You know, you are probably right, as that is exactly what Microsoft did this past holiday, with the price for a premium 360 in the UK now only £289 with PGR3, Live Arcade (the boxed game), and an extra wireless controller. I think it is fair to say that Microsoft have certainly 'attempted to improve the perception of value by bundling in games, Blu-Ray movies, or peripherals (or some combination of the three)', don't you?

£425 is the retail price of the PS3 in the UK, and I expect that many retailers will move this to £399 very quickly, they will be forced to as £399 is just so much more acceptable, and at that price it is very comparable to the 360, in terms of features.

I actually believe that both Sony and Microsoft are in a tough place. Sony has had to spend a fortune in R&D and turn a very profitable business into an unprofitable one, and this is off to a shaky start, and Microsoft have been in the console business for 5 years and are still losing millions of dollars. I am not sure how long Microsoft shareholders will accept that kind of return.

You can't answer this question, obviously, but I wonder how much Microsoft is viewing Sony as no longer competition on price. If Sony is the main price competitor, then the Xbox360 won't need a price drop until demand slackens considerably, or until the PS3 drops in price. But if Microsoft is now viewing Wii as the price competitor, then there will be a strong impetus to drop the 360's core unit to or below $250 soon.

Well said.

Your job gets easier everyday doesn't it?

i am sure there are still a lot of ways to reduce prices

- Delete HDMI for third SKU (one of main reasons how 360 kept its costs low

- 65nm Cell Broadband Engine Architecture (even though its difficult since yield is poor)

after all, i can't see why ps3 wont sell well, looking at exclusives and name value of playstation

it seems this blog is magnifying beyond truth

Very well said.

Sony also appears to have manufactured 1 million units for Japan, but sales have dropped down to about 25,000 per week in Japan. That means that they are sitting on inventory that cost more to manufacture than they make selling it (since they admit to selling at a loss).

It puts them into a really bad position, but that also can be dangerous to competitors too. They have too much inventory, and a massive short term price drop could solve that (at a huge cash flow loss to Sony). But, then they would have a significant market for their content sales such as movies, which in turn builds a want for the consoles.

The question is, does Sony have the balls to do this right, or will they sit on the fence? Right now they seem to be taking losses on each console to create demand for their HD content, but the losses aren't great enough to actually create the demand they need.

Plus, current movie content seems to be rented. So, Sony is boxed in a bit on the content side as well. Maybe people buy one or two bluray movies, but rent the rest. That has to hurt sales.

I think that if warehouse inventory outstrips retail inventory for an extended period of time, Sony will drop prices. Probably on short notice. So, maybe people would be smart to wait a month or two before buying the PS3 they wanted. Doing that hurts sales, which forces the issue.

Nintendo could probably increase their prices, and still sell out stock for the next few months. Microsoft seems to be doing decent sales, and is now (apparently) making a profit on each console. That sounds pretty healthy to me.

PS3? Healthy doesn't exactly sound like the word to use to describe the situation.

Gamespot is reporting by way of Kotaku that the Don Quijote chain in Japan is discounting PS3s on the basis of a build up of inventory. Not quite an official price cut, but it seems to give indication of supply beginning to temporarily out strip demand. The PS3 won't be easy to price reduce because the component costs are high even though they have already achieved such a high level of system integration this early on according to iSupply. According to iSupply's teardown, GPU = $129, Cell = $89, Blu-ray drive = $125, I/O bridge controller = $59 and RAM = $48. It will be awhile before you see the price of the GPU and RAM come down at least.

Sony could afford to reduce prices because they still have the tremendously profitable PS2. But I suspect that they simply want to maintain the PS3 as a (loss) brand leader while they make money on PS2. Although, this probably wasn't part of their original plan, the underestimated console demand price elasticity and are paying the price.

For a long and interesting discussion (at least to me!) on this subject and how it relates to the convergence of consoles and PCs see http://thunor.spaces.live.com/blog/cns!71C238B5E0E3724D!177.entry

LOL, about that Bridge......

I can't see the PS3 successfully making it through 2007 (let alone '08) without a price drop, considering I see great quantities of them sitting on store shelves when you can barely get a Wii. Sony better make the PS3 worth the price through games and updates or they're gonna have some problems.

"- Delete HDMI for third SKU (one of main reasons how 360 kept its costs low"

Isn't the 360 already HDMI enabled, or could be. But just doesn't have the port for it?

The PS3 doesn't come with the cable, so that can't be it.

I just don't see how it would save any money.

"after all, i can't see why ps3 wont sell well, looking at exclusives and name value of playstation"

What enticing exclusive is there for the PS3?

Name value doesn't mean much. As shown with the PSP.

Hehehe, you're headline might as well have read "Sony to Keep PS3 Sales Low".  I was in BestBuy this weekend getting a Wii, and saw 2 pallets of PS3's sitting untouched. I think that Sony is as out of touch this generation as Nintendo was last gen. I own every console made within the last 10 years except this one, I'm more about games and gameplay than any kind of fanboyish console devotion and I don't see anything that the PS3 brings to the table that is _new_.  Now, I'll go make some more mii's while I wait for MS to send back my fixed 360 :shakesfist:

Oh, and when will MS fix the part where I have to be online to play my purchased content after getting my xbox360 fixed?  

