Top

PS3 price cut "ridiculous" says economist

Sony's decision to reduce the price of the PlayStation 3 in Japan before the console has even launched has been branded "ridiculous" by a Japanese financial expert.

The outburst comes following Sony's announcement at the Tokyo Game Show that it is due to cut the Japanese price of the 20GB version of the console from 62,790 yen (421 euro) to 49,980 yen (335 euro).
"It's ridiculous to decide to cut the price before they start selling the PlayStation 3," said Yoku Ihara, head of equity research at Retela Crea Securities, speaking to Bloomberg.

"They may cut the price again if sales don't go well," he added.

Read Full Story >>
gamesindustry.biz
The story is too old to be commented.
kingboy3772d ago

ridiculous my @ss,it`s called marketing strategy,plus it`s only for japan.so no problem here.

UrbanJabroni3772d ago (Edited 3772d ago )

How is "marketing strategy" great when it effects the short (and potentially long) term profitability of your company?

This is AN ADDITIONAL $100 loss per Japanese console compounded on top of whatever loss they were taking. For the lauch window alone in Japan this represents an ADDITIONAL TEN MILLION DOLLAR LOSS! Expand thigs out 6 months+ and you are easily looking at an ADDITIONAL ONE HUNDRED MILLION DOLLAR LOSS.

Meryll Lynch already estimates a THREE TO FOUR HUNDRED DOLLAR LOSS PER CONSOLE SOLD WORLDWIDE.

Sony is looking at losing billions of dollars in subsidised console says that it may never, ever be able to regain. Sony is not Microsoft, despite what you may think. Microsoft has a $50+ billion dollar warchest of _cash_ (and securities) it is just sitting on. One of the reasons for the slow rollout may very well be to wait until they can get yields up and costs down...fast PS3 sales would, quite frankly, bankrupt the company...

...so tell me again, for Sony as a company, how an additional $100 loss per console is in any way, shape or form a good thing?

RuffRyder3772d ago

This was a stupid move from sony.
It would have been better to drop the price after the first batch of ps3 where released because its obvious that the first batch of ps3 will sell out to the hardcore gamers regardless of the price.

Sony has just lost them selves an extra couple billions so how is it not a problem.

kmis873772d ago

Sony is a larger company than MS, so this notion that they can't spend as much as MS is ridiculous. Plus, the higher ups at Sony, past the Playstation division, really want to get bluray adopted as the new format. If that happens any losses on the Playstation end will be made up by bluray sales.

UrbanJabroni3772d ago

You've got to be kidding me...why do I even bother. sigh.

Chexd3770d ago (Edited 3770d ago )

LMAO!!!! I litterally laughed out loud for several minutes!

+ Show (2) more repliesLast reply 3770d ago
FeralPhoenix3772d ago

Damm, Sony can't win for losing!....kingboy, I think you are missing the point of what the financial expert is saying. He's saying that Sony is already losing a substantial amount on PS3, and by cutting the price so early (its not even launched yet) they will lose even more money. Of course most consoles always start out losing money, but over the life cycle they make it back through games sales/royalties and eventually hardware sales as production/manufacturing process becomes cheaper and cheaper....PS2 is a perfect example of this....but if they start off too far in the hole they may not ever make a substantial profit or worse case scenario they might lose too much and never recover. Now I wonder why, this financial expert believes Sony might not be able to "cover" the instant loss of a price cut?.....*cough, Blu-ray, *cough, *cough....uhm excuse me I just I have a lil cold. Thanks.

UrbanJabroni3772d ago

Actually, the idea that consoles are always sold at a loss is somewhat of an urban legend. The only console that has been confirmed to create an instant loss was the original XBOX...although speculation abounds as to the PS2. Prior to this all consoles (especially the Nintendo ones) were sold at a marginal profit.

Ravenator5293772d ago (Edited 3772d ago )

It is not a myth. M$ never gained profit off the XBox system. And the PS2 saw losses at the beginning.

Software sales are what turned profit for these companies. Even today, M$ still doesn't make any money off an original XBox. Also, M$ has a few other divisions that make up for the "expected" losses on XBox.

The reason Nintendo would profit from their systems is that they always kept the production costs low. Their systems were just for games and nothing more.

Trust me, M$ loses money on the 360 and Sony will lose money on the PS3.

