Official PS3 Price-Cut Possible?

Edgewise · Jan 31, 2007

Took from www.psxextreme.com

It's no secret that the cheaper Xbox 360 and Nintendo Wii are seeing better performance in sales largely due to their price-tags. The gaming populous has repeatedly stated that the number-one reason why they won't be buying a PS3 is because it costs an upward of $600. Now after constantly denying any thoughts of a price-cut, word from Sony has just come that a price-cut is actually now being considered for the console.

In an article with the Associated Press, Sony Senior Vice President Takao Yuhara spoke about the possibility of a price-cut stating: "Pricing is among the factors Sony Corp. is studying as it expects to break even in its money-losing gaming business next fiscal year." He continued with: "We may look at the price as part of our strategy to expand the market when the timing is right."

But perhaps the most intriguing of the comments made is that Yuhara-san mentioned that the plan of Sony breaking even by next fiscal year actually includes various financial factors, and a price-cut is one of them: "Such factors, including price cuts to some extent, are factored in [the break even plan]."

Pretty exciting stuff. While a price cut anytime soon will probably upset the first millions who bought the console -- a planned cut just around the Fall season would give Sony the holiday boost it needs. It would be in Sony's best intentions to make the price-cut worthwhile or perhaps offer a free controller or game if the price-cut isn't any more than $50.
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http://www.psxextreme.com/ps3-news/760.html

xhardc0re · Feb 2, 2007

Sony has three major problems in regard to the PS3
1: cannot produce enough systems for demand worldwide
2: not selling HW as fast when they get to the stores
3: game sales are not as good as expected

It's no secret that retailers want the systems that sell the fastest. Because they need to sell games. Games = $$$profit
That is where the real money is made, on game sales. A typical retailer like Target/Walmart might only make 5-10% profit on the sale of the HW. But on games, it makes 100% profit. If the game is selling for $60 they actually paid $30 to the distributor. Minus their cost to get it to the store, they have a huge profit on game sales. Don't quote me on accurate percentages but anyone in retail will tell you that game sales = $$$$.

Sony needs to fix #1 on their own; HW/SW sales will not effect how fast they can produce systems. #2 can be fixed by a price cut, but not much. There has to be demand for a system for it to sell. Unfortunately, demand for the Wii is much higher than PS3. Not because of the price tag. Nintendo also has incredible factory resources & if Sony battled them on price they'd just bump production up. The PS3 cost much more to make then the Wii. Nintendo could financially wound Sony for many years if they cut the HW price and then Nintendo responded by cutting their own price. Nintendo also has deep 1st party resources; they could increase the license fees to developers for a short while to recoup the price cut & not have to worry about losing games.

Sony has themself cornered on #1 & #2. The gamers (that's us) decide how #3 will go. Just because we own the HW doesn't mean we have to buy the SW that goes with it.

Expect Final Fantasy XIII & Metal Gear Solid 4 to boost game sales way up. But that's still atleast 7-8 months from now.

What will Sony do in the meantime?

Nintendo has 3-4 A+ titles coming out before Summer from 1st party & SquareEnix/EA/Ubisoft have another 4-5 games. That's not counting Konami/Capcom/Namco or any of the other companies.

Other than Sega (Virtua Fighter 5) and EA, I think Sony is SOL on game sales until atleast Summer 2007. If any of them were to be delayed...

canuckerz · Feb 3, 2007

I hope sony holds off on the price cut for a bit until the manufacturing cost of the ps3 goes down, because it seems like the price cut is an act of desparation and I dont want to see sony dig their own grave.

Edgewise · Feb 5, 2007

i think that they should go ahead with this. Sony has enough money, they aren't in trouble and couldn't be in trouble, i mean, it's sony. They are raking in loads of money from all the other things they make. I think a price cut would not only set the ps3 winning the war in stone but would also help Blu-ray win it's war, even tho i personally think the ps3 is worth it's current price but thats besides the point.

inmate347 · Feb 5, 2007

Well, the better cut the price now. It's a very simple, yet vital strategy to not even mention a price cut until the day the price drops. Stupid move by Sony, they've killed any hope of stronger sales until the price cut.

xhardc0re · Feb 5, 2007

Bring out more/better games. $ony could always decrease the license cost to developers for a short time & then cut the console price once enough games are being sold. Remember, no games = no reason to buy a system

blacGoku · Feb 6, 2007

The race to 65nm Cell (already confirmed btw)

There have always been game consoles that competed directly against each other for sales, market share, and third-party support. Today, the battle is very much between Microsoft's Xbox 360 and Sony's PlayStation 3, with Nintendo opting to play a different kind of game with the Wii. As the 360 and PS3 are closely matched in terms of performance and the types of games they play, the winner may be the company that reduces the cost of their platform the fastest.

One of the best ways to reduce manufacturing costs of any high-end electronic devices is to use a die shrink, where a more fine-grained optical process allows more transistors to be packed into the same area. In the case of a game console, the same number of transistors can be delivered in a smaller area and with lower power dissipation, lowering the cost of manufacturing the console by lowering the cost per-chip and cutting down on the amount of active cooling needed.

For both the 360 and PS3, the big move is from a 90nm process to a 65nm one. Sony indicated in a recent press conference that the company had already started production of parts of the PS3 chipset on a 65nm process. Microsoft had previously announced, along with its manufacturing partner Chartered Semiconductor, that the Xbox CPU would be moving to 65nm Silicon-on-Insulator (SOI) technology in the first quarter of 2007, although there are rumors that this migration may not be complete until the second quarter.

How much could each company save by this migration? A report in the Chinese-language paper Commercial Times estimates that Microsoft could reduce the cost of the CPU, northbridge, and GPU on the 360 from about $200 to $150 with a 65nm migration. The research firm iSuppli estimated that the total bill-of-material (BOM) cost of the Premium Xbox 360 is down to about $323 from $525 at launch, which would significantly help Microsoft's margins.

iSuppli puts the BOM cost of the premium PS3 at $840, which means Sony is losing as much as $240 on each unit. A similar component price reduction from the move to a 65nm process would lower this loss to under $200 per console.

If Sony completes the transition first, it will allow the company to execute the much-rumored price drop on the PS3, which can't come soon enough for Sony's flagship console. The PS3 sold well out of the gate but sales have tapered off as the non-early-adopting public waits for more compelling games and a lower sticker price. As for the 360, it has sold moderately well so far, with Microsoft estimating 10.4 million units delivered to retailers, but if Microsoft wants to maintain their lead over the PS3 they will likely have to drop their price as well. Microsoft has been coy about discussing any 360 price drops, although they did once say that consumers could expect one cut per year.

It is worth noting that Nintendo also benefited from process shrinks with the Wii, although their strategy was to take similar technology from the GameCube with more modest improvements (a higher clock speed, mostly) and gain the cost benefit of the die shrink right away. So far, their gamble has paid off, as Wiis continue to be in short supply.
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this could mean good news for both systems for sooner price cuts

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