According to Bank of America's Michael L. Savner, a price drop on the PlayStation 3 later this summer or fall would likely not be enough to stimulate sales of Sony's console significantly. Moreover, he believes that the weak PS3 sales and continued shift towards Nintendo's Wii could have "adverse implications" for publishers.
Think on this, Microsoft may be close to making money on the Xbox 360 if they're not already. They've got an Elite in the field now to help equalize the competition with the PlayStation 3. Now, consider a PS3 $100.00 price drop and think about Microsoft's response to such an event.
Microsoft has two possible reactions:
- Indifference
- Price cut
They can choose the path to indifference because their product would remain lower costing and highly competitive in the market. They can do this because Sony cannot capture enough exclusives to make a big difference. Secondly, they have Halo 3 coming down the pipe and the hype is building with the reality of the public beta.
Sony can talk about awesome exclusive titles but Halo 3 became tangible the moment the beta opened. Now potential buyers are extra hyped for this holiday season. On top of which, the game title is being released in September--two months before gamers expectations.
Enter Nintendo. Nintendo makes top sales month after month and game developers can see a huge potential in titles for the Wii. First, they can produce titles that look last-generation which requires less energy because the technology is a bit dated. That means a development team can be a bit smaller and produce a game that utilizes the Wii remote thus making the title exclusive to the Wii.
Why develop an exclusive title for the PS3? If you sell 20% of those titles to customers you'll do okay, but what if you sold 20% of your title to the Wii customer base? That's naturally going to mean more sales figures to report to your board of directors who, in fact, love money.
The price cut would simply cause the PlayStation 3's losses to extend further into the future and make recovering that money harder while still being more expensive than all your competition. It doesn't make much sense.
Savner noted that Sony made a number of mistakes. Consumers are far more price sensitive than they anticipated; consumers are wary/indifferent to Blu-ray (a main driver of the PS3 cost); and Sony didn't have enough compelling exclusives at launch. To make up more ground, he thinks Sony would actually need a $200 price cut, but doesn't see that happening.
Does this mean the PS3 is doomed to fail? No, not really - it just means we can expect the PS3 to lose out in sales to that of the Wii and the Xbox 360 in North America. Really, it means Sony has to work as hard and as intelligent as possible to fix the sales issues and get on track. That means awesome exclusive games and top notch third-party titles.
The PS3 isn't expected to make a huge profit for years, Sony knew this when they invested in it. The big struggle right now will be to keep third party developers interested in developing on the platform without leaning more towards Xbox 360 and the Wii.
"Offsetting a potential price cut are decreasing production costs, which should improve significantly this year. We estimate that the loss per console could decline to about $50, assuming Sony does not cut its wholesale prices. Bottom line, we don't expect Sony to make up meaningful ground against the Wii this year."
source: businessweek
