Analyst: Price cut could do more harm than good
by Jem Alexander 
{ May 24th 2007 at 9:00PM }
Michael L. Savner, an analyst for the Bank of America, has made it clear that he sees Sony's current position as a lose-lose scenario. While the rumoured $100 price drop would be welcome, Savner argues that it could be too little too late. The Xbox 360 would still be cheaper and the drop in price would not be enough to get the fence-sitters to topple over into Sony's camp. To top it off, Savner argues, the PS3 exclusives library is looking thin in comparison to the 360's. With GTA IV and Devil May Cry 4 becoming next-gen neutral, there's nothing drawing people to the PS3 that they can't get elsewhere. We at PS3 Fanboy believe that the recent Sony Gamer's Day says otherwise.Savner goes on to say that a $150 to $200 dollar price drop would make the system much more attractive, having it fly off the shelves. The downside would be that Sony's earnings would drop dramatically as they're already losing money on the system with every sale at the current price. We're glad we have these analysts to tell us these things. There's no way we would have come up with that on our own. Drop the price, sell some consoles, lose some money - it's genius, really.
The crux is, Sony is going to lose out either way. What it needs are strong, system selling titles. Some sort of marketing for Blu-Ray might help, as well. As the BD drive is what makes the console so expensive in the first place, it makes sense that Sony should take the time to explain to their consumers how great a piece of technology it is. Sell Blu-Ray, sell the PS3. Kind of like 'save the cheerleader, save the world', but less apocalyptic.
Read the full analysis over at GameDaily.com and let us know what you think.
Reader Comments (Page 1 of 1)
mccomber @ May 24th 2007 9:18PM
I think at this point we have an analyst predicting just about every possible future for all the systems.
K.T.P.S.3. @ May 24th 2007 9:25PM
doesn't the "elite" lol, with the hd-dvd player on the side lol, cost about $50 more than a ps3 right now?
Matt B @ May 24th 2007 9:39PM
As of update 1.8....
The PS3 is completely worth the money. I feel that I stole it for $600.
Trust me.
mccomber @ May 24th 2007 9:47PM
I've got to agree with Matt B, the fact I can stream media (and do it from my Mac), upscale my PS2 games, and as soon as I decide to go ahead and make hdmi a part of my life, upscale my DVD collection... damn. Now if I could get my hands on some of those ps3 games from the future, I'd be set and a half.
sonicyouth @ May 24th 2007 9:58PM
Yeah, the war is so over! Microsoft has sold all of like 5 million 360's! -end sarcasm-
Xiru @ May 24th 2007 10:05PM
Well I may not be an analyst, but I've been gaming a long time and I know what I want. The PS3 is everything I could want in a video game machine. If Sony drops another $200, it would really wreck the xbox 360's chance at domination, of course MS could just drop the price of the premium. I own all 3 systems and the PS3 is my favorite because of its features and future. All Sony needs to do now is hurry with those exclusives and drop the price so my friends can buy one. Out of 5 of my friends, 4 said they will buy one when the price drops. The other is such a Wii fanboy that he thinks the PS3 is a "bad product" lol. Expensive maybe, but far from bad.
John @ May 24th 2007 10:03PM
This is an interesting phenomenon, but he is only looking at it from a certain perspective.
There are a lot of informed people who have been following ps3, just waiting for some excuse to spend the money.
Those people have been reading AVS, and with this latest update, a number of them will buy.
A number of other people will buy who had ps2's but were on the fence. They're going to get it now because it has upscaling.
This is a tricky thing, but this current update alone and the word of mouth surrounding it (just Google ps3 news) will be enough to sell some systems, right there.
More will sell when the new games come out in fall, regardless of a price drop.
He's right in the sense that Sony cannot afford a price drop because any hit they take, Microsoft can just lower theirs, even more. They can afford that, and they would do that.
So if Sony made the move of price drop right now, it couldn't be enough... they could drop at max $100, then people are going to see xbox for $350, and get that...
No, they need to stay where they are. They are building slowly.
This recent activity shows what foresight they have, and what a great machine they've built.
PS3 owners are saying it's a tank. It doesn't overheat or burn up, it doesn't scratch disks, there's no red ring of death, and it's getting rave reviews in the audio-video forums.
Acceptance will be slow, but it is happening.
I think it would be foolish of them to lower the price before holiday '07 barring some catastrophic disenfranchisement, but I don't see that happening.
People have been waiting to buy one, keeping their eye on blogs like this, and now they're ready-- so this summer will see new adopters who were just waiting to see if Sony was sturdy, and they have proved that they are a hardware company. They make a great product.
massive_98 @ May 24th 2007 10:29PM
Can you blogstarters stop posting these news articles about so called analysts?
Not everything can be compared with a bussiness school education.
Sony needs to do some underground marketing to save the PS3. How about a pro lets go PS3 song instead of the undeducated PS3 song floating around YouTube.
Last I checked 1473218 people have watched that video.
Thats over a million potential customers lost.
naruto007 @ May 24th 2007 11:58PM
have anyone really think about this
console wars started since MS enter the gaming market? everyone knows MS and his viral marketing? dont get ir wrong i think the 360 is great except for the hardware errors but MS like a company sucks hard.
yeah years back they were small fights between consoles but not so dirty like now.
Champloo @ May 25th 2007 12:57AM
Erm, who hasn't known that the PS3 is in a lose-lose situation financially? I've known since the product was announced. They lose money if they sell the console, and they lose money if they don't. Then if they drop the price and it sells, they lose even more money. And if they drop the price and it doesn't sell... they lose even more.