Name value of playstation is still incredibly high, you only have to read multiple comments by several posters on this blog just to take an example. For instance, in my country you never hear the word "console" on interviews, but you do hear a lot the word "playstation" up to a point in which they have come to share the same meaning (I can't recall I ever heard the word "xbox" on tv out of the official 360 commercial). Back to topic, I honestly couldn't care less about a 100$ discount on a ps3, but I wouldn't mind a 100$ (or bundled value) for a x360 in the near future (or, to be correct, soon enough before I buy it at its current price)

Gamespot is running a story by way of Kotaku that the Don Quijote chain in Japan is discounting PS3s.  While not an official price drop, it seems supply is currently outstripping demand.  This will probably change though once some better games drop.

Cost reduction on the PS3 will be tough considering the high component cost and the already high degree of system integration.  Do a search for iSupply PS3 teardown and check out those component costs (I tried to post the costs but I guess my post got filtered).  The GPU, I/O bridge controller and RAM are very expensive and so new, the cost of those parts won't come down for at least 6 months.

Ozymandias, my posts still seem to go into the vapor bin.

Re: "Ozymandias, my posts still seem to go into the vapor bin."

Can you email me your full comment text to ozymandias@ozymandias.com? I want to look at what you said and try to see why the spam filter might be catching it.

Sony is in such an erratic mode of operation right now that I hesitate to even speculate what they will do, but I think the timeframe you spell out is pretty reasonable. Given that Sony and Kaz, will not want to look foolish for pricing the system so high.

In my mind the best games coming out for PS3 are actually PS2 games, like God of War 2, and that is a serious problem for Sony. What is compelling on PS3??? Nothing this year... There's no Final Fantasy yet, no Kingdon Hearts yet, God of War 2 should have been moved to PS3. Given the software situation, Sony find themselves dealing with the success of the PS2 far more than they had expected.

MS took a lot of criticism for the manner in which the XBOX was put out to pasture, but in hindsight it was a smart move.

I would buy a PS3 for $500 if the stupid controller had rumble. I played Fall of Man and Motorstorm and it just felt soo lifeless without it.

Just so you guys know, about 10 posts got caught as spam this time around... so I tweaked some more settings. Hopefully we'll keep tuning this so it works for most people. If you posted earlier, your post should now appear here.

Yes, my post appeared, but it took out the paragraphing. Makes it a lot harder for my fans to read every word. :)

I agree with the lack of rumble is irritating comment.  It really does take something away from the games.

Sony's problem is that they didn't hit the ground running.  The coud do that with the ps2, there wasn't competition...especially because they had included a dvd player in their console.

This time around, competition is a problem.  If you're going to bring out the most expensive console of the three, you'd better be able to show why it's worth the extra cost.  They haven't, so the console is sitting on shelves.

OH well, looks like i won't be playing on a ps3 until 2009 or so then. But I always have my 360, and soon, a Wii.

:)

"I think that Sony is as out of touch this generation as Nintendo was last gen."

Was the Gamecube really that bad? Sure, sales might have been low. But is that because they made a bad console, or because they suffered from competition?

Competition it not always decided through quality of product. Look at the iPod. Just another MP3 player with some improvements in the UI. Yet, they gave it enough marketing where most people have one now.

I have equal games on the Gamecube and the PS2. Yet, I feel that the Gamecube is a much more solid console as far as the games go.

That's how I felt about the PSX. A lot of games, but most of it was filler.

"Isn't the 360 already HDMI enabled, or could be. But just doesn't have the port for it?"

Nope, 360 is capable of digital output but they don't have HDMI chip to output signals in digital. microsoft needs hardware revision to put hdmi chip into 360 to enable digial output.

I see.

Thanks for the clarification.

"Was the Gamecube really that bad? Sure, sales might have been low. But is that because they made a bad console, or because they suffered from competition?"

In fact GameCube was more profitable console than Micro$oft Egg$Boc$

;)

spinning a bit back on almost the same topic, there are rumours spreading on Europe about the euro launch of the ps3 with on the 599euro (776.543 USD - and you complain about the 600USD price...) price for the 60gb version, while the 20gb version might not be even available for the 23rd March supossed launch date.

I think its been said before, but even if they were planning on cutting the price next week they would still make this same announcement.  It makes no sense to tell customers to hold off a few weeks/months so they can buy it cheaper.  

Sure it may not be selling as fast as they want, but it still hasn't been released in Eurpoe yet.  After a few months of selling there , if sales don't pick up significantly then I'm sure we'll be looking at a Thangskgiving price cut like Ozy has suggested.

The 360 has no need to worry since they're already cheaper than their competitor, as the Wii is different enough (in graphics at least) to not compete directly, and to also warrant the extra $150 increase.