Sony Cuts the Price of PS3? In the Right Direction, But...

Not three days after emphatically saying that a price cut wasn't in the cards, Sony announces a $100 price cut on its PS3 console with 60GB hard drive - now available for the low, low price of $499. Ok guys, nice move. So now you're forcing Microsoft to lower its prices and trying to re-define the console wars at the high-end of the market. Sure, higher volume, lower margins, pressing for share. Makes sense. But it doesn't address the larger issue - you are now fighting Microsoft for a smaller piece of the pie.

Sure, the pie has been expanded because the Nintendo Wii is drawing in new buyers - specifically casual gamers - into the console market. But even more than that, the Wii is taking sales away from both Microsoft and Sony due to its fun user experience and low price point (less than half that of the 60GB PS3, even after the price cut). Bottom line: the Sony and Microsoft "window to the family room" strategy versus the Nintendo "gaming should be fun and accessible to all" strategy is going to keep them at a higher price point, with the hope that people will see value - lots and lots of value - in its other applications. As I've written before, I think this is a big and scary bet with odds that, as an investor, I don't particularly care for.

So Sony, sure, go and engage Microsoft in a race to the bottom (of profits, that is). You are still missing the big picture. It's the product that needs work, guys. Not just the price that needs lowering. And like I just wrote about EA, it is going to call for a wholesale change in strategy and not merely an incremental shift in tactics.

Comments

[Anthony V.]

Everyone loves playing the analyst, despite the fact that a vast majority of people aren't adequately qualified; I count myself among that group. However, if I had to guess - and trust me, this is strictly a guess - I'd say that deriding a high-level console as flawed and a world-renowned corporation as lacking vision or direction is a bit of a short-sighted and misguided endeavor. Give the PS3 two years. Let the games come. Let the developers learn the system. Then take a look at the sales numbers. Everyone wants to focus on NOW, NOW, and NOW. But we may yet discover that the PS3 is the best equipped to survive long-term. And sure, I bet Sony would much rather be selling billions of consoles as opposed to tens of thousands, but in the end, the Wii MAY end up stagnate and become a passing fancy, the 360 may be further hampered by REAL design and manufacturing problems, and the PS3 might become the de facto standard among home consoles, vis-a-vis PS1 and PS2 (you know, the two previous iterations of the product line that were marginally successful). So before all you genius analysts start wailing about Sony's need to self-destruct and rebuild, perhaps you should give it a little more time. Maybe.

[Richard A.]

Those are not design flaws. Thats just Sony horrible strategy. It's not cells fault that Sony didn't bother to properly document it for developers. Nor is it Blu-Rays fault that Sony has not bother to promote it. Sony has the goods, it just doesn't know how to handle them...

Things would be different if Sony had better management. I remember reading an article that stated Sony lost exclusive s because they just did seem to care... i'll try to look for it.

[Jack]

"Sony knows full well that the PS3 will not gain any steam or garner much games for another year or two, and it doesn't care."

What we need here is a basic lesson in logic. First point: Sony SHOULD CARE. The loss leader startegy works when you have software to support it. By lowering the price (although,it was noted below they didn't *really* lower anything, did they), Sony is hemorrhaging even MORE money. They are admitting the console is overpriced; they are bowing to public outcry. They are losing MORE MONEY. Microsoft can relate: financials out this week show they missed their sales goal and missed their units shipped estimates by a few hundred thousand units.

"Because [Sony] knows in the long run, that people will get bored with the wii, nintendo has problems with staying strategies with its games. Sure the Wii has garnered some fun interest, but it will wane"

Second point: Just clap harder, and it will come true? Right? Because you provide absolutely no basis for this argument. It's pure opinion, and misguided opinion at that. However, what IS proven is that a disruptive technology will have a tremendous impact in the market to which it is introduced. iPod, DS, the Wii... all disruptive technologies. If anything, the patterns established by the Wii -- and subsequent responses from its competitors -- show overwhelming evidence that the Wii will go UP in popularity this year and next, and beyond, not down. And this is ignoring the fact that the DS still chugs along, and is only beginning to be understood as an input device for the Wii. And this "staying straetgies" nonsense is just that. Nintendo's DS portable is a cash cow. It prints money. It can do no wrong -- with ANY type of person. Hardcore, casual, puzzle player, Soduku, etc. Nintendo used this console as its "in" -- it taught the company, once reviled for close mindedness, how to open doors and develop new models, and of course be profitable like no other system in recent history. To say Nintendo has no staying power in the industry today is either completely ignorant, or you're doing this on purpose. To say without basis of fact that the interest in the Wii will simply wane because you say so is like me saying one day puppies will suddenly no longer be cute.

