Dodece said:
I suspect that Sony expected that it would lose market share this holiday season to both Nintendo and Microsoft. However I also suspect that Sony probably did not expect to lose so much market share. This will not be the first time that Sony has had the PS3 dance close to dangerous margins, but with over two years on the market retailer patience is probably already quite thin.
According to this weeks data the PS3 is standing at just over 17% of the North American next gen console market. This week the console accounted for just over 13% of next gen console sales. The sobering realization is that Sony once more is going to plumb the limits of tolerable margin. Once again they are going to test the tolerance of retailers. Frankly it is like playing with fire, and they are right if you play with fire eventually you will get burned.
This will not be the first time this generation that Sony has tread these particular shores, but they always seem to recover towards safer margins before the hammer can fall, but if you tempt fate often enough. Fate does have a way of delivering a death blow, and it looks as if Sony is going to push it even farther this time around. Getting to within a few weeks of discontinuance if you believe the rumor that is.
Were I a PS3 owner I would be deeply concerned, because this strategy leaves Sony at the mercy of their rivals. Who can attack at the weakest moment. Sure the price cut may help the PS3, but what if Microsoft or Nintendo drop two or three blockbuster titles at that exact same point. The PS3 price cut may get lost in the excitement about those titles, and that could be the few weeks needed to cast the die for retailers. |
Good thinking overall, but several things should be kept in mind before starting into the "XY is doomed" mode (with XY mostly being Sony if you watch the fanboy threads here).
1. Every console has a saturation level. Provided that all companies stay in the console business over the next years, sales numbers will likely converge for all consoles, as they offer roughly the same thing.
2. The PS3 is way past the critical level of being supported with around 19Mio units sold at the end of this year. Even if X360 were at a 8-9Mio lead within the next 3 months (entirely possible, and nobody at Sony is panicking about that), independent software manufacturers would not dismiss 40% of a potential market. There is no question that Sony was surprised at the losses on hardware MS is willing to take (notice how every other day, some MS guy issues press releases solely about "beating Sony"), but that ship has sailed and there is nothing Sony can do about it.
3. Resellers like to sell the stuff that gives them the biggest margin (lesson number 1 of how to organize a store). This is only a local observation, but the PS3 currently gets way more visible shop space than the X360 or even the Wii (in all shops I checked). This is an indication that the margin on the PS3 is higher than the margin on the X360. How high that margin is on lower priced elctronics I don't know, maybe in the 12-18% range, with the X360 in the lower and the PS3 in the upper end. Currently X350 is outselling the PS3 in Switzerland roughly 6:5 (before the price cut, it was around 5:3 for PS3), so selling PS3s is clearly more profitable for the shops than selling X360s despite less PS3s sold.
(mostly)
