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.'"
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.
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.
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.
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.
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.
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
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?
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?
Their marketing and PR needs a overhaul though - has poor timing or doesnt capitalize enough on its hard ware products to the right consumer.
hopefully these are the wake up calls needed to remind these muppets that they need us as much as we need them?
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.
"...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 "
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..
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
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.
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.
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.