Just think about it, a brand new Blu-Ray DVD player costs $1000 by itself. That should tell you right there that a video game system with a Blu-Ray DVD player selling for $600 is going to create a substantial loss for Sony.

A loss that IMO, they may not recover from.

These expensive systems are the reason why we are paying $60 for a new game rather than $50. They need to turn a bigger profit on the software for the losses on hardware.

This also hurts Sony because realistically they should be selling their games for upwards of $70. Why?, because Blu-Ray media is more expensive than DVD9 media. Plain and simple.

This is a move by Sony because they are genuinely worried that M$ is going to dent their Japanese market.

FeralPhoenix3772d ago (Edited 3772d ago )

M$ was the first to launch with a HDD included at the time, and the tech in the original Xbox was expensive for that specific time, but M$ knew that if they sold the original Xbox for what it cost to make, most consumers would not pay that much money for a console, Neo Geo is good example, therefore M$ took the strategy of selling at a lost and trying to make a profit over the life cycle of the console, which didn't happen....but it did establish them a solid 2nd place in the business. Now in todays world new tech is very expensive because of all the research and development money spent on chips, etc. so I don't believe we will ever see the days of launching a videogame console with a instant profit, think about it, who's going to pay $1,000+....unless you take the Nintendo strategy of not using the latest most powerful technology, because otherwise if you try to charge the consumer what the new tech actually costs....its just not going to work, since most gamers are not hardcore gamers....which means its just a toy to them. I mean the numbers speak for themselves, I forgot the actuall amount but the 360, costs M$ alot more to make than what their selling it for, and the PS3 is costing Sony a arm and a leg....now the point of my #2 post is that they would only have marginal loses on every PS3 sold, if they had not chose to go with a uneccessary format,(Blu-ray). Now when you add a price cut before they even launch, suddenly you are talking about a major financial loss for every PS3 sold. The question is was Blu-ray worth the risk?...in my opinion Hell No!....not that Blu-ray is a bad thing, I just believe, no Im positive that by the time, we need 50gigs for games...PS3 will be outdated because the next-next gen Xbox will be here with the latest and greatest technology. M$ is smart, and they seem to have the better hand this deal.

kingboy3772d ago (Edited 3772d ago )

lol what about bill loosing rite from day one with the original xbox and is still loosing even more.what u call that then?u think he enjoys loosing money?please cut the cheap talk like we don`t know why these companies play with marketing prices..it`s called installing some motivation and confidents on purchace.They`ll still make money some how on other products they provide
And to that so call Ruffryder..it`s been a while u`v been on my back talkin sh*t..i know ur still mad just because i hit on your sister all night..u don`t want it with me in these forums lol! and by the way kingboy is the logo i own when sellin or promoting my stuff..

calderra3772d ago

Few people know- Xbox is only one step in a larger Microsoft plan to push Sony out of the home market. They had prepared for loss from the get-go in order to make the first attempt work. The Xbox division was made one small part of the Entertainment division, and even though Xbox lost some money, the loss was largely absorbed by the Entertainment wing.

Sony is in a nearly desperate financial situation. They didn't even have enough money to produce PS3 on their own- they had to call on investors to help them finance production.

When you can't even afford to MAKE the console, how can you afford to slash its price?

Plus- the REAL reason this is happening is because they're only shipping 100,000 total units to Japan. Without a price cut, Japanese gamers caught in the shortage will be too angry at Sony to buy into the console. This is to help soften the blow.

Ravenator5293772d ago

You have no idea what you are talking about.

Yes, the XBox was not a profitable system. On paper the division lost money on every console sold.

But M$ as a company was never hurt by the losses because of the profits made in other divisions.

kingboy3772d ago

who gives a sh*t about bill anyway.i`m here for TGS news today.please i`m not into arguing ..just let me wait for my ps3 right!hope u not mad cuz i`m gettin one hahah!

PS360WII3772d ago

Good for you. Really I'm happy that you found out you can't win this fight so you went ahead and changed the subject. Sony is taking a loss for each console sold. They said that themselves. Plus now they put themselves deeper in with Japan just so they can "soften the blow" (I read that in a previous comment)

It's an intresting way to go about it they must know that Japan isn't really up on the whole ps3 so they have to dangle a carrot in front of them....

Show all comments (35)
The story is too old to be commented.