PS3 Super Slim Could Be A Super Stumble

Chris Morris argues that Sony is shooting itself in the foot by not lowering prices this holiday

Just a few short weeks ago, it seemed pretty clear how this holiday season was going to shake out for the video game industry - on a few fronts at least.

The long drought of mediocre titles would be replaced with a steady stream of AAA hits. Nintendo would roll out the first next-generation console system. And Microsoft and Sony would battle the Wii U with the best tool at their disposal: A price cut.

Then came Wednesday's pre-TGS Sony press conference - and all hell broke loose.

The decision to roll out a redesigned, even slimmer PS3 wasn't a real shocker (nor was the bundling of two admittedly great games). Rumors about the redesigned system have been around since E3. But Sony's decision to price the new entry-level system at a point that's $20 higher than the current low-end PS3 was downright baffling.

While the Superslim PS3 is still priced lower than the Wii U, Sony opted to bypass an opportunity to boost its market share this holiday. To put it another way: new form factors are all well and good, but at this point in the game - and in the current economic climate - people are making decisions based on price.

"I think they're going to be caught flat footed when Microsoft does something like bundling Kinect with the Xbox for $200"

Michael Pachter

"I think the form factor looks like a nice improvement, but if I were Sony I would focus more on lowering prices," says Colin Sebastian of R.W. Baird. "At this point, in terms of competing at the end of the cycle and in terms of driving more mind share, I don't think consumers are as interested in the prettiest console they can find, but rather the one that has the best value."

Wedbush Securities' Michael Pachter agrees.

"I think Sony is missing an opportunity to differentiate on price," he says. "And I think they're going to be caught flat footed when Microsoft does something like bundling Kinect with the Xbox for $200."

P.J. McNealy of DWR Research, however, calls the pricing decision a "non-event". In addition, he points out, the current financial situation at Sony might be one of the motivations behind the move.

"[The PlayStation division has] a corporate mandate, with Kaz Hirai in charge, of trying to make money - and cutting the price isn't always in line with that mandate," he says. "The reality is Microsoft, Sony and Nintendo have two choices now. They can cut prices on current models or they can extend the life cycles of the current machines by adding more technology and bundling games with them. Sony is clearly in the second camp."

If McNealy's right, that could also explain Sony's resolution to not lower prices on existing PS3 inventory. While reducing the retail cost of systems that will be noticeably outmatched by their successors seems a gimme, Sony's not making any official moves. Instead, it's seemingly giving retailers the green light to do what they want.

"They want to maintain the brand value and the equity in the Sony name. They want to make sure Sony's not associated with a cheap box"

PJ McNealy

That, actually, makes some degree of sense.

"They want to maintain the brand value and the equity in the Sony name," says McNealy. "They want to make sure Sony's not associated with a cheap box. So putting in more value also lets them to keep the price up and allows them to charge $60 for AAA titles."

Sony is certainly leaving money on the table with its Superslim PS3 pricing decision - and in doing so is giving both Microsoft and Nintendo a chance to gain market share. For Nintendo, that's an opportunity - though for Microsoft, it might be less of one.

The reality of the situation is we're at the end of this console cycle. Despite all the rhetoric of a 10-year life cycle the console manufacturers are spouting, the majority of systems are likely already sold. And the value buyers that are still fence sitting, waiting for a $99 system, might help boost lifetime sales numbers, but they don't dramatically impact the bottom line, since they typically have a fairly low tie-ratio.

As for the core gamers? They might ooh and ah over the redesigned PS3, but with new systems from Sony and Microsoft looming on the horizon, they're not going to do much more than that.

"This is not a price cut, it's a product introduction," says Pachter. "It's not like people are going to say 'I'm going to take my 160 GB PS3 and upgrade to one that's 250 GB.'"

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Latest comments (23)

Jim Webb Executive Editor/Community Director, E-mpire Ltd. Co.9 years ago
The Games division took a loss last quarter and with the Yen projected to drop from 77 to 70 against the USD, it makes a lot of corporate sense for them to keep the prices where they are. Hence we've not seen a Vita price drop either. Simply stated, they can't afford it.

It's a bad deal for consumers but Sony needs it. You don't want to move into a new console generation with losses already taking place.
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Michael Revis Writer, NerdReactor.com9 years ago
Only thing I'm concerned about, is where the flying fuck is the backwards compatibility?
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Spencer Franklin Concept Artist 9 years ago
@Michael Revis

This...if they had included backwards compatibility (as with the first gen ones) I'd actually consider buying this. as is, I don't see a single thing to make me want this.
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Jim Webb Executive Editor/Community Director, E-mpire Ltd. Co.9 years ago
If they can't afford to lower the price of that, they're doing something very wrong
Yes and no. What they wrong was make an expensive console to begin with which forced them to take heavy losses early on. But now the exchange rate has dropped from 110 to 77 yen against the USD meaning they make far less money per PS3 sold (if at a profit) or far more losses (if sold at a loss). So their ability to reduce costs in the foreign markets has not held up with the longevity of the console and this means they have to make as much profit on it as they can.

