PS3 Price Cut Too Little Too Late

Cygnus · 05-29-2007, 06:43 PM

http://www.businessweek.com/innovate...n_id=rss_daily
Dropping the price of the PS3 won’t ease Sony’s woes, says BoA analyst

According to Bank of America's Michael L. Savner, a price drop on the PlayStation 3 later this summer or fall would likely not be enough to stimulate sales of Sony's console significantly. Moreover, he believes that the weak PS3 sales and continued shift towards Nintendo's Wii could have "adverse implications" for publishers.

"Despite growing anticipation that a $100 price cut for the PS3 is imminent this summer or early fall, we do not believe such a move would meaningfully improve stagnant PS3 sales and we are growing more concerned that a share shift away from Sony and Microsoft to Nintendo's Wii platform is incrementally negative of all 3rd-party publishers," Savner said.

He continued, "Based on our analysis, we conclude that a $100 price cut for the PS3 (we have dismissed a potential $50 cut as meaningless) would still leave the 'all-in' cost for a PS3 console and basic accoutrements 20-25% higher than the comparable Xbox 360, and does not even reflect the possibility that Microsoft could also lower its hardware prices. Further, an important driver of Sony hardware last cycle was exclusive games, such as Grand Theft Auto. Unfortunately, Sony does not have a similar advantage this cycle. Halo 3, a highly anticipated game release this year is a Microsoft-published game only for the Xbox, and Grand Theft Auto IV, by Take-Two's Rockstar unit, is being released on both the Sony and Xbox platforms."

Savner noted that Sony made a number of mistakes. Consumers are far more price sensitive than they anticipated; consumers are wary/indifferent to Blu-ray (a main driver of the PS3 cost); and Sony didn't have enough compelling exclusives at launch. To make up more ground, he thinks Sony would actually need a $200 price cut, but doesn't see that happening.

"While Sony could cut the price by $150 - $200, we view that as less likely given that it is already losing approximately $200 per console at $599, based on our estimates," Savner said. "Offsetting a potential price cut are decreasing production costs, which should improve significantly this year. We estimate that the loss per console could decline to about $50, assuming Sony does not cut its wholesale prices. Bottom line, we don't expect Sony to make up meaningful ground against the Wii this year."

On top of that, the Wii's success is obviously great for Nintendo, but as publishers look more and more to Wii instead of PS3 it could hurt the industry.

"So why are weak PS3 sales so bad for the U.S. game publishers? Independently, the implications over the short run are not necessarily significant. However, viewed at a macro level, the share shift currently taking place where the Wii, and even the PS2, are the share takers, our concern is that if software sales also begin to skew along those lines that publishers will be trading higher wholesale revenue (PS3 and Xbox 360) for lower wholesale revenue (Wii and PS2). Moreover, this is coming at a time when publishers are continuing to increase R&D spending for the more expensive platforms," he explained. "Lastly, while certain 3rd party publishers like Ubisoft, EA and Activision have shown some success on the Wii, Nintendo remains the dominant publisher on its platform.

TomTomTuning · 05-29-2007, 07:15 PM

hmmm.. interesting

mshulman · 05-29-2007, 08:01 PM

Factor in a 360 price drop if Sony drops the price and this makes perfect sense.

bboncorr · 05-29-2007, 08:30 PM

well everyone told sony they where making a mistake (on pricing)and sony dismissed them. sony likes to go against the analyst and push the market. they generally dislike to be told what to do or get pushed into something.

that is how the Asian business culture is. that isn't an insult because Asian men and woman are very good business people and it works for them. but at some point they need to learn to bend without breaking and thats something sony hasn't figured out yet.

Cygnus · 05-29-2007, 08:50 PM

Hopefully M$ makes the smart move and drop 360 price or make a 360/GOW bundle regardless of sony's actions on PS3 price. Its important that 360 reach 20 million shipped this year.

junehhan · 05-29-2007, 10:43 PM

This is one of those articles that make you want to say, "no @hit Sherlock." Those people at Sony were fools if they really thought that people wouldn't be as price sensitive as they are in the console industry. The fact is that Sony has steep competition this time as the X360 is really hot, and the new Nintendo is a great lower cost alternative is really killing them as it is having a seriously bad effect. The competition is just incredibly stiff this cycle. Not many people can afford multiple gaming consoles let alone being able to spend $600 just for a single console when the HDTV adoption rates are still incredibly low. Its simple that people are substituting lower cost consoles for the PS3.

bboncorr · 05-30-2007, 10:18 AM

Quote:

Originally Posted by Cygnus

Hopefully M$ makes the smart move and drop 360 price or make a 360/GOW bundle regardless of sony's actions on PS3 price. Its important that 360 reach 20 million shipped this year.

there is a bundle like that being sold at c.c.. it looks like it came straight from the factory since it has a specific look to it.

