PS3 Woes and Console Marketing

A recent article discussed the problems with PS3 sales and the idea that a $100 price cut would do little to boost sales against the Nintendo Wii or even just sales in general.

This article indicated that a $50 price drop would be insignificant and that a $100 drop in price for the PS3 would have minimal impact. At the end of the article it is noted that a $200 priced drop could have a significant impact, but that such a drop in price is not expected.

There are concepts; however, that are not discussed in the article.

The model for sales of the Microsoft XBox 360 and the Sony Playstation 3 is to sell the consoles at a loss and then after x number of video game sales per unit they would be flush and after y number of games sold per unit they would make money.

Employing this kind of logic to its end you find that in reality the price of the console could effectively be zero *if* you had the purchaser open a contract that they had to buy a certain amount of games over a specified period of time.

People could take it on and not buy any games and pay a higher than current price (nonsensical).
People could pay the same price with a contract indicating they will by at least 4 games over the next year. This is what Sony and Microsoft hope for anyway, so if they encode it like that it isn't a big deal and the higher price for the base model becomes justifiable - instead of a price increase (which technically it isn't).

For every rung on the price ladder - let's say $100 in price reduction, you have a contract level indicating that the user will buy x number of games over the next 2 years. You could take this all the way down to a price level of $0 for the console and the person signs a contract that they will buy 15 or 20 games over the next 3 years or something.

Listen, the reason people buy these units is to play the games. They want to buy the games. If you make them pay a hefty price for the console, they don't have much money to buy games. Buying a console makes little sense if you don't buy at least 1 game at the time of purchase. You might swing a few people to buy the Sony Playstation 3 while Blu-Ray players are still horrendously expensive, but this is a short-term win that doesn't really appear to be working anyway. The Nintendo Wii comes with a game, but in turn this just makes it easier for Nintendo owners to buy a game when they get the console and have 2 games to play.

The manufacturers want people to buy the games. The people want to buy the games, the only real limitation is the price of the consoles.

So, end console pricing immediately (if you need that kind of help, Nintedo is pretty secure at the moment in regard to pricing their consoles). Contract people to buy games for the unit to a good point where console cost would be absorbed completely. Hell, start up your own Game Club like the Science Fiction Book Club that I love to buy books from, overcharge for shipping, and offer specials on things that don't sell well and don't count them towards people's contracts to own their system!

These guys need to be inventive if they expect to keep this portion of their businesses alive.

Sony PS3 sales vs Wii

Sony has pitched a claim that their sales are brisk and that it is hard for them to keep PS3's on the shelves.

But this is totally untrue. Many people have been writing comments on articles indicating that the PS3 is easy to find in stores where people have difficulty still in finding the Nintendo Wii.

Sony released information today that came out in articles like this one - which indicates that they have overproduced Sony PS3s compared to what has actually sold.


The article states pretty clearly that Sony has produced 5.5 million Playstation 3s and sold 3.6 million. So, nearly 1.9 million Sony PS3s sit on shelves or worse, distribution centers that have not sold.

They have indicated already that they don't make money on selling the console so the money invested by Sony in these devices is more than the $600 price tag. So, at a minimum Sony has $1,140,000,000 in PS3s that have not sold. Check that folks, 1 billion 140 million dollars with of PS3 gathering dust in warehouses and store shelves somewhere.

This isn't the kind of thing you hear from Nintendo, who apparently missed their mark for sales because they couldn't produce enough of their game console. This is bad too, but not like Sony.

A lot of the articles out there say this was a bad year for Sony, but that things are looking up. We'll see. One of the main problems with manufacturing is cost of storage if you produce too much when demand is down. Currently, I'm sure Sony is being optimistic and continuing to produce more PS3s. But they are already 1.9 million units in the hole, and the number of units on hand will only increase unless sales really goes up.

The problem with supply and demand in this case is that Sony's supply is really high, but demand doesn't really appear strong. Typically this would mean that Sony's prices would have to come down (significantly) to encourage sales; however, since they already don't make money on the consoles, they really can't lower the price any more without cutting significantly in to features or digging a deeper hole for each console sold.