Analysts criticize Sony Japanese PS3 price drop

Or: Bliggy and his sockpuppets go into spin overdrive:

http://www.next-gen.biz/index.php?op...864&Ite mid=2

Analyst: PS3 Price Cut 'Ridiculous'

Analysts are already criticizing Sony for cutting the PlayStation 3's
price in Japan before launching the system, suggesting the move may be
premature.

ImageYoku Ihara, head of equity research at Retela Crea Securities told
Bloomberg, "It's ridiculous to decide to cut the price before they
start selling the PlayStation 3. They may cut the price again if sales
don't go well."

Sony cut the price of the 20GB hard drive-equipped PS3 under heavy
criticism that the system was too costly. The company reduced the price
from just over 60,000 yen ($516) to 49,980 yen ($430). Japanese
retailers will determine the price of high-end, 60GB PS3s.

The price reduction is limited to the Japanese market.

Naoki Fujiwara with Shinkin Asset Management added that the cut "is
negative for the short term because the company may not be able to sell
enough consoles to cover an instant loss caused by the price cut."

The PS3 is set to launch November 11 in Japan.

Sammy Moulden wrote:
Or: Bliggy and his sockpuppets go into spin overdrive:

http://www.next-gen.biz/index.php?op...864&Ite mid=2

Analyst: PS3 Price Cut 'Ridiculous'

Analysts are already criticizing Sony for cutting the PlayStation 3's
price in Japan before launching the system, suggesting the move may be
premature.

ImageYoku Ihara, head of equity research at Retela Crea Securities told
Bloomberg, "It's ridiculous to decide to cut the price before they
start selling the PlayStation 3. They may cut the price again if sales
don't go well."

Sony cut the price of the 20GB hard drive-equipped PS3 under heavy
criticism that the system was too costly. The company reduced the price
from just over 60,000 yen ($516) to 49,980 yen ($430). Japanese
retailers will determine the price of high-end, 60GB PS3s.

The price reduction is limited to the Japanese market.

Naoki Fujiwara with Shinkin Asset Management added that the cut "is
negative for the short term because the company may not be able to sell
enough consoles to cover an instant loss caused by the price cut."

The PS3 is set to launch November 11 in Japan.

It is not the NUMBER of console sales that will get Sony profitable
with the console. It is the amount of SOFTWARE they sell. To say they
have to sell more consoles to make a profit, is like saying to make up
for loss per unit, you need to increase volume.

- Richard Hutnik

wrote:
Sammy Moulden wrote:
Or: Bliggy and his sockpuppets go into spin overdrive:

http://www.next-gen.biz/index.php?op...864&Ite mid=2

Analyst: PS3 Price Cut 'Ridiculous'

Analysts are already criticizing Sony for cutting the PlayStation 3's
price in Japan before launching the system, suggesting the move may be
premature.

ImageYoku Ihara, head of equity research at Retela Crea Securities told
Bloomberg, "It's ridiculous to decide to cut the price before they
start selling the PlayStation 3. They may cut the price again if sales
don't go well."

Sony cut the price of the 20GB hard drive-equipped PS3 under heavy
criticism that the system was too costly. The company reduced the price
from just over 60,000 yen ($516) to 49,980 yen ($430). Japanese
retailers will determine the price of high-end, 60GB PS3s.

The price reduction is limited to the Japanese market.

Naoki Fujiwara with Shinkin Asset Management added that the cut "is
negative for the short term because the company may not be able to sell
enough consoles to cover an instant loss caused by the price cut."

The PS3 is set to launch November 11 in Japan.

It is not the NUMBER of console sales that will get Sony profitable
with the console. It is the amount of SOFTWARE they sell. To say they
have to sell more consoles to make a profit, is like saying to make up
for loss per unit, you need to increase volume.

- Richard Hutnik


You're gonna have to think this one through a bit more mate

wrote:
It is not the NUMBER of console sales that will get Sony profitable
with the console. It is the amount of SOFTWARE they sell. To say they
have to sell more consoles to make a profit, is like saying to make up
for loss per unit, you need to increase volume.

Nope. The bottom line is Sony needs to sell TONS of consoles, I mean
tens of millions, to start coming close to even breaking even. That's
why the price drop was stupid, it only helps fuel sales for the cheaper
model which at 20,000 untis will sell out in a blink of an eye anyway.
Actually at launch both SKU's will sell out fast, so a price cut was
way premature. All Sony is doing is cutting into their revenues.

Tom wrote:
Nope. The bottom line is Sony needs to sell TONS of consoles, I mean
tens of millions, to start coming close to even breaking even.

Actually what I meant by this is they need to sell millions of consoles
over many years, to start breaking even as manufacturing costs and
component costs start to go down and they start realizing economies of
scale.

It's true that today at the current cost of manufacturing the ps3,
selling more consoles means more total losses but as they sell more
consoles the loss per unit decreases some.

Tom wrote:
Tom wrote:
Nope. The bottom line is Sony needs to sell TONS of consoles, I mean
tens of millions, to start coming close to even breaking even.

