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Savings Experiment: Snow RemovalSony (NYSE: SNE) has one heck of a powerful video-game system in its PlayStation 3. In fact, I'm really looking forward to playing Resident Evil 5 on it. But Sony is having a tough time competing against Microsoft's (NASDAQ: MSFT) Xbox 360, as well as the system that no one can touch, the Nintendo (OTC: NTDOY) Wii. Forget that it has the Blu-ray, forget that it has the Cell processor. Right now, it has something that consumers just can't ignore: a pretty hefty price tag.
So, as we look into our crystal balls, do we see the chance of a price cut coming for the PlayStation 3? I think we see more than a chance. I think it may be a foregone conclusion. That's because I've read a news item that says Sony has succeeded in reducing the amount of money needed to make one of the high-end units.
Until recently, every PlayStation 3 reportedly set Sony back by about $690. Now, a little under $450 is required to create one of the consoles. It really costs a lot to make a PlayStation 3, and that's what's causing all the financial headaches for Sony's latest video-gaming ambitions. Not only does the company not make a profit on any of the units, the retail price of the console ($400 for the 80-gigabyte system) has arguably shifted consumers to the other platforms.
So, even though an investor might urge Sony to keep its pricing strategy the same and just enjoy the benefits that come with losing less money on each system produced, I don't believe there's really much choice here. Sony needs to pass the savings on to the consumer and hope that it can increase its installed user base as quickly as possible.
For the record, Sony denies that there will be a price reduction. My reaction? Sure, Sony, whatever. You better think long and hard about reducing the price at retail. I know it will hurt, but, fair or not, consumers just aren't in the mood at the moment to pay $400 for a video-game system.
It truly would not surprise me in the least if we hear of a decline in the cost to buy a PlayStation 3 by the summer. If that does happen, I won't be buying Sony, of course. Instead, I'd say that publishers like Activision Blizzard (NASDAQ: ATVI) and Electronic Arts (NASDAQ: ERTS) are the bigger beneficiaries. More PlayStation 3s in the market means more software-selling opportunities. We'll see what happens...
Disclosure: I own Activision Blizzard; positions can change without notice.
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Reader Comments (Page 1 of 1)
12-31-2008 @ 4:55PM
Tigre said...
I hope the rumors of a price reduction is true. I want a PS3 so bad but I can't lay down 399 + 150 for hdd upgrades + 50-100 for accesories. If the price was to be dropped to 299 or 250 then I would be able to finally get a PS3 and be happy. So I truly hope that the rumors are true.
12-31-2008 @ 9:12PM
Jammy said...
It will even cheaper in the spring as sony have said the cell and gpu will be shrunk again making them cheaper.you'll then see (big guess here) the slim version ready for very late 2009 or mid 2010,this will be sold at £150 and the fat Ps3 will have production halted.I think they would be wise to cut the price the day KZ launches,a month or two before the next chip shrinkage and make sure the price allows them to brake even,and steadily increase the profits as the years roll on,just like Ps2.
1-08-2009 @ 3:39PM
Carlos said...
I hope Sony cuts the price down of the playstation 3 in this early year of 2009 because I hear so many people complaining that the price is too high.
I bet you peolpe would be buying PS3's right if the price was cheaper and because so many good games are coming out soon for the playstation 3.Like Killzone 2,Imfamous and God of War 3.