How Sony is killing the PlayStation 3
In a recent interview with Videogamer.com, Sony managing director Ray Maguire told the publication that although the company is feeling pressure to reduce prices, it shouldn't be forgotten that Sony "has a business to run" and needs to "do the right thing" for its shareholders.
Maguire is obviously right on both fronts and makes two points that should be enough to make pundits and consumers satisfied. But then again, Maguire's comments smack of desperation and are a ludicrous departure from the gravity of the situation his company finds itself in.
I think consumers realize that Sony execs have a business to run and they need to do the right thing to ensure the company can stay profitable, but doesn't Maguire and the rest of the execs at Sony realize that doing the right thing isn't always keeping the price on the PlayStation 3 so high? Or doesn't Maguire and the rest realize that in order to do the right thing for its shareholders, Sony has a responsibility to be far more competitive and attempt to take control of the video game industry again?
Most consumers realize that's what needs to be done and I'm willing to bet that shareholders realize that too. Sony's responsibility as a public company isn't to "do the right thing." Sony's responsibility as a public company is to maximize shareholder value and a part of that requires the company to make the right decisions. So far, Sony hasn't made the right decisions with the PlayStation 3.
As I've mentioned before, products become successful through price differentiation or feature differentiation. Sony is losing on both counts. The PlayStation 3 is about $100-$150 more expensive than competing products in the market and the console isn't differentiated in any way.
Think about it: Microsoft has an online component that easily eclipses any other offering from its competitors. Nintendo has the Wii and its innovative style of game play. Sony has nothing that can differentiate on any significant level. Sure, some will claim Blu-ray will do it, but there's still little evidence to suggest consumers would pay more for a video game console for its Blu-ray functionality. For proof of that, look no further than current console sales figures--Sony is getting beaten handily each month.
Sony can try all it wants to prove it has the product and strategy in place to do right by its stakeholders, but I don't agree. The company has no other option but to reduce the price of the PS3 and make it a more competitive offering. If it continues to stick to its guns and claim that it needs to keep the price so much higher because of its responsibility to shareholders, I think it's doing them a great disservice.
If Sony really wants to do the right thing and address its issues, it needs to drop the price of the PlayStation 3. It's as simple as that. I know Sony will try to make a cockamamie claim that by dropping the price, it will operate at a loss and lose even more revenue, but let's be honest with ourselves: every single console maker sells consoles at a loss for a while and once it hits critical mass in its production cycle, it can operate at a profit.
Usually, that plan works. But when Sony shipped a console that was too expensive at the onset, it backed itself into a corner and was forced to maintain a price that's simply not conducive to growth. And now that component costs have dropped and Sony can afford to drop its price, it needs to. The game right now isn't about profits, it's about increasing its user base to eventually yield significant profits at some point in the future.
A lot can be said for being more competitive and making the smart moves that may damage the company's financial outlook in the short term, but become a source of great success in the long term. Unfortunately, by thinking about its financial condition in the extreme short term, Sony isn't doing what it needs to do to satisfy its shareholders in the long term.
The PlayStation name isn't what it used to be. And if Sony continues to make the wrong moves and hitch its future to a price strategy that makes no sense, the PlayStation 3 will sink into the realm of irrelevance and the entire PlayStation name could die.
It may sound extreme, but the way management is running Sony right now, it's becoming abundantly clear that that is a very real possibility.
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Don Reisinger is a technology columnist who has written about everything from HDTVs to computers to Flowbee Haircut Systems. Don is a member of the CNET Blog Network, and posts at The Digital Home. He is not an employee of CNET. Disclosure.
Sony is in trouble.
SOURCE 1: http://www.forbes.com/feeds/reuters/2008/10/29/2008-10-29T063126Z_01_T126558_RTRIDST_0_SONY-UPDATE-1.html
We're in a RECESSION. Can you not see that?
It?s a decent machine that plays 1080P HD Blu-Ray movies and plays games. Yes it?s expensive but you get a well built machine that has many functions and has a free online network.
It?s still selling well and it has some big name exclusives coming out this week and beyond, just 3 that are coming are LBP, Resistance 2 and then next year we have Killzone 2. All massive titles, all have hype and all have the ability to shift consoles, as those are the games that people want to get their hands on.
The Wii and 360 should sell more through the Christmas period but that?s a given because of the lower price points but don?t count Sony out just yet. Killzone 2 will set the benchmark.
I'm not trying to trash the PS3 -- I own one -- but your arguments don't paint the picture of a 180. They simply underline a slow, painful death for the console. Without becoming competitive in price, it doesn't matter how many whiz-bang features or pretty games it has. The reality is with the economy the way it is, $100 difference may as well be 200-300 dollars. People just aren't spending, and if they are, they're going to be a little frugal IMO.