Actually what I meant by this is they need to sell millions of consoles
over many years, to start breaking even as manufacturing costs and
component costs start to go down and they start realizing economies of
scale.

It's true that today at the current cost of manufacturing the ps3,
selling more consoles means more total losses but as they sell more
consoles the loss per unit decreases some.

The base components Sony buys is going to have to hit large enough
scale also to drive the cost down. BUT, the profits in the videogame
business is NOT from the consoles sold, it is from the games on the
system. Even if Sony sells, say 5 million or so PS3s in 2 years or so.
If they don't sell sufficient amount of games, they don't make money.

Increasing the amount of consoles only makes this worse. Like, if
people buy the PS3 as a cheap BluRay player, and don't buy games, Sony
bleeds themselves financially to death.

Getting the number of consoles out there is a critical piece, but it
alone isn't going to cut it.

- Richard Hutnik

On 23 Sep 2006 06:18:39 -0700, "Tom"
wrote:


Tom wrote:
Nope. The bottom line is Sony needs to sell TONS of consoles, I mean
tens of millions, to start coming close to even breaking even.

Actually what I meant by this is they need to sell millions of consoles
over many years, to start breaking even as manufacturing costs and
component costs start to go down and they start realizing economies of
scale.

It's true that today at the current cost of manufacturing the ps3,
selling more consoles means more total losses but as they sell more
consoles the loss per unit decreases some.



But you missed the point. All current console hardware is sold at a
loss, even the venerable PS2 and Xbox. And of the new contenders, only
the Nintendo Wii is likely to come close to break-even or even make a
profit before the product is replaced by some successor. The real
money for the console hardware-producers come from the huge per-copy
license revenues on the software. Why are games for the new consoles
up to 30-40% more expensive than the identical game on the PC ??

Console-hardware === LOSS LEADER

So the need for volume in the console business is primarily driven not
by hardware manufacturing cost-of-scale ( which does help of course,
but relatively slightly), but by the number of new software titles
purchased by the owner of each machine. No hardware, no software
sales, no software profit to help offset the hardware losses and
generate net revenue. For the console manufacturer to break-even on
his hardware losses, typically 6-10 new titles need to be sold per
machine at hardware product introduction. In the case of the PS3 at
introduction that number is certainly likely to be at least 10 for
Sony to make any sort of profit at all.

John Lewis

"John Lewis" wrote in message
...
On 23 Sep 2006 06:18:39 -0700, "Tom"
wrote:


Tom wrote:
Nope. The bottom line is Sony needs to sell TONS of consoles, I mean
tens of millions, to start coming close to even breaking even.

Actually what I meant by this is they need to sell millions of consoles
over many years, to start breaking even as manufacturing costs and
component costs start to go down and they start realizing economies of
scale.

It's true that today at the current cost of manufacturing the ps3,
selling more consoles means more total losses but as they sell more
consoles the loss per unit decreases some.



But you missed the point. All current console hardware is sold at a
loss, even the venerable PS2 and Xbox. And of the new contenders, only
the Nintendo Wii is likely to come close to break-even or even make a
profit before the product is replaced by some successor. The real
money for the console hardware-producers come from the huge per-copy
license revenues on the software. Why are games for the new consoles
up to 30-40% more expensive than the identical game on the PC ??

Console-hardware === LOSS LEADER

So the need for volume in the console business is primarily driven not
by hardware manufacturing cost-of-scale ( which does help of course,
but relatively slightly), but by the number of new software titles
purchased by the owner of each machine. No hardware, no software
sales, no software profit to help offset the hardware losses and
generate net revenue. For the console manufacturer to break-even on
his hardware losses, typically 6-10 new titles need to be sold per
machine at hardware product introduction. In the case of the PS3 at
introduction that number is certainly likely to be at least 10 for
Sony to make any sort of profit at all.

You do know that Nintendo turns a profit, right?

John Lewis wrote:

But you missed the point. All current console hardware is sold at a
loss, even the venerable PS2 and Xbox. And of the new contenders, only
the Nintendo Wii is likely to come close to break-even or even make a
profit before the product is replaced by some successor. The real
money for the console hardware-producers come from the huge per-copy
license revenues on the software. Why are games for the new consoles
up to 30-40% more expensive than the identical game on the PC ??

Console-hardware === LOSS LEADER

John, the Gamecube shortly made a profit after release. The Wii is expected
to from the start. The PS2 made a profit about two after it's release. I
don't think the Xbox ever has.

wrote in news:1159032936.973656.115270
@k70g2000cwa.googlegroups.com:



Increasing the amount of consoles only makes this worse. Like, if
people buy the PS3 as a cheap BluRay player, and don't buy games, Sony
bleeds themselves financially to death.

Devil's Advocate
Perhaps Sony will factor in sales of Blu-Ray discs when calculating
the overall profitability of the system?
/Devil's Advocate

--

Aaron J. Bossig

http://www.GodsLabRat.com
http://www.dvdverdict.com