They may also still be taking losses on the PS Vita and software alone is not offsetting those losses. They have to make it up somewhere.
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Daniel Hughes Studying PhD Literary Modernism, Bangor University9 years ago
I'm with Jim. With Vita sales (software and hardware) underwhelming, declining PS3 and PSP sales, difficulties across practically every division of Sony, and a yen that continues to strengthen against the dollar, euro etc, Sony's hands may be completely tied. Sony and Nintendo's approach to pricing hardware will continue to be tied to the fortunes of the yen for the forseeable future.Let's not forget that the PS3 cost up to $800 per unit to manufacture at launch, and pushed Sony into multiple billion dollar losses. If the PlayStation division has a chance to recuperate some of those losses in order to secure long-term viability at the sacrifice of short-term market-share gain, then a price cut cannot, and indeed should not, happen right now.

Sony are acting with one eye on the future. It might blunt their ability to combat the Wii U's launch (would a PS3 price cut even draw in the kind of consumer buying a Wii U at launch? I doubt it), and it might leave Microsoft able to shift more 360s, but the last thing Sony need is to get drawn into a price war with its competitors, especially two competitors with effectively deeper wallets. A price cut for the struggling Vita is needed far more than a cut for the PS3, I would think, and healthier finances in time for a PS4 launch is more important than expanding an already significant PS3 base this Christmas.
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Brandon Hofer Editor in Chief, Totally Gaming Network9 years ago
The introduction of PS3 Slim 2.0 is a really bad decision on all fronts. The PlayStation Vita has been a complete failure so far and I don't say that jokingly. I own a Vita and think it is a great piece of hardware. Sadly Sony doesn't seem to know what to do with it. They botched E3 as far as the Vita is concerned and now at TGS instead of trying to build some excitement around the Vita they decide to parade around a brand new PS3 unit. It simply blows my mind.
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Jim Webb Executive Editor/Community Director, E-mpire Ltd. Co.9 years ago
Andrea, how does not lowering the price piss off a user base given that user bases are the people that already own said console? Why would someone be mad for a comapny not lowering the price of something they already own?

If you mean potential owners, then maybe. But those are late adopters. And late adopters aren't likely to be your PS4 early adopters so whatever perception they have right now of Sony not dropping the price probably won't mean much 6-8 years from now when they become late adopters again.

Would it help them gain market share against the X360? Probably some. But it's far too late in the game for that matter at all. None. The install bases are at a saturation point where it's irrelevant if one sold better one month over the other. Publishers are going to support both.

I wouldn't be surprised if they held this price until just before PS4 launches...if not even a little after.
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Aric Norine Animation, Next Level Games9 years ago
This redesign probably exists because Sony is updating the internals with more cost-effective chips. This move might actually increase their profit more than a small increase in market share. It also sets them up for more deeply discounted hardware in the future if they need to drop the price.

This is Sony planning ahead, plain and simple. The worst thing they could do is keep their current (more expensive) model and drop the price (and kill their profit).

Edited 1 times. Last edit by Aric Norine on 21st September 2012 7:34pm

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Andrzej Wroblewski Localization Generalist, Albion Localisations9 years ago
Hey, Suony... the time of corporations enforcing profits on customers isn't here yet. In fact, it'll never be here. Go play some Ferengi fantasy RPG while you go bankrupt.
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Jim Webb Executive Editor/Community Director, E-mpire Ltd. Co.9 years ago
I think you misunderstood my question. You said, "Is the risk of pissing off a good portion of your user base worth anything you can gain by not lowering the price of your six year old technology in a cheap plastic box."

The key term in that statement is "userbase" A userbase is the group of people that already own your product. So I ask again, how does not lowering your price piss off the group of people that already own your product?
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Jim Webb Executive Editor/Community Director, E-mpire Ltd. Co.9 years ago
But that's hardly enough to harm corporate perception in the face of needing to ensure profits to even survive.

Sony as a company is losing money, badly. If they don't start making money where they can they have to start selling off or closing off company divisions. Would you prefer that to happen?
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Jim Webb Executive Editor/Community Director, E-mpire Ltd. Co.9 years ago
And with that, I think we are in complete agreement.
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I too want a better Sony.
Their marketing and PR needs a overhaul though - has poor timing or doesnt capitalize enough on its hard ware products to the right consumer.
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Jamie Knight International Editor in Chief, Playnation9 years ago
Their PR is one of the worst in the business. Uppity 'full of themselves' and downright hostile and rude. They still think they rule the roost and its the days of the PS1 and 2.

hopefully these are the wake up calls needed to remind these muppets that they need us as much as we need them?
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Paulmichael Contreras Contributing Editor, PlayStation LifeStyle9 years ago
"It's not like people are going to say 'I'm going to take my 160 GB PS3 and upgrade to one that's 250 GB.'"