"Serious gamers are the meat of the market, and serious gamers want serious games, that so far only Sony platforms have provided"

Third point: Serious gamers? Define them. I spend hard earned money on Wii games and PS2 games. I consider it a serious investment in having fun. Am I not a serious gamer because I don;t buy into Sony's befuddled multimedia strategy?

What I have seen in the past 5 years is a decrease in the number of people playing video games BECAUSE of these so-called serious gamers you are describing (methinks, perhaps they played too seriously?).

What we're seeing now is an influx of gamers like myself who played in the 1980's and late 90's and became put off by "hardcore gamers" and stopped playing.

What we're also seeing today are new gamers, like women, young girls and the elderly all playing side by side with us.

These serious gamers you describe have held sway over game development and console direction for long enough. It's time to open up the doors to everyone else. The company that does that correctly wins. Which one do you think I think it is?

[DavidBeoulve]

Owing to my studies in Human Interface Engineering, the Wii is not going away anytime soon, and no future consoles will feature nothing more than a gamepad the play with your thumbs. It is exciting, completely aside from the Wii, to watch this change spread across the gaming industry.

[mutantmagnet]

Don't see how the product needs work. - Richard A.

It was briefly touched on by Jack and yourself. THe product has several design flaws.

One of them is the blue ray player. It inflates the price of the ps3 beyond mass consumers reach and completely destroys Sony's chances of ever making a profit from the hardware for years to come.

Another problem is Cell processor and from what I'm gathering from forums devs go to the cheap graphics card chosen for the ps3.

Cell is simply very hard to design games for and the graphics card is grossly ineferior to what Microsoft uses devs are forced to use Cell to make anything comparable with the 360. The situation was so bad developers can't even go to Sony for help in the design process. Usually they have to go to IBM to wrap their head around it.

Sony has thrown away one of their advantages that existed in their first two playstations. A platform which moved game design in new directions while providing tools that made assimilation of the new technology easy.

[Wiggins]

Why does everyone ignore sony's long term strategy that they have been fairly public about? The PS2 is still going fairly strong, and its actually PROFITABLE. Sony knows full well that the PS3 will not gain any steam or garner much games for another year or two, and it doesn't care. Because it knows in the long run, that people will get bored with the wii, nintendo has problems with staying strategies with its games. Sure the Wii has garnered some fun interest, but it will wane. Serious gamers are the meat of the market, and serious gamers want serious games, that so far only Sony platforms have provided.

[Richard A.]

Just notice that the price drop isn't really a price drop. It's still $500 or $600 .(hint: notice it's still not cheaper then the cheapest blu-ray dvd player)

Jack,
Developers aren't really running from the PS3 to Wii, they are running from PS3 to Xbox 360. They are adding development to the Wii. However the development is down right sad. All they are doing is remaking PS2, xbox360, PS3(aka Porting) games for the Wii. It's a cheap process that churns out half-assed games(and some good ones) but increase profits for the original investment(original game).

So what developers are doing is porting or creating mini games to offset the time/money between major releases.

It will be interesting to see who will have the strongest third party support.

[Roger]

Rob, to me the issue is Sony's messaging and strategy, and how that fits into the machine they've built. You can't be all things to all people. If you want to focus on the elite high-end of the market, ok. Be the best at that, deliver what you say you are going to deliver and incentivize developers to write good games for your platform. Problem is, Sony wants to be a high-end gaming console, a media center, and to possibly become more appealing to the casual gamer. It simply isn't possible. Therefore, they aren't particularly good at anything, much to the chagrin of Sony fans and their stockholders. I don't think you can look at the product without looking at Sony's strategy which, quite frankly, is pretty hard to discern at this time.

[Rob]

The problem isn't the product, in terms of its gaming philosophy, it's the price. Non-casual gamers, the people who made up the industry before the Wii, still want a high-powered console with a traditional controller and traditional games. However, I agree that this price cut is too little too late. The PS3 is still too expensive, and by the time Sony is able to drop the price to the needed level, they may no longer be relevant.

http://blog.thetechnonaut.com

[Jack]

Richard, I'm not so sure. Part of the reason developers are dumping the PS3 and running to Nintendo IS the hardware. It's too expensive and slightly complicated to develop for -- especially when paired up next to the Wii. Oh, and the fact that the Wii is kicking ass right now doesn't hurt either.

Sony marketed a geek's dream machine to the broad, casual market and got burned. The vast majority of people do not want a media center, they want a game machine. The price cut is in the right direction, but it only addresses MS, as Roger said, and not the bigger picture.

[Richard A.]

Don't see how the product needs work. Everyone pretty much agrees that the product is fine. It's just the price and lack of games that keep people from buying.