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Forums - Sony - PS3 Price Cuts: Why Sony Can’t Afford Not To

jkimball on 03 April 2009

As pointed out your logic on the 50% price cut doesn't work when applied to hardware. And as further pointed out, they sell enough PS3 that HD developers will develop for it or at least port to it - they can't ignore 40% of the HD market.

 

however, the price cut on the PS2 was really, really stupid.  Do the math from a revenue perspective:

 

if they sell 1million price cut PS2 they have 'lost' 30M in potential revenue.

If they had price cut the PS3 by $30, and they sell a million of those they still lost 30M in potential revenue.

Sony is willing to give up $30M in revenue per million units sold. Why not give up that 30M in revenue to try and grow your FUTURE user base, instead of the past?  IT all goes into the same revenue bucket as Sony in the end anyway...

 

Dear Sony, we love you , but please start looking AHEAD instead of BEHIND.

 

 



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Dgc1808 on 03 April 2009

I still don't expect a price cut anytime soon.



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SpartanFX on 03 April 2009

hopefully E3

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Procrastinato on 03 April 2009
jkimball said:

As pointed out your logic on the 50% price cut doesn't work when applied to hardware. And as further pointed out, they sell enough PS3 that HD developers will develop for it or at least port to it - they can't ignore 40% of the HD market.

 

however, the price cut on the PS2 was really, really stupid.  Do the math from a revenue perspective:

 

if they sell 1million price cut PS2 they have 'lost' 30M in potential revenue.

If they had price cut the PS3 by $30, and they sell a million of those they still lost 30M in potential revenue.

Sony is willing to give up $30M in revenue per million units sold. Why not give up that 30M in revenue to try and grow your FUTURE user base, instead of the past?  IT all goes into the same revenue bucket as Sony in the end anyway...

 

Dear Sony, we love you , but please start looking AHEAD instead of BEHIND.

 

 

 

If Sony is making $60 on each PS2, and sell 50000 units, they make $3.0M.

If Sony cuts the PS2 price by $30, and now makes $30 on each PS2, but the number sold rises to 75000: They make $2.25M.

(0.75M loss, but they are clearing inventory as they ramp down production, saving money on the balance sheets for the current quarter, and perhaps hurting the competion some, as well as building marketshare)

 

If Sony is losing $50 on the PS3, but is selling 80000 units, they lose $4.0M

If they cut the price of the PS3 by $30 (to -$80 per unit old), and sell 120000 units, they lose $9.6M.

(5.6M loss, having to up production, and thus reported losses in the current financial quarter, although they do build marketshare)

 

I hope that makes it a bit clearer.  Cutting the price on merchandise that is popular, but already losing money is a really really bad idea.  Cutting the price on a device which is losing popularity, but making money, isn't necessarily a bad idea at all.



 

radha on 03 April 2009
fastyxx said:
Here's the major flaw. When Valve drops L4D by 50%, it costs them nothing. There's no physical product in a Steam download. No manufacturing costs. They've already recouped expenses on that game with millions sold, so anything beyond that is gravy.

When Sony needs to make $80 on their cut of new games or peripherals before they break even - that's a large task. We who frequent the site tend to buy a lot of games. But there are LOTS of gamers out there - the kind that would never spring for the PS3 at current prices - that might buy two or three games a year. That doesn't cover their losses.

What "we want" is irrelevant if they can't provide it without killing their business. What a corporation wants is profits - or in this case - to limit losses so that stock prices stay up and shareholders are happy. Especially Japanese companies. Corporations do not have egos about 2nd or 3rd place. Only employees, perhaps, and fans of products. And employees would rather keep their jobs rather than get laid off just to gain meaningless marketshare - in this case meaningless because selling more consoles at that price would actually be BAD for the company, not good.

You're thinking like a consumer - not like a corporation.

 

 

QTF damn accurate post +++ to you man



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rohail88 on 04 April 2009

What???



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KBG29 on 04 April 2009

PS2

Sony has come out admitting that 3rd parties were in talks of dropping PS2 from there schedual. This was a move that would have been devistating for Sony. The PS2 is a pure profit machine, but the games are were the money really pores in. If they start loosing big games like Guitar Hero, Madden, Need For Speed, ect. then they loose a masive amount of potential income, which far outstrips the profit that would be made from selling PS2's at an extra 30 a pop. It is for this reason only, that we are seeing the PS2 price point come down.

PS3

Playstation 3 has absolutly no reason to see a price cut. It is still selling exeptionally well when compared to consoles from previous generations. It is well on its way to passing every other home console not called Playstation, that came before it. As I have stated many times, software and services sell devices. With the right software, services, and marketing $400 starts to become a non factor.

What Sony needs to do with PS3 is continue to push the envolope on what they are offering out of the box, and show that in a way that they can get the general public to garner interest. PS3 has every oppertunity in the world to become the iPod of the Blu-ray industry. Sony just has to get it out there, and make people want it.

I think they are in good hands with Howard Stringer, as he has been about software, and services since day one. Now it just comes down to how much Home, and PSN can eveolve before the holidays, and how well Sony can show the public the massive amount of value you get for your money.

One last thing.

Even if they wanted to drop the price. They have waited to long. It makes no sense to drop in April, because it would give you momnetum going into the slowest part of the year, and by the time people are ready to shop for something like a game machine, the hype of the price cut will be long gone. If they have to drop the price this year, late September to early october is a mcuh better time frame.



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Seihyouken on 04 April 2009
KBG29 said:

One last thing.

Even if they wanted to drop the price. They have waited to long. It makes no sense to drop in April, because it would give you momnetum going into the slowest part of the year, and by the time people are ready to shop for something like a game machine, the hype of the price cut will be long gone. If they have to drop the price this year, late September to early october is a mcuh better time frame.

Not only that, Sony should actually be able to afford a price drop in Q4 with the 45nm Cell revision coming this summer and huge multi-million selling software titles such as Gran Tursimo 5, God of War III, Ratchet & Clank Future: A Crack in Time, Uncharted 2: Among Thieves, and M.A.G. making up for any losses from PS3 hardware remaining.

Then comes the 45nm RSX revision in Q2 2010.



rohail88 on 04 April 2009

very good insughts coming over here...good article bro although its a pity ur banned!!!!



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vthokiesrmoo on 04 April 2009

Double negative in thread title. Fail.



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