Oh Pachter, you say the silliest things. There are plenty of consumers who think exactly like that! I would have liked to see a price cut, but Sony's much more than just games, and many of its divisions have seen better days. Time for PlayStation to pick up the slack, I suppose.
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Jamie Knight International Editor in Chief, Playnation9 years ago

"...but Sony's much more than just games...."

no, no it isn't. we are talking about the gaming division here, and I hate to break it to you but Sony, its PR, its management , its 'official' supporters and fanboys have dragged this fine company down to nothing more than a bottom feeder. A "sega in waiting "

this latest " con-slow" is nothing more than portable piece of plastic crap but without the screen. PSN is a joke, PS Home is the favourite haunt of the paedophile, your community for online multiplayer is wrecked by hackers, spammers, glitchers, lag switchers, modders, thieves and pirates. ( and don't get me started on the bad joke that is PS Plus. )

It has been systematically stripped of every endearing feature that was the original consoles selling points.

but what do Sony do? " aah thats okay, just update the store and let them spend more we are finished with this gen anyway "
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Andrew Jakobs Lead Programmer 9 years ago
@Jamie kinght: I really wonder where you get all the crap you've been spilling here. Yes you seem to know everything so well even though you're full of crap.. especially commenting on PS home being a favourite place for peadophile is so low that I can't even take you serious and with that also your whole gamesmediapro site seems to be one big joke and seems only to have some texts to justify all the advertisement and usertracking.. and let's not forget the nonsense you spill about the online community, the 360 scene is much worse, let's not forget that it isn't easy to hack a PS3 (unless you have a unit that's still at 3.55 or lower, which is almost impossible to get, especially from a store or if you have a progskeet or similar device, but those also don't work with all versions), whereas the 360 is still easily hacked..

The PS3 isn't doing badly, it's almost at the same ammount of units as the 360, and that's with being a year (and a half in most countries) later on the market with a price that's much higher (and I'm not including the RROD for the 360 as the PS3 has also it's problems).. To me that says something, hmm more expensive and later and yet has almost the same ammount of units out there at this point, to me it says that the PS3 isn't doing bad...
And also you have no idea what Sony really is expecting from the PSVita, it's still selling even though it has a high price..
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Klaus Preisinger Freelance Writing 9 years ago
I can only speak of the German PR department of Sony, which I never experienced being hostile or rude. Not uptight at all.

What is there to say about the PS3? Sony announced a 10 year plan, they try their best to stick with it in a world in which Apple has demonstrated beyond the shadow of a doubt that yearly updates to your platform are accepted by your customers and do not fragment the platform enough to cause a problem.

Replicating this Apple model of success is a challenge Sony is facing on an engineering level, not on a PR level.

Edited 1 times. Last edit by Klaus Preisinger on 22nd September 2012 10:48am

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Tony Johns9 years ago
the sad thing about consoles having newer models, is that they don't think about backwards compatibility, and the people who care about backwards compatible systems will buy the older used model instead of the newer model.

while the casuals will just get what ever is cheaper for them and once again, it is not going to be the newer models.

I would think that the hardware devs need to think carefully about who they market the new models of current consoles when the next gen is in full circle when they start having new models.
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Klaus Preisinger Freelance Writing 9 years ago
The PS3 has not been backwards compatible for the last five years, why would this be an argument now?

If you replace one custom chip (PS2) with another totally unrelated custom chip (PS3), then backwards compatibility cannot be maintained. Including the previous generation chip drives up costs, emulation only becomes really viable if you skip a few generations of processing power, not just one. Want to play your previous generation games? Use your previous generation piece of hardware. Complaints about too much computers and cable in the living room? Then asking for backwards compatibility is entirely missing the point as well. :)

Besides, the entire console business is build on "buy game, play game, throw away game, buy same game next year". It does not make financial sense to introduce backwards compatibility to a market which is relentlessly driven forward.
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Howard Parry9 years ago
A lot of the arguments here seem to be for the sake of being critical. No-ones going to be "pissed off" because a product they were thinking of getting is above the price point they want. They'll just ignore it til the next price cut. If they wanted the product to the point where they would be pissed off, they would have bought it early on.
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Nick Parker Consultant 9 years ago
A bit late to this thread but anyway...Sony has a business plan which we are not privy to but when it's a decision between market share and profitability, at some stage in all businesses, profitability must prevail. It can't drop prices across all devices so I am sure that the PS Vita will enjoy a price drop within the next 6 months. I see Sony as being the last to launch next gen so if it sees another 18 months to 2 years ahead before PS4, it must try to eke out this cycle.
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Rick Lopez Illustrator, Graphic Designer 9 years ago
I think at least a $30 price cut would help. I can understand SONY. The whole idea of streamlining the console isto save money on manufacturing costs. I think the smart thing would be to juice it as long as they can at the highest price possible to recuperate at least some of the money they lost at the beginning.

SONY's mistake was at the beginning by releasing expensive hardware from the get go. A lesson that they still havent learned from since apparently they did the same with PSP(UMD) and now the VITA.

SONY has made the same mistake, time after time, expecting a differant result. Hoping to make high prices on hardware a standard thing. SONY has failed each time.
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