$249 would be a great price. MGS4, who knows when it'll be released Killzone (remember this was supposed to be a launch title!) and the full version of Grand Turismo I'd buy.
Until then I'm happy with my Wii and PS2.
Sony needs to drop the PS3 price this christmas by $100 or they WILL lose the console war. Their choice, just as it was their choice to include Bluray.
Why should Sony cut the price if it's 1. Outselling the 360 worldwide, and 2. Is moving close to 17 million and closing the gap in the U.S?
Sony cannot drop the price at this point, otherwise it will hurt them financially. They are focused on making a profit, not outselling Microsoft.
And what the hell is wrong with you people? The PS3 was very expensive last year and now that it came down in price significantly, you're still complaining about the price.
Give me a break.
I'm sick of CNET and their ******** articles.
Sony will not win the war by ONLY offering Bluray. Unless the company starts with a reasonable price (which was reasonable AT THE TIME, it does not cost any more to produce a PS3 today than it did at launch). If anything Sony is pulling MORE profit now due to the depreciation in the technology that is going into the console.
Plus, a 90% decrease in sales is NOT reflective of the recession. While the recession may be a contributing factor, it does not account for the full 90%. Where do you think the rest of the loss came from? Maybe the unappealing price?
Things that make you go 'hmm'...
If Sony had every chance to drop the price, believe me, they would. But as of right now, it seems that they're losing money for each console that's sold. This is what I've been hearing. Sony has to please their shareholders, otherwise they go down the drain. And I still do not understand the whole 'The PS3 is still too expensive' argument when people these days are walking around with the most expensive sneakers, the most expensive phones, among other things.
At first, I agreed that they should drop the price but now I'm understanding why they're not doing that. If people are buying pS3's at this price point, then why drop the price? That would be SUICIDE, because Sony would lose sales once people wait for the prices to lower.
Believe me, if the PS3 was $599.99 as of right now, I would have said 'hell no, that price needs to come down'. But it's at $399.99.
I think Sony is focused on profit, not beating Microsoft. That would be a plus but profit is more important.
THEY'RE DOING FINE.
This doom and gloom crap was talked about when the PS2 came out as well.
I think it's time you media hacks tell the truth about how crappy the 360 is and how it isn't a real value. We've heard enough crap from you losers about how expensive the PS3 is.
this arguments are really awful. I do understand that for uninformed consumers the PS3 is only a toy and I will not deny that this is also a demographic Sony ins interested in. On the other hand, everyone else, knows the PS3 can do much more than just play games in the kids room and for all these people, who understands the value of the product, it is not overpriced, in fact it is cheap. Am I pushing a little by saying it is cheap? No, I'm not and I can easily show you why, look at the iPhone. It is as expensive as the PS3 and there are others in the competition that are cheaper and almost match it's features. On the PlayStation case, the competition is the XBox 360, and it lags far behind when you start matching features.
The problem here is not a matter of price, it is a matter of perception. Everyone who buys the iPhone, see the value in it, on the PS3 side, people compare it to a 360 and forgets it is also a Blu-ray player, a Media Center, a Linux capable computer and it doesn't have the hidden prices of WiFi adapter and monthly fee, plus it is compatible with the devices you already have at home like Bluetooth headsets, DNLA media devices, USB hard disks.
All Sony needs to do so articles like this keep popping up is make all these features more visible and well known.
What you and others fail to see is that the XBO360 was built for gaming 1st and foremost. The PS3 is technical comprimise between gaming and BLU-rAY movie payback. Gamers don't really care about HD movies or WIFI access or media centers. Most of them already have a pc. On top of that as a Linux computer the PS3 is lacking. There are celeron based PC's that eat it's lunch running Ubuntu. The free Online gaming will NEVER COME CLOSE TO XBOX LIVE just because it is free. If Sony attempts to match Xbox live feature for feature without charging they will lose even more money. If they try to pass the cost on to Game developers they will find fewer titles headed their way down the road. (Why spend more money to develop for a smaller audience?)
Sony had to cut the price of the PS3 before it was a year on the market. That is unheard of for any Successful Console. In hindsight they should have left BLU-RAY out of the ps3 but then they would have lost the battle with HDDVD. Of couse they may still lose the format war against standard DVD. In short Sony is in a no win situation right now and if Blu-Ray dosen't become the defacto standard of Movie media by 2012 they might have destroyed their most successful product other than the Walkman (Killed by Apple Ipod) for absolutely nothing.
Microsoft has brilliantly out manuvered Sony this time. Even with it's hardware problems The XBOX360 continues to sell not to mention that Microsoft has been making money on the system for about two years. Couple that with an attach rate of about 8 titles for system sold and the 360 practically printing money at this point.
