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.

[kingboy]

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

[UrbanJabroni]

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?

[RuffRyder]

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.

[kmis87]

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.

[UrbanJabroni]

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

[Caxtus750]

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

[FeralPhoenix]

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.

[UrbanJabroni]

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.

[Ravenator529]

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.

[FeralPhoenix]

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.

[kingboy]

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..

[calderra]

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.

[Ravenator529]

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.

[kingboy]

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!

[PS360WII]

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....

[kewlkat007]

a Big boo boo from sony. They haven't even released the prodcut, yet slashing prices. This either means they are afraid they may not sell the core versions because most people wil likely buy the premiums. Which is probally why they added HDMI to all the japanese core models.

Thats another slap in the face to others that are buying the core in Europe and USA. Does that mean they don't need the HDMI and price-cut? Afraid of failing in their own backyard it seems like. It's just not fair sometimes. They should of just scrap the core version. I mean whats the big difference now between the premium..the HDD?

Sony never had a true strategy thats why its undermining its install base with last minute screw-ups. It's even making japanese economist saying WTF!! Also making fanboys bendover. This is coming from japanese economist people. They know thier marker better than any fanboy like to think.

Just ridiculous..now back to TGS

[specialguest]

ok, so everyone cried and complained over the high price. now Sony is actually cutting price down, and you people still cry and complain! which is it? high price or reduced price?!?

when they created the PS3, they included things the public complained about and wanted. the end result was an expensive machine.

then the public cried out in horror over the high price and Sony heard those cries. Sony now dropped the price, but that still wasn't good enough. stupid idiotic people!

[PS360WII]

That's why Nintendo doesn't listen to the people. The people don't know what they really want. So they just make the console how they see fit. Cuz if you try to put in everything the people want you'll get this outcome...

[kewlkat007]

Besides the Fanboys..that swear the core version was worth $500 price. Also take a look at sony they are crying now since they are not the only "next-gen" console with 1080p.Even sony is rethinking its strategy, which it never really had. The core , which now has HDMI in japan should be the premium now. Whats the point of paying for the premium. 60 GB HDD?

They should of scratched the Core version. with the X360 at least you can upgrade much later.

These sony prices are all whack. The japanese get the better deal after realizing sony's product is not worth $600-$500 respectivley.

"They may cut the price again if sales don‘t go well," he added.

[EnforcerOfTheTruth]

Uhmm I don't know about you, but I don't see any true, native 1080p titles for the 360 insight. Maybe because such games will run 15fps and be on 3 discs or more? LOL
The prisedrop was because Japan was complaining badly and because of the simultaneous Wii release.

[TheThinker]

The real question is whether or not the games will utilize excellent textures, or lesser ones to makeup for the boost in resolution.

By what I've seen in some PS3 games like Lair, 1080p with wonderful textures is possible along with a good frame-rate. I have yet to see that simulated in the 360.

Of course, we will still but heads about this beacause not all of us have HD television to begin with, so comparing the two consoles resolutions would be impossible. 720 resolution still rocks, just not as much.

[Islandkiwi]

That's what I get from Sony, it's confusing. They have two sku's, that was confusing. Now they lower the price on the cheaper one, but not on the expensive one. And they now have hdmi on both. And they're going to sell 80% of them at the higher price point.

But what they've done is made the lower price point so much more attractive. It's like 150 dollars cheaper, and the only real difference now is a smaller hard drive.

So are you going to spend 150 dollars more for a larger hard drive? Or would you wait and save 150 dollars?

[UrbanJabroni]

For those fanboys that don't seem to get the point of this article, I'll try and boil it down.

It was not about HDMI.
It was not about whether or not you think the PS3 will "r0x0rz".
It was not about the quality of games.
It in NO WAY was about PS3 versus 360.
It is not about whether or not there are any "native" 1080p games.

This was a financial analyst commenting on the poor decision for Sony to drop prices prior to launch _based upon a pure financial perspective._ If you don't want to talk about whether or not this price drop will hurt Sony and would rather read TGS news and post the same mindless pro-Sony propoganda then by all means go to one of those posts.

This was actually an interesting article that questions the profitability of Sony Corporation, something that greatly interested me and has some great comments from non-fanboys.

[calderra]

The problem with the strict financial cut comes because Sony's brand strength is so critical to its success. See all the brand polls putting Sony #1 in the world.

Sony on HDMI in the PS3...
=HDMI and 1080p are critical to the next gen!
-PS3 will have dual HDMI ports.
--Wait, only one.
---Now the 20GB doesn't have one at all.
----But no HDMI cables in the 60GB.
-----Now the 20GB has HDMI.
------But it still doesn't get cables?

On SKUs:
=360's two SKUs hurt the market.
-PS3 will have one unified SKU.
--Now it has two, but only the HD differs.
---But the 20GB has no HDMI, no wi-fi...
====$500 and $600
-----Now the 20GB has HDMI
------Now the 20GB is CHEAPER too?
-------But only for Japan?
--------But the 60GB remains the same?

On the online platform...
=PS3 will not counter Xbox Live.
-Wait, yeah it will. And it'll be free.
--Devs report using XFire, Gamespy to connect.
---(^Does unified online really exist?)
----Now demos may cost $1 a pop.
-----(^Confirmation Sony online isn't free?)

