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With a price cut, PS Vita could hit 12.4m units in 2012

New handheld will generate sales of $2.2 billion, says Strategy Analytics

Sony's new PlayStation Vita handheld could sell as many as 12.4 million units in 2012 - provided it gets a price cut.

That's according to research firm Strategy Analytics, which assumes with an average selling price of $180, hardware sales could generate as much as $2.2 billion for Sony.

"The real value of the PlayStation Vita is its drive for content revenue growth and its strategic position in Sony's entertainment ecosystem," said Jia Wu, senior analysts at the company. "The PlayStation Store will have a vital role in selling games, videos and other content through its online access.

In the time of austerity, consumers are considerably sensitive to prices, and Nintendo proved that a price cut can save a product.

Jia Wu, Strategy Analytics

"We believe that PlayStation Vita will cause Sony's 2012 portable console software revenue to grow by $800 million compared with 2011. Although it's too small a device to turn the company around in terms of financial contribution, we expect it to bring in $2 billion incremental revenue from both hardware and software sales in 2012."

The company expects a price cut this year, in a move similar to Nintendo reducing the price of the 3DS once the initial hardcore gaming crowd had made its purchase in the first month of sale. There's a similar trend in Japan for the Vita, which released in the region before Christmas.

"In the time of austerity, consumers are considerably sensitive to prices, and Nintendo proved that a price cut can save a product," offered Wu.

"Sony now is experiencing the same story in Japan. Sales of the Wi-Fi version of PlayStation Vita at $249 initially exploded, selling more than 300,000 units in the first week of release. But the new console is barely moving 20,000 units per week in its home market after all the hard-core fans made their purchases, mirroring the experience of the Nintendo 3DS."

"Despite the solid design and strong processing power, it is challenging to convince consumers to buy a dedicated game console above the $200 price range in today's economic environment as Nintendo has learnt. Sales of 3G models will be a particular challenge as it demands a $50 premium and additional data plan charges and in the long run is likely to represent only a small portion of total PlayStation Vita sales."

He added that Sony can strengthen the PlayStation brand with the new handheld, "even if the console hardware itself will not generate much profit."

And with the continued growth of smartphones and tablets, Strategy Analytics said Sony's challenge is to create unique content only available on the PlayStation Vita.

"To survive the march of smartphone's entering the casual gaming space, Sony needs to achieve the Holy Grail of inventing innovative new gameplay whilst at the same time investing heavily in exclusive content," said Wu.

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Latest comments (13)

Terence Gage Freelance writer 9 years ago
I don't believe that Sony are making $180 per unit, considering it's only selling for $250 in the US (on, at least) - what about distributor cuts and retailer cuts?! Aside from that, I agree generally with their sentiments though; all reports suggest the Vita is a top-quality piece of hardware, and aside from some disgruntlement over the memory cards and that we in the UK don't seem to be getting very good value by downloading some of its games, it really seems as though everything has gone as well as it could have so far.

Now it remains to be seen how the software support for the rest of the year will be (looking quite good though, from a glance), and whether the hardware can make itself seem a bit more unique than just being positioned as a portable PS3.
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Tamir Ibrahim Programmer, Splash Damage9 years ago
I took from the article that if the Vita sold at $180 it would generate the stated revenue. As in if the price was cut to $180, I may have misinterpreted though.
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Terence Gage Freelance writer 9 years ago
Well someone from Strategy Analytics has got their figures mixed up then, because 12,400,000 x $180 = $2,232,000,000; suggesting that they expect Sony to sell every unit for $180, rather than being the retail price to customers. I don't see how that leaves room for a price cut, unless the retailers are willing to take the hit - which obviously won't happen.

Edited 1 times. Last edit by Terence Gage on 23rd February 2012 11:39am

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Show all comments (13)
Firstly, its traditional for consoles/handhelds to have almost no retail margin - this is why several retailers aren't interested in stocking it at all. Sony will be selling it to retailers for close to the full retail price.

Secondly, I don't believe Sony has any scope for any real price cut - the Vita was designed around a $250US price point, and Sony need this to be profit making (or close) from the start.

Adding $2.2bn to Sony's revenue may seem like a great thing - but not when it comes at the cost of over $2.2bn in costs... (i.e. making a loss!).

That said, I really can't fathom how $250US = $350AU (given the AU is trading at $1.05US, and has been above parity for a long time). At that price, they are going to struggle to sell many here (and its $420AU for the 3G version - almost the price of a Galaxy tablet...).

And yes - Nintendo did cut the price of the 3DS - and it cost them at least $1bn in cash. Nintendo are still cash rich (over $10bn in cash), and with no debt - unlike Sony who have no cash, a lot of debt, and a credit line they need to manage.

