truly take advantage of the PS3 strenghts, the Blu-Ray storage advantage, the SPE processing power advantage and the default harddrive advantage. PS3 owners would then mainly see subpar XBox 360 ports.

IMO such a situation would be similar as was the case with Amiga games developers. Due to a larger install base initially developers had to worry about their games playing well on the Atari ST as well. Later with the Amiga becoming dominant Amiga games really started to shine as developers were able to optimise their games for the Amiga's custom chips, features lacking on the Atari ST.

As Sony is still profitable, they are fully capable of absorbing the initial high costs. With these high specifications consumers will benefit for the longrun, though some may not be able to afford one right now. Selling the harddware at a loss enables software developers to develop PS3 optimised games due to a large enough install base, again benefitting current but also future consumers (they will have a better software library to choose from).



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