I am honestly reevaluating my stance on whether Sony will cut the MSRP on their console. I have to readjust my estimation of the situation given the economic situation. Most knowledgeable posters are well aware of my stance on the issue. I have placed Sony as putting a premium on finding profitability. Unfortunately given the economy at this point Sony will find itself in a position where profitability is not a possible solution to the given problem.
The reality is that Sony is acutely vulnerable to the economic downturn. They have been putting a greater focus into their hardware division, and unfortunately those product lines will find themselves squarely in the category of unnecessary luxuries. Those sales are going to see a drastic downturn due to a loss of optimism on the part of consumers. This holiday season is going to see more frugal shopping patterns, and that tends to mean more smaller ticket items. Not a few large ticket items.
Let me say this I fully expect that Sony is going to have solid losses in their home electronics divisions regardless of the price of their console. They are going to need to curtail production on many product lines, and are probably going to have no recourse other then discontinuing the production of many products. The picture is particularly grim. That said their console is actually a pristine example of where to place their prospects for the future.
The reality is that the consoles price is probably to extravagant for the current economic situation. I am not saying it will sell a little less. I am saying it will sell a lot less. The console is truly going to exceed the holiday budget for the overwhelming majority of consumers. Sony will either curtail production of the console, or they will find the public pain threshold. Those are probably the only two positions afforded for them. Curtailing production will actually drive the price up for the foreseeable future as cutting the costs will not be possible. So the console will have to maintain that price point through the entirety of the economic downturn. While increasing the losses per unit will have the effect of a more substantial loss.
This all said the console is actually a golden goose for Sony. The bird can and will eventually start to deliver on its promise once the global economy begins to rouse itself. With the hardware in homes Sony can start to regenerate those losses that they will incur now. To put it simply it will have been capitol only lost in the short term. Unlike other electronics which are permanent losses. So their console can help the company heal in the tail end. Not only that but it is still three product lines within one. The console can see their format through hard times, their technology through hard times, and a established brand that has a greater prolonged return on investment. Especially if the current economic situation delays the introduction of the next generation.
Ironically one of the consoles vices will have become a virtue, because it can sustain so many of Sony's properties through the lean times. Better to sustain them through a single product rather then half a dozen all losing capitol. I absolutely think Sony will bend to the economic pressure, and will place a large value on sustaining this brand. That means cutting other products and putting the resources into what is actually a silver lining.
I expect Sony to cut the price of their unit during the last week of November or the first week of December by one hundred dollars in North America. Yes they will eat some staggering losses, but they will explain to investors the value of having the console strong going into an economic recovery. This is not necessarily about competing with Microsoft or Nintendo. I honestly think Sony has little to no hope. Those consoles will be at easily digestible prices. However at a three hundred dollar price point the console can and will sustain itself. Which means in a year Sony can be looking at the line becoming a source of positive income.