Sony thought the PUBLIC would want the PS3 regardless of the price just based on the success of the PS2. They were willing to bet the farm on it and right now it looks they lost. The best thing they can do is accept their fate on the PS3 and ride out last place and reduce their red ink as much as possible.
Bottom line: Gamers do not see the PS3 as being so superior to the Xbox that it's worth the difference in price. This nagging little detail is just going to be exacerbated by the current economic situation. So all three companies are going to feel the sting, but Sony's going to feel it worst.
I'm not going to prolong my self here... but:
1 - Blu-ray was a great decision by Sony, it not only enabled the PS3 to be in the bleading edge of AV tech, but allows developers to make games that are larger in scale, footprint and graphical quality.
2 - The last quarter was the first one Microsoft managed to report earnings on it's gaming division.
3 - If you really think Media and Movies are not something gamers care about, you should go and focus on the Wii. It is the only console that has no multi-media features. As far as I know, Microsoft is putting a lot.. I mean a lot of effort in their digital videos and NetFlix deal (That already makes your argument invalid). The difference is that they sell these videos as HD but they fail to point out that HD for streaming has bitrates in the order of 6Mbps, while Blu-rays are about 45Mbps, this is directly proportional to AV quality (I guess the difference is very clear there).
4 - If WiFi is also not important, why would Microsoft have a device and a port specifically made for that device in their video game? I'll tell you. Microsoft has been in the consumer business for as long as 25 years and they are known by their very unfaithful tactics, what they did here is no different. It's a fact that most people do not have ethernet cabling in their living rooms, that's why you have all this WiFi routers in the market. As video games this generation rely a lot on the ability to access the internet, it was clear for them they could sell their product for a lower price and overprice the WiFi dongle, and if you don't want to see that, It's fine with me, just don't say it is unimportant, because it isn't.
5 - Last but not least, yes it runs Linux, and does it well. It's for sure better if you have a standard computer, but the feature is there and lot's of people make good use of it, juts look at the latest version of Ubuntu that came out yesterday... It supports the PS3 from day one.
So, don't try to make my argument into fanboyism, because it is not, I'm basing it on facts. Like the attach rate you are talking about, do you have any idea of when the data was collected? The PS3 had a huge problem in it's first year and it was the small library of games plus the bad ports, witch affected directly that statistic when it was released in the beginning of this year with data from 07. This is not an issue anymore and if you don't believe me, look at the numbers from EA, Ubisoft and Atari (Captain-Atari), you will see a very different picture forming.
On a last note I have to say YES, the XBOX360 rocks as a video game, it has awesome features, very nice interface and great games like Oblivion, Bioshock, Mass Effect, Call of Dutty 4, Gears of Wars, Fable 2, I just like the PlayStation 3, it's online features (browser on big TV rocks), Blu-ray, 320GB disk ($99 at any store) and it's exclusive games better. Now that Some of the XBox games have migrated over, it makes the PS3 even more attractive.
Cheers and spread information first, than your take on it. (That's what "journalists" should do, even in the comments of a blog)
fanboys are expected to be non-biased but as a journalist you should show thoughtfuless, integrity and balanced opinions.
your hatred for sony and blu-ray borders on two possible things: madness or brown-envelope pay-offs.
i don't hate microsoft since i own vista, xbox 1 xbox 360 and have countless other ms products. however, i believe ms messed up so many times (vista, rrod and xbox legacy support) but you never seem to criticise them but go all out war against sony. why? are you crazy or does microsoft own your soul? what has sony done to you for you to hate them so much?
if you are a real analyst then you will realise that the reasons why sony cannot cut the price of the ps3 are based on three things:
- sony realised it can't compete with microsoft in this credit crunch environment because it CAN'T afford to.
- euryen, usdyen and other yen crosses exchange rate movements in the past few months has blown sony careful budgeting out of window. sony is hugely dependent on the value of the yen. the strength of the yen has caused sony almost 2bio usd worth of profit hit,
- sony survival is at stake - just look at it's share price. hence the shareholder's comments. sony can't just keep throwing money at SCE because it has too many holes to plug in it's balance sheet. sony isn't just a games company. it's a bank, a credit card company etc etc.
your talk of sony needing to cut prices but really if you have one iota of knowledge about the differences between microsoft and sony then you will realise it can't do it just yet until it gets the manufacturing cost down further.
please learn more about how much money microsoft has and learn more about economics before drawing conclusions.
it is a shame that so many journalists like yourself manifest this generation. even equity analyst have nore integrity than yourself.
If C|Net disclaimer is accurate "Don Reisinger has no business relations, investments or affiliations with subjects he covers.", why would any respectable reporter write an article with very imprecise data?
If you check the sales numbers for the PlayStation 3 and the XBox 360 over 2008, you will see a different picture from the one presented by the article. This kind of attitude makes both C|Net and the author less trustworthy. Don't get me wrong, I love C|net and I care about it, that's why I'm pointing it out.
