Sony Focusing on PS3 Profits and Not Market Share


Posted March 20, 2009 - By bleahy

Sony Focusing on PS3 Profits and Not Market Share

With everyone and their mother predicting that Sony will drop the price of the PlayStation 3 soon, SCEA's senior vice president of marketing, Peter Dille, went on record to explain why we might not see a drop anytime soon.

"I think it's already well publicized that we have a very clear objective from our parent, Sony Corp., that we're to focus on a profit objective, and with those marching orders it limits the playbook when it comes to pricing and promotion. Our competition had a very aggressive pricing strategy, but they also were packing two, three, four games in with the unit weekend to weekend with different retailers, and that cost a lot of money. So we had a profit goal and they had a market share goal. We've had a very successful year; we had record revenues across our three platforms last year, and our PS3 business was up 40 percent, notwithstanding the tough climate. So we've really focused on changing the conversation away from price and trying to communicate the value inherent in the PS3."

Consoles usually take some time to become profitable, especially if they sport cutting-edge technology like the PS3's Cell processor and Blu-ray drive, but I think Sony might not be looking at the situation the right way. Profit is great, don't get me wrong, but market share is extremely important. It ties into the attach rate (average number of games purchased by a console owner) and even influences which consoles developers will focus on.

We've seen several classic PlayStation franchises go multi-platform during this generation with Final Fantasy, Spyro the Dragon, and Crash Bandicoot. The low point of entry is important in growing a console's installed base and increasing the amount of potential customers for software. Microsoft is selling you a razor, which requires everyone to go out and get more razor blades. Sony is selling you a really expensive electric shaver... and we all know which gives you a better shave. Metaphor burn!

Dille continues:

"We also have to work hard to gain our consumers' trust and make them comfortable that when they buy a PS3, it's going to stand the test of time. The fact of the matter is we're the only console manufacturer that's ever launched a product that's had a 10-year life-cycle. And we've done that now not once, but twice. One of the great things about the PS3 is that if you buy it today you can be confident it's going to be the centerpiece of your entertainment for the next 10 years. Economically, that's a great value."

I have no doubt that the hardware in the PS3 is future-proofed enough that the console will last 10 years, but I absolutely don't see it as the centerpiece of my entertainment. Blu-ray is great, but I'm not ready to re-buy my collection in 1080p. In fact, I'd much rather spend my money on games than build up my Blu-ray collection. I have Netflix to rent movies and they ship Blu-rays. Speaking of Netflix, I find myself streaming movies and TV shows to my Xbox 360 much more frequently than watching Blu-rays on my PS3.

With these tough economic times, how are consumers looking at the PS3? Peter Dille thinks that "when people start doing the apples-to-apples comparison, and see what PS3 can do, and see the value of Blu-ray, and what free online and free wi-fi with a hard drive in every box really means, it resonates." How about throwing in an HDMI cable or at least component? For me, that is worse than not including a hard drive or wi-fi. Let's sell an HD system without the cables to make it HD!

Yes, the PlayStation 3 packs more into the box for the money you're spending on the console, but do consumers even realize what they are buying? Remember, we aren't just talking about hardcore gamers that know the specs of each console and how much Xbox Live costs. In fact, I'm willing to bet that most buyers don't even know that Xbox Live or PSN exists. So when someone goes to the store and looks at the PS3, Xbox 360, or a Wii (if it's in stock and they happen to be a grandma....), they look at the price. Also, just so you don't think this is all PS3 bashing, I laugh when people say the Wii is the cheapest console and then start buying extra Wiimotes and Nunchuks. That starts getting into PS3 price territory. It's an interesting observation about consumer practices. I guarentee that if Nintendo sold the Wii with an extra Wiimote and Nunchuk for $310 they would move a lot less at retail.

Why do you think the hardcore PC market exists mostly online and is a custom-built industry? People aren't walking into a retail chain dropping $3,000 on a top-of-the-line PC. Those stores sell $400 eMachines and maybe something approaching $1,500 if it's mid-level. The mass-market doesn't want top-of-the-line. They want something that will play some games. Right now, that's the Wii and Xbox 360.

Furthermore, this is why I don't really feel like Killzone 2 will be a system-seller. Let's look at the reality behind the "system-seller" title. Wii Fit is a system seller. Halo 3 is a system seller because it snags the franchise fans. It's a bit different in Europe where Killzone is a hit-franchise, but it isn't exactly a household name in the US. The commercial is impressive, but $460 to get a game is steep. An Xbox 360 exclusive can be had for a $260 point-of-entry. The Wii comes in around $300, depending on the price of the game.

Bottom-line... Sony needs to drop the price of the PlayStation 3 and soon.


Sony Focusing on PS3 Profits and Not Market Share


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