Sony definitely have their work cut out for them...
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Martyn Brown Managing Director, Insight For Hire9 years ago
Vaguely random statement pulled from nether regions = "analysis" (and news) these days. Hmmm.

I apologise in advance for the lack of a crystal ball.
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Daniel Hughes Studying PhD Literary Modernism, Bangor University9 years ago
I have to agree with Michael: I can't see Sony being able to stomach a price cut right now. It's not as if a slow couple of years killed off the PS3, which also entered a highly competitive market. Nintendo had a huge war-chest built up through years of massive profits with which to absorb the 3DS price cut, and of course the majority of their losses have been driven by the high yen. 3DS will also become a profitable piece of hardware by April (I think that's what Iwata said), whereas the last I heard, Sony won't be able to turn a profit on Vita for a couple of years. I think Sony will do their best to ride out any slow patches with Vita this year without cutting price, their entire company has been bleeding money for years, and I highly doubt they'd sacrifice any more profitability to push Vita sales higher this year.
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Jim Webb Executive Editor/Community Director, E-mpire Ltd. Co.9 years ago
Sales analysts don't hold too high a regard with me. Martyn, it's OK. They don't have one either.

Strategy Analytics [Jul-05] (Worldwide Through 2012)
Sony PS3 - 121.8 million (61%)
Xbox 360 - 58.8 million (30%)
Nintendo Wii - 18 million (9%)
Total - 198.6 million

Kagan Research (U.S. Through 2010)
Sony PS3 - 56.5%
Xbox 360 - 28.5%
Nintendo Wii - 15%

Piper Jaffray (U.S. Through 2008)
Xbox 360 - 19.6 million (48.3%)
Sony PS3 - 15.5 million (38.2%)
Nintendo Wii - 5.5 million (13.5%)
Total - 40.6 million

Citigroup (U.S. Through 2008) Didn't even list Wii
Xbox 360 - 19.8 million
Sony PS3 - 11.0 million

UBS [Jan-06] (U.S. Through 2009)
Sony PS3 - 23 million (43%)
Xbox 360 - 20 million (38%)
Nintendo Wii - 10 million (19%)
Total - 53 million

Friedman Billings Ramsey (U.S. Through 2010)
Xbox 360 - 24.6 million (40.7%)
Sony PS3 - 23.3 million (38.6%)
Nintendo Wii - 12.5 million (20.7%)
Total - 60.4 million

In-Stat (Worldwide Through 2010)
Sony PS3 - 50%
Xbox 360 - 28.6%
Nintendo Wii - 21.2%

Wedbush Morgan Securities (U.S. and Europe Through 2010)
Sony PS3 - 45%
Xbox 360 - 35%
Nintendo Wii - 20%

Merrill Lynch (Worldwide Through 2008)
Xbox 360 - 47%
Sony PS3 - 33%
Nintendo Wii - 20%

IDG (U.S. Through 2008)
Xbox 360 - 15.5 million (43.3%)
Sony PS3 - 13.5 million (37.7%)
Nintendo Wii - 6.8 million (19.0%)
Total - 35.8 million

P.J. McNealy (Worldwide Through 2007)
Xbox 360 - 21 to 23 million
Sony PS3 - 13 to 16 million
Nintendo Wii - 12 to 14 million

Yankee Group (North America Through 2011)
Sony PS3 - 30 million (44%)
Xbox 360 - 27 million (40%)
Nintendo Wii - 11 million (16%)
Total - 68 million

Nomura Securities (Worldwide Through 2011)
Sony PS3 - 71 million
Nintendo Wii - 40 million

Enterbrain / Famitsu (Worldwide Through 2009)
Sony PS3 - 34 million (39.1%)
Xbox 360 - 28 million (32.2%)
Nintendo Wii - 25 million (28.7%)
Total - 87 million

IDG (North America Through 2010)
Xbox 360 - 23.9 million (39.2%)
Sony PS3 - 23.5 million (38.5%)
Nintendo Wii - 13.6 million (22.3%)
Total - 61 million

Merrill Lynch (Worldwide Through March 2011)
Xbox 360 - 39%
Sony PS3 - 34%
Nintendo Wii - 27%

Strategy Analytics [Nov-06] (Worldwide Through 2012)
Sony PS3 - 121.8 million (59.47%)
Xbox 360 - 59.7 million (29.15%)
Nintendo Wii - 23.3 million (11.38%)
Total - 204.8 million