Be sure, Christmas 2008 will be awesome for the PlayStation 3, for the XBox and for the Wii.
Luiz out!
360 controllers are not IR dingdong. They use a wireless 2.4Ghz signal. And oh my... doesnt the PS3 have or had serious issues with the bluetooth controllers disconnecting? .....FANBOY!!!!
The PS3 definitly has feature differentiation over the XBox. In fact, the XBox is still actually more expensive than the PS3 for a lot of gamers who a. need a hard drive and b. need wireless internet.
How many homes do you think have wired networks where their TVs are? The fact is, Microsoft has done an excellent job with marketing and due to their easier to use architecture they've made a name in 3rd party titles. They had a one year head start as well.
The PS3 has been catching the 360 this year incrementally and will continue to do so. The war is price vs. capability and marketing puts spins on it going both ways. For Sony to recover they need to:
1. Dominate with 1st/2nd party exclusives
2. Reduce the price (not immediatly) gradually as they can afford to. The PS3 should be $299 by XMas 2009
3. Drastically improve marketing
Simple economics means they're not going to sell a ton at $399. The fact they are keeping pace with the 360 at a $100 higher price proves they have an edge when the price comes down.
Lastly, companies like EA and Ubisoft are showing greater profits on the Sony platform than they are on 360. In the end it should come down to 1st party exclusives, price and hype.
I have seen two things from this Don guy and both are so flat out lacking in logic that it amazes me CNET gives this guy web space. I could find a kid off the street who'd probably post more intelligent stuff than this dude. Sad....
Don's got a way of one-sidedly presenting information in a very opinionated way.
I subscribe to the RSS feed of Cnet news, and I can usually tell which articles are written by Don, just from looking at the title.
"How Sony is KILLING the Playstation 3"
"Why Sony needs to stop drinking its own Kool-Aid"
"When will Microsoft regain its identity?"
All his articles are extremely biased...I usually only read them to see him make a fool of himself.
He looks like a kid.
We writes like a kid.
And has the logic of an infant.
i still remember one article in which he mentioned that the Dreamcast should be brought back. HAHAHAHAHAAH!
like i said before, the guy probably is snorting coke, turning his brain into mush while typing away at his pathethic cheap keyboard.
First off Sony?s game division is showing profit. Sony as a company is reporting a loss. This has nothing to do with the PS3, yet you managed to spin it that way and come up with a few paragraphs. Overall, Sony as a company took a huge plunge in profits despite strong video game and flat panel TV sales. This plunge is attributed due to the increase in value of the Yen. However, company economics aside the most interesting news was in the game division report, which indicates a reduction in its operating loss by 60% year-on-year.
PS3 is close to breaking even. Learn to live with it.
You should change your name from Cnet to ?Xbobx please fix me? fanboy. Please kill yourself. Thank you for your tim
http://www.reuters.com/article/rbssConsumerGoodsAndRetailNews/idUSTKB00310320081029
You see $400(PS3 full featured with bells and whistles) or $260/$300 for an adequate enough system to start gaming with(XBOX 360 Pro, Best Buy prices for 20 and 60GB). Which would you get if you didn't research gaming consoles and were looking for a gift in this economy? Even if they did research, they may still decide the kids don't need a BluRay player. In this economy when people have stated they would spend less for the holidays, look at it from the average consumer view.
I think Sony should offer a holiday package of sorts. If they aren't going to lower the price, throw in some games or something. Something to get average consumers to spend the extra $100-$150 that they wouldn't have spent otherwise.
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by John Howell
October 30, 2008 1:11 AM PDT
- Sony has already lost the console war. If you think of branding, sticky take was won by Sellotape, MP3 players are now all iPods, and the PlayStation generation has grown up but game console are x-boxes, at least with all of the kids my son associates with.
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by juuken2
October 30, 2008 3:45 AM PDT
- ...You're a joke.
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Showing 1 of 3 pages (71 Comments)Here in NZ, $800 for the console alone is enough to stifle purchasing, and the new games are $120 each or more. It might be the cheapest blu-ray player you can buy, but who cares about blu-ray anyway. You cant rent many movies in the format here yet. The region encoding means I can't buy US or UK content from Amazon like I did with DVD when it came out (region free hacks were common), and I'm not going to drop $40-80 on a shiny silver platter that I then cant store on my network, or play on my iPhone, or stream to my xbox, or play on my Mac, or play on my linux laptop.
I was going to buy a PS3 just to use as a linux box in the lounge, but Sony block access to the blu-ray video playback when in another OS, and it runs linux slower than my G4 powered MacMini (which I bought second hand for half the price of a new PS3) due to the fact the PS3 doesn't have accelerated video drivers for linux, and not a lot of RAM.
They lost the console war.
This war is far from over.