EddieDZ · 05-30-2007, 04:16 PM

why did they ignore the elite model? hhmm.. guess it sucks or something lol

Cygnus · 05-30-2007, 09:57 PM

If I were buying a next-gen console, 360 Pro is the best value out. Period

Quote:

Originally Posted by EddieDZ

why did they ignore the elite model? hhmm.. guess it sucks or something lol

05-29-2007, 06:43 PM	#1
Cygnus The Bringer of Balance Join Date: Dec 2004 Posts: 6,766	PS3 Price Cut Too Little Too Late http://www.businessweek.com/innovate...n_id=rss_daily Dropping the price of the PS3 won’t ease Sony’s woes, says BoA analyst According to Bank of America's Michael L. Savner, a price drop on the PlayStation 3 later this summer or fall would likely not be enough to stimulate sales of Sony's console significantly. Moreover, he believes that the weak PS3 sales and continued shift towards Nintendo's Wii could have "adverse implications" for publishers. "Despite growing anticipation that a $100 price cut for the PS3 is imminent this summer or early fall, we do not believe such a move would meaningfully improve stagnant PS3 sales and we are growing more concerned that a share shift away from Sony and Microsoft to Nintendo's Wii platform is incrementally negative of all 3rd-party publishers," Savner said. He continued, "Based on our analysis, we conclude that a $100 price cut for the PS3 (we have dismissed a potential $50 cut as meaningless) would still leave the 'all-in' cost for a PS3 console and basic accoutrements 20-25% higher than the comparable Xbox 360, and does not even reflect the possibility that Microsoft could also lower its hardware prices. Further, an important driver of Sony hardware last cycle was exclusive games, such as Grand Theft Auto. Unfortunately, Sony does not have a similar advantage this cycle. Halo 3, a highly anticipated game release this year is a Microsoft-published game only for the Xbox, and Grand Theft Auto IV, by Take-Two's Rockstar unit, is being released on both the Sony and Xbox platforms." Savner noted that Sony made a number of mistakes. Consumers are far more price sensitive than they anticipated; consumers are wary/indifferent to Blu-ray (a main driver of the PS3 cost); and Sony didn't have enough compelling exclusives at launch. To make up more ground, he thinks Sony would actually need a $200 price cut, but doesn't see that happening. "While Sony could cut the price by $150 - $200, we view that as less likely given that it is already losing approximately $200 per console at $599, based on our estimates," Savner said. "Offsetting a potential price cut are decreasing production costs, which should improve significantly this year. We estimate that the loss per console could decline to about $50, assuming Sony does not cut its wholesale prices. Bottom line, we don't expect Sony to make up meaningful ground against the Wii this year." On top of that, the Wii's success is obviously great for Nintendo, but as publishers look more and more to Wii instead of PS3 it could hurt the industry. "So why are weak PS3 sales so bad for the U.S. game publishers? Independently, the implications over the short run are not necessarily significant. However, viewed at a macro level, the share shift currently taking place where the Wii, and even the PS2, are the share takers, our concern is that if software sales also begin to skew along those lines that publishers will be trading higher wholesale revenue (PS3 and Xbox 360) for lower wholesale revenue (Wii and PS2). Moreover, this is coming at a time when publishers are continuing to increase R&D spending for the more expensive platforms," he explained. "Lastly, while certain 3rd party publishers like Ubisoft, EA and Activision have shown some success on the Wii, Nintendo remains the dominant publisher on its platform. __________________ Toshiba 57H81 Kenwood VR-616 Comcast DCT6412 III XBox 360 GamerTag Sec0nd2N0n3