The key, as most people know, is games. The PS3 has, and needs... great games. They need to make costs back with said games, but along with the cycle they're trapped in above, they're also trapped in a second cycle: the system needs games to sell the console, but 3rd party developers don't want to put games on the system until it's selling.
The only thing that can help Sony is time, since eventually costs on hardware will be reduced, hence the 10 year plan. But the problem with that is twofold; first of all they need money to continue production in the first place, and if they don't sell they won't last ten years. And second of all the competition are on 5 - 6 year plans. Half way through the PS3's lifespan Nintendo and Microsoft will be releasing their next next-gen consoles.
I wish the best for the PS3, it's an incredible piece of technology. But based on those two cycles alone things don't look great. However, if the console does fail/die/etc, and that's a huge if... Sony is a strong enough company that they'll come back swinging a short time later.
So yes, they are potentially losing billions of dollars. The things is, Sony is a multi-billion dollar company, and is one of the market leaders in just about every market field possible (movies, music, electronics, and so on), so should anything bad happen, they can easily afford it.
Next-Gen-Gamer @ May 25th 2007 2:45AM
Funny that he says "Long live" when referring to the 360. Sweet, sweet irony.
Eric @ May 25th 2007 2:50AM
Blu-Ray is pretty much the only thing going for it right now. BR is a superior format to HD, at least IMO. I've pretty much stopped buying HDs. BR is just that much better. But in EVERY other way, the 360 is superior. GT5 is coming, as is home, and those will help. But at $600, $500, or even $400, gaming-wise, it's just not currently worth it. I mean hell, one of the best games on the system is a PSP port...
bootsielon @ May 25th 2007 3:19AM
" Long live the powerful and affordable 360!
USA is a 360 nation. Accept it."
USA voted for bush, so what can you expect?
Stellarpimp @ May 25th 2007 3:36AM
@19
And that I'm ashamed of... *sobs*
langx @ May 25th 2007 6:41AM
Savner goes on to say that a $150 to $200 dollar price drop would make the system much more attractive, having it fly off the shelves.
This is what I have been saying they need to do.
Having all those PS3's on the shelf does not help your bottom line either. I'm sure it hurts more because you don't have any money coming in. Again, it's sitting on the shelf. The fan base is still there but I have not seen a must game that's going to make a bunch of 8th graders mom spend $700-$800 (extra stick, a few games, tax) on a video game system when they have a PS2.
Being able to stream music from your Mac along with this update will not make people run out and spend $600. Have you seen Gas prices.
Are U serious.
They have to lower the price in a major way.
Sony will have to bite the bullet.
They better do it before Halo hits and MS decides to lower the price on the 360. If MS puts out an updated 360 this fall thats runs cooler with a price cut Sony can forget it.
It will be welcome to Dreamcast land.
ConteZero @ May 25th 2007 6:52AM
Sony is doing fine.
3 Mln console sold, and PS3 came a year after XBox360 (stalled @ 10Mln from some time).
Games aren't coming this fast, but they'll come for september, just in time to kick Halo 3 (wich is the only "worthy" X360 title on MS lineup) ass.
GL @ May 25th 2007 7:01AM
"We're glad we have these analysts to tell us these things. There's no way we would have come up with that on our own. Drop the price, sell some consoles, lose some money - it's genius, really."
LOL! Great commentary, Jem Alexander. Really! :) Why is it this so-called analyst, Michael L. Savner, seems like he just woke-up yesterday after a year slumber? He telling us the things that the average PS3 gamer already knows.
p0tempkin @ May 25th 2007 8:30AM
As of January 2007, 17% of the estimated 110 million US households had HDTVs.
So 17% of US households *might* give a sh1t about Blu-Ray and upscaling enough to consider dropping $600 on a PS3. In reality, monthly sales in the US during April was 82,000 units for the PS3.
Meanwhile, the other 83% of US households who don't have an HDTV don't care about Blu-Ray or upscaling. The lower priced XBOX 360 and Nintendo Wii seem like better options at less than half the PS3's price. Which is why in April the Wii sold 360,000 units and the XBOX 360 sold 174,000 units.
No amount of software is going to change the PS3's fate. Only a hefty $200 price cut will increase sales. Either way, the PS3 will be in 3rd place for another year or two.
Brian Spence @ May 25th 2007 1:57PM
They're blowing it with the marketing thing. I saw that Burger King has a promo where Sony is giving away lots of things with the Spider-man movie. Guess what they're NOT giving away? A PS3! Damn it, they even use the same font.
James @ May 25th 2007 10:47AM
How is this for a price cut?? FREE!!!! At CompUSA, through tomorrow, May 26th, if you buy a flat-panel HDTV (which are all on sale) they will give you a FREE XBox 360. Check it out on CompUSA's website. So all of you PS3 fanboys that want to play good games now can do it for FREE!!
massive_98 @ May 25th 2007 11:08AM
Yay...I just got my Wii. So much fun! I love playing Resistance on my PS3 though.
Grindstone @ May 25th 2007 2:32PM
I think the situation is obvious, and some of you have hit upon it; Sony is in a "damned if we do, damned if we don't" situation.
You can criticize this analyst all you want, but you know the core message is true; no matter what Sony does, they will still lose money. They don't have any stellar games out, and MGS4 and FF13 have been pushed back to 2008. Most games coming out can be found on other, cheaper systems. And since the PS3 debut, consumer prices on goods -- from gas to milk and postage -- has gone up. Dropping $600 large (plus game, controller, etc.) is becoming more problematic.
The sooner you realize the financial quagmire Sony has, the sooner you will realize that Sony has serious problems and that the hegemony of the PlayStation brand is nearing it's end. Not out, not done for, but not the leader.