SFG Research (North America Through 2010)
Xbox 360 - 29.4 million (43.8%)
Sony PS3 - 24.2 million (36.1%)
Nintendo Wii - 13.5 million (20.1%)
Total - 67.1 million

SFG Research (Worldwide Through 2010)
Sony PS3 - 62 million (46.6%)
Xbox 360 - 46 million (34.6%)
Nintendo Wii - 25 million (18.8%)
Total - 133 million

Screen Digest (U.S. Through 2010)
Xbox 360 - 42%
Sony PS3 - 38%
Nintendo Wii - 20%

Screen Digest (Japan Through 2010)
Sony PS3 - 64%
Nintendo Wii - 25%
Xbox 360 - 11%

UBS [May-07] (U.S. Through 2010)
Xbox 360 - 22 million (35.5%)
Sony PS3 - 21 million (33.9%)
Nintendo Wii - 19 million (30.6%)
Tolal - 62 million

A price cut from $250 to $180 would prove incredibly costly for Sony. $250 is about as low as Sony can go before losing profit. Losing $70 on each unit with 12.4 million sold is an $860 million loss. Couple that with then Yen to dollar situation and I'd hate to be the guy telling their investors their FY financials given they already are predicting a $2.9 billion loss this FY.

Michael, Nintendo didn't lose $1 billion due to the 3DS price cut. 75% of that loss came from the appreciation of the Yen against the dollar. The remaining 25% came from the price cut and a few other factors (Wii U R&D, possibly some money towards that new R&D facility they are building).
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Charlie Moritz Studying Philosophy with Psychology, University of Warwick9 years ago
I'd like to see a cut in terms of buying one but Sony can't afford to! They were selling the PS3 at a huge loss and it wasn't good, the Vita will need to be sold at a profit of some kind - given the hardware is so advanced I can't see them dropping it to what is basically 150 within the next 6 months at least, if at all. I mean I bought my PSP only 2 or 3 years ago and it still cost me some 80
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@Jimmy: nice stats! Did any of the analysts get it even half right?

The $1bn Nintendo loss was "hypothethical" - revenue loss if they never cut the price (and sales still boosted somewhat). I believe the stock writedown was around the $200m mark. You have to wonder where sales would be now with no cut, and the big titles out...
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Thing is: Sony has a tradition of downgrading consoles. PS3 was downgraded until they could find a price point acceptable by market. Same thing with PS2 before: PS2 slim without possibility of HD, etc. Now it is time to wait and see what they'll do regarding Vita.

The undeniable fact is that UE is in recession and US is not in good shape either. Then, a $250 + $50 (memory card) + at least one game is expensive for most consumers. The best indication that the product is completely out of what market believes to be an acceptable price is that it is selling less than PSP in Japan. In contrast, 3DS with all its limitations is doing really well.

One important thing is that consoles are supposed to be sold with really low or even negative profit margins. Profits come through sales of games and related stuff. But in order to make this model work, game sales must be massive. That's just what is not happening with Vita: console price inhibits game sales... and if this situation is not fixed soon, this will make developers think twice before start to develop for this platform: the entry cost for development is high (SDK + etc) and game development cost ($ man.hour, etc) is high, thus it is a real risk to develop a game for a platform that sold poorly following launch.
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Jim Webb Executive Editor/Community Director, E-mpire Ltd. Co.9 years ago
Michael, Strategy Analytics did OK with their X360 projections but that's it. The rest were way off.

Here are another couple of golden nuggets.

Notice this one has both the Wii and X360 somehow losing consoles?

<img src="" />

Edited 4 times. Last edit by Jim Webb on 23rd February 2012 7:28pm

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Curt Sampson Sofware Developer 9 years ago
The other thing about a Vita price cut is, what happens to the PSP? Bringing the Vita down from a 24,980 RRP by any significant amount starts to put it dangerously close to the PSP's 16,800 RRP. (Discounted retail is about 22,000 and 15,000.)

You know, the PSP outselling the Vita almost makes me wonder if Sony wouldn't have been better off to release a slightly upgraded PSP, with a second joystick, bluetooth, and the usual complement of modern stuff....
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Craig Page El Presidente, Awesome Enterprises9 years ago
I don't see the point of a PS Vita. I already carry around a phone that's a similar size, there's no room in my pockets for another device. I can't play it at work because that's too obvious. :) The games are all lesser quality than the console versions, but cost almost as much. I could play it at home but why not just play a real PS3 game instead?

I think they'd sell a lot more if it was also a phone, and could run android apps, but had some Vita exclusives for $10 to $20. Then I would have to get one, and so would every console gamer who needs a new phone. Sony could go all Apple on us and charge $450 and they'd still sell millions of them.
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