05-29-2007, 07:15 PM	#2
TomTomTuning WOW Join Date: May 2007 Location: Camp Hill, PA Posts: 23	hmmm.. interesting __________________ My Setup Play Station 3 (Also used for Blu-Ray DVD player) Samsung HLT5076S 1080P DLP HDTV Harman Kardon Receiver + JBL Speaker system (5.1)

05-29-2007, 08:30 PM	#4
bboncorr High Definition is the definition of life. Join Date: Nov 2005 Posts: 4,418	well everyone told sony they where making a mistake (on pricing)and sony dismissed them. sony likes to go against the analyst and push the market. they generally dislike to be told what to do or get pushed into something. that is how the Asian business culture is. that isn't an insult because Asian men and woman are very good business people and it works for them. but at some point they need to learn to bend without breaking and thats something sony hasn't figured out yet. __________________ Living Room pioneer kuro plasma PDP-5010FD (9.9) Denon 4308CI (9.5) B&W 683's, HTM61, 685's (9.0) Sony PS3 (9.0) Sony BD-S350 (9.5) HSU VTF-3 MK3 sub (9.0) Harmony 1000 (9.5) XBOX360 + HD DVD (9.2) Nintendo Wii (7.5) Netflix Roku (9.0) Gaming Room 60A3000 (8.7) Halcro ssp200 (10. perfection) Deftech BP7004, C/L/R2002, BP2X (8.7) Sony Remote Commander (7.0) Toshiba HDA35 (7.9) Samsung 1400 (5.0) Bedroom Panasonic TH-42PZ85U (8.7) Tivo HD (9.7)

05-29-2007, 08:50 PM	#5
Cygnus The Bringer of Balance Join Date: Dec 2004 Posts: 6,766	Hopefully M$ makes the smart move and drop 360 price or make a 360/GOW bundle regardless of sony's actions on PS3 price. Its important that 360 reach 20 million shipped this year. __________________ Toshiba 57H81 Kenwood VR-616 Comcast DCT6412 III XBox 360 GamerTag Sec0nd2N0n3

05-29-2007, 10:43 PM	#6
junehhan High Definition is the definition of life. Join Date: Aug 2006 Age: 29 Posts: 5,640	This is one of those articles that make you want to say, "no @hit Sherlock." Those people at Sony were fools if they really thought that people wouldn't be as price sensitive as they are in the console industry. The fact is that Sony has steep competition this time as the X360 is really hot, and the new Nintendo is a great lower cost alternative is really killing them as it is having a seriously bad effect. The competition is just incredibly stiff this cycle. Not many people can afford multiple gaming consoles let alone being able to spend $600 just for a single console when the HDTV adoption rates are still incredibly low. Its simple that people are substituting lower cost consoles for the PS3. __________________ X360 Gamertag junehhan Toshiba HD-A1 HD-DVD player -Klipsch RSW10 Subwoofer -Pioneer VSX1016TXVK reciever -Klipsch Synergy Quintet III 5 channel speakers AIM: jhhan80 HD-DVD's: Loving it! BD's: When we get a reasonably priced BDP with lossless decoders Everyone wants to live at the expense of the state, they forget that the state lives at the expense of everyone - Frederich Bastiat, 1848

05-29-2007, 08:01 PM	#3
mshulman My Projector is High Def. Join Date: Nov 2004 Location: Marlborough, MA Age: 35 Posts: 6,571	Factor in a 360 price drop if Sony drops the price and this makes perfect sense.

05-30-2007, 04:16 PM	#8
EddieDZ PSN is Free Join Date: Jan 2006 Location: Saint John, NB Canada Posts: 4,696	why did they ignore the elite model? hhmm.. guess it sucks or something lol __________________ Uncharted 2 l GRID l Killzone 2 l Battlefield:BC l BuzzQuiz l Pacific Rift l Dead Space l Burnout l Motorstorm l R&CF l Uncharted Fat Princess l Shatter l Zen Pinball l PJ Monsters l PJ Eden l Astro Tripper l Zuma l Soldner-X l Cuboid l Prince Persia l PowerUp l Magic Ball l WipeOut HD l R&CF: Quest Booty l Fatal Inertia l Stardust HD l flOW l Blast Factor AR l Nucleus l Everyday Shooter Samsung LN46A530

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