Dodece said:
I think the Sony loyalists have found a messiah in price drops. Unfortunately due to financial constraints this particular messiah has been crucified. I think the unwavering faith has brought about a clearly myopic hindsight. Sony has been more then aggressive. They have been downright foolhardy. They started with a heavy loss leading formula, and in under a year slashed the suggested retail price of their product by a third. The couch analysts on these forums have decided that these measures are not only common, but entirely feasible. Yet they also think that Microsoft cannot do exactly the same thing. They quote Microsoft's losses as proof that Microsoft must make up that deficit, and then behave as if Sony does not.
This is the reality Sony is primarily an electronics company that focuses on high end hardware. The global economic woes do them no favors, and in fact almost guarantee that once profitable divisions at Sony will not be profitable. This was Stringers strategy to focus the company back towards its historical strengths. Unfortunately this also means that the company as a whole is more vulnerable when their core strengths become an economic liability.
To those posters with unwavering faith I ask you a simply question. Where is the money for these price cuts to come from? I mean if most every division at Sony is probably going to lose money who exactly is going to foot this bill. More to the point if the gaming division actually starts to bring in serious cash flow what exactly is to encourage Sony to turn down the flow. They need every dollar they can get. Where is the rational of walking away from the money you need.
There are two opposing trains of thought that result in the same outcome. Sony can either not afford to incur more losses so they cannot cut the price. Sony is actually being profitable on hardware which they need to make their bottom line. No matter how you parse it the PS3 is probably the most price entrenched product on the Sony catalog.
Your thinking about winning a console war at all costs. When Sony must be thinking how can we stay afloat. You are suggesting that Sony must be reckless, and self destructive to wage a war they cannot win, and that is the biggest truth. Sony cannot win, and in fact has no hope of doing so. All they can do is lick their wounds, and try to leave this generation with some future prospects.
The problem isn't just that Microsoft has more money. The problem is that Microsoft has had the fool proof strategy all along. Their online service is the key to their strength. This is quite literally a money generating engine, and the longer it runs the more money it churns out. Microsoft can literally loss lead an entire generation with this model, and still have positive profitability.
That is why it is futile for Sony. The longer a generation goes on the more powerful Microsoft becomes. Six months ago Microsoft may have had ten million gold members. Right now they may have thirteen million. Next holiday season they may have twenty million gold members each paying fifty dollars a year. Do the math they could be grossing a billion annually from Live alone. Before hardware profits, and licensing fees. Let alone the first party developer payout.
The faithful are talking about Sony just getting by. Meanwhile Microsoft will be churning out over a billion dollars in profit annually. Who has the margin to do the most harm. Once Microsoft meets that kind of critical mass the fight is all but hopeless for Sony. The 360 can literally be sold at a hundred dollars by the next holiday season. For Microsoft the money isn't in the hardware its in their gold service.
I read Sony will not let it happen, and I say how the hell can they stop this kind of perpetual motion machine. Eventually Microsoft will rest complete dominance over Sony. The price point is not enough for Sony to turn the tide. What Sony needs to do is begin charging for their online service. That is a stable secondary revenue stream. To have even a hope of winning Sony needs the money to wage this kind of war, and that isn't going to come from eating scraps. |
Even with Live Subscriptions, MS's gaming division isn't anywhere near making $1 Billion/yr in profits, especially once you factor in the price cuts, their rather limited first party, and all of the money that they pay for third-party support.
The idea that MS's strategy is fool proof is absurd to say the least. The 360's sales have never been anything spectacular. Sure, it's selling well now, but this is the holiday season right after price cuts and the release of their biggest IP. Those sales will return to 50-70K per week in US/EU and <10K per week in Japan come January. A console doesn't succeed just by selling well during the holidays. It succeeds by doing well all year long, and that's something the 360 has yet to accomplish. The PSP has actually done a better job of having strong sales throughout the year.
No matter how you slice it, the 360 still appeals almost exclusively to core and hardcore gamers. This is why it(along with the PS3) gets destroyed every week in hardware sales by the Wii. The 360 simply lacks mass appeal. Sure, it may sell a lot of software, but that's helping the third-parties more than it's helping MS.
The best case scenario for MS this generation is to finish a distant, unprofitable second just a few million ahead of the third place console, which is exactly where they were last generation.
Consoles owned: Saturn, Dreamcast, PS1, PS2, PSP, DS, PS3