WTF is going on with this company?

[richie007bond]

LMAO sony are dropping the price of the console in japan and they havnt released it yet lol,wtf are they doing,they must be running scared man

[DJ]

Especially with how vocal the Japanese have been about the price (even more so than us). And the inclusion of HDMI makes the 20GB version a lot more appealing. People have to understand that the 20GB PS3 is actually more feature-packed and capable than the Premium 360. It's a premium system, while its 60GB counterpart is basically overkill. Extra memory card ports, 40 extra GB of hard drive space, built-in Wi-fi, and that cool slab of chrome on the front.

I was getting the 20GB version anyway, so the inclusion of HDMI just sweetens the deal. This was obviously done in anticipation of Microsoft's 1080p update. Sony had been touting this PS3 feature for over a year, so it's only rational that Microsoft would try to play catch-up and make the competing systems similar in terms of features (add-on hi-def movie player as well).

Sony knew that Microsoft would try and tout 1080p functionality and saw that HDMI was suddenly becoming an industry standard in the HDTV market, so now they have a hardware advantage (yet again) over the 360. Even if Microsoft builds another add-on for HDMI compatibility, it still won't be HDMI 1.3(which is what the PS3 has), and it probably won't even be the same quality.

It'll also add to their long list of expensive add-ons needed to get near-ps3 functionality.
----------------------------- ----------------

[TheThinker]

Some of you forget that Sony and Microsoft sell other products beside consoles. In particular, Sony is planning to sell Blu Ray players and cds, so this slash in pricing is not without reason. The more Blu Ray players penetrating the market through the PS3, the better overall in the sale of Blu Ray products. Likewise, Microsoft is beginning to push their own HD-DVD addon for the 360.

Also, the price/slash only applies to Japan. Europe and the U.S. will pay the full price, and more than make up for the slash's cut in the first place.

[shotty]

I woke up the TV and turned on the news. I read "Sony slashes playstation 3 prices, admist fears of strong showing of microsoft's xbox 360 and Nintendo's Wii". So I was like wooh, how is that possible, so I go on the internet and it's true for only in Japan. Japan being sony's strong point is being threatened so much that sony has to make a major price cut before the console is even released. I wonder how the situation is going to be in the rest of the world.

[PS360WII]

this hdmi on the core is really only for Japan? that's my question that no ones answered yet

[HiSpeedSoldier61]

Only on this web site can a ps3 price slash be viewed as such a awful and notorious development from the Sony bashing elite and others.

Sure, it probably won't benefit us brave, patriotic americans but now it is going to be ALOT harder for MS to conquer the PS3 in japan; with the PS3 only $30 more than the premium 360 and all.

I don't mean to create any flaming backlash but MS must be pissed off about this. They must now be planning suicide attacks against sony's TGS booths now.

"you ready? You ready? Lets Get It On!!"

[sweeper]

Trying to give it away and it's not worth the money they want for it and they know it.

[DJ]

The system costs a sh*tload to manufacture. People accuse the Blu-ray drive of adding to the cost, which it does, but it doesn't contribute anywhere near as much as the CPU and GPU. They lowered the price because the Japanese economy had a bit of a dip, so it's only natural. That and there was a lot of outcry over the pricing.

I'm glad that they put HDMI 1.3 across both versions of PS3. It makes the 20GB 'tard pack' even more fully featured than the premium 360, which is quite a feat. Personally, I'm picking up the 20GB version since i'm going to replace the default hard drive with an 80~100GB one.(i love how you can just shove in anything you want, regardless of brand.)

[FeralPhoenix]

OK, forgive me but I'm going to try to say something rational to Sonyfanboys......the whole point here is that a price drop was the last thing Sony needed, especially in Japan. Damm, you guys are just not getting what the analyst is talking about:

1. Japan is PS3 home territory; the PS3 would have sold out at the original price no matter what price it was, no question!

2.#16 Sony will easily outsell the 360 in Japan, have you seen 360 sales #'s lately...with some of the new titles like Lost Oddysey they will get a lil better, but Sony is in no way threatened by M$ "IN" Japan, now the Wii, is a different story, but regardless the analyst is exactly right, the price drop is ridiculous because they will lose even more money than they were already going to lose, since PS3 would have sold out at the original price anyway.

3.#7 You are missing the point, yes Sony fans complained about the PS3 being too expensive, and it is because they "chose" to go with an unproven format called "Blu-ray". So the question has always been and still is was it worth it?, especially considering the delays and other problems.......but whats done is done, its already in every PS3 now, so what the analyst is saying here again is that....PS3 would have sold at the orginal price which was at an acceptable loss for Sony, but now Sony may be losing too much...(all in the name of Blu-ray--OK, that part is my opinion)

4. Another unintended downfall of this strategy is that.....it overwhelmingly weakens the value of the premium PS3, because they are almost the same thing now, except the premium will have a larger HDD, plus a few other added features, but relatively speaking they are alot closer now....that hurts the Premium PS3's value.

Remember Sonyfanboys, "Reading comprehension is fundamental."

[Say's you]

Sony would lose knowing that you guy's are not analys and just saying numbers and not being good at it may I add!.

[Say's you]

For being such a 10 year old that only say's Sony=Lame how retarded can you be richie? oh wait don't answer that you would be very retarded.