Sony’s PS3 Pricing Strategy – Insanity?

MaxPower July 17th, 2007

For those of you who haven’t been following the PS3 pricing strategy debacle, let me catch you up.

Last year before the PS3 debuted I wrote an article right here on the hallowed pages of Reading for New Times. In it I discussed how I thought Sony’s “luxury pricing strategy” was, to be blunt, insane.

Some quotes from that article:

Will Sony be able to make up that head-start in console sales? Well a lot of it depends on the PS3’s price point. Sony has been pretty conceited (and defensive) around the expected PS3 price (US$599, C$659, A$999) with a “if we build it, they will buy it” mentality. Check out this quote from Ken Kutaragi (President/CEO of Sony Computer Entertainment):

“Is it not nonsense to compare the charge for dinner at the company cafeteria with dinner at a fine restaurant? It’s a question of what you can do with that game machine. If you can have an amazing experience, we believe price is not a problem.”

Sony’s seeming ambivalence around its price point is either a huge mistake or a stroke of genius in that gamers will pay up for both the PS3 system and its follow-on games. I have racked by brain trying to come up with an analogy to this situation (a company expressly ignoring price as a consideration in rolling out a new product) and I am honestly having a tough time. Sony’s conceit is amazing and it will be interesting to see how it plays out.

For those who don’t know, it played out with Sony getting a royal ass kicking at the hands of the Wii.

Sony has all but admited that the price point was too high. So along comes the speculation of a price cut, but does the Sony brass admit that? July 6, 2007 “July 6 (Bloomberg) — Sony Corp., the world’s biggest maker of game consoles, said it has no current plans to lower the price of the PlayStation 3. “We have no immediate plans as of now” for price cuts, President Ryoji Chubachi said today in an interview in Tokyo.”

Then literally two days later – whoops, $100 price cut in North America on the 60GB PS3 version to $499. Then one week later (that would be today), Sony says – well actually the $100 price cut? That is more like a “clearance sale” as once the old 60GB PS3’s are gone you’ll only be able to buy the new 80GB PS3 for $599! What a great deal!

A company spokesman said Sony would sell the $500 version until “supplies of that unit are depleted,” estimated to be months after the August debut of the new, pricier model.

“We have ample inventory to meet the immediate needs of consumers in this territory for several months to come,” Dave Karraker said in an e-mailed response to questions.

“We won’t be making any further announcements regarding our PS3 model hardware strategy in North America until the 60GB model is exhausted and market conditions are evaluated,” Karraker said.

Link

So if I am Sony what do I do. Discontinue the 60GB PS3 at $499 in August, sell the “new” 80GB PS3 for a couple months $599 and then cut its price to $499 in time for Christmas? What a stroke of pricing genius. Insanity I say.

I’ll say it again: “never have I seen a company expressly ignoring price as a consideration in rolling out a new product.” This’ll be a business school case study on how not to create a pricing strategy.

  • D4V

    Side note to this.. I hardly ever even touch my xbox 360.. I just don’t feel compelled by any of the current games out there..

    Is there any good games out on ANY of the platforms right now?

  • Grfxguy

    Forza 2. And I don’t even have a 360.

    I am waiting with anticipation for our god, Will Wright, to finally release Spore, which is supposed to be sometime in April next year. Everything else (except for Halo 3 for some people) is moot.

  • D4V

    Isn’t Spore gonna be for PC?

  • Grfxguy

    Yup. It will be glorious :)

  • MaxPower

    Sony Corp. currently has no plans for a further price cut to its PlayStation 3 (PS3) game console following a $100 cut in the U.S., the electronics conglomerate’s president said on Friday.

    “We’ve announced the price cut in the U.S and have no additional plans beyond that at this time,” Ryoji Chubachi told Reuters on the sidelines of a gathering of business executives in Shizuoka Prefecture, central Japan.

    We all know what that means! Price cut on Monday!!!

    http://www.reuters.com/article/ousiv/idUST20825520070727

  • D4V

    Hah.. I also heard that the 360 is expected to shed about $50…

  • Add the iPhone to the list of products that were insanely mispriced.

    $599, no wait, $399 oh and for all of you SUCKERS out there who bought one in the first 3 months we’ll throw in a $100 Apple gift card so you don’t feel so royally screwed.

    Price point people! Don’t price your product too high! Apple just pissed off legions of its most-hardcore cultish buyers (well maybe not, they’ll worship at the Jobacle even out 200 bones). $200 is worth it for 3 months of feeling cool right? Right?

  • Man. Ok. Quote from me on July 17 2007:

    “So if I am Sony what do I do. Discontinue the 60GB PS3 at $499 in August, sell the ‚Äúnew‚Äù 80GB PS3 for a couple months $599 and then cut its price to $499 in time for Christmas”

    Quote from Sony’s press release TODAY – Oct 18

    “The company also announced that effective immediately, the current 80GB PS3 model will be available in North America for $499 (USD/CND), $100 below the original launch price.”

    To recap, Sony has a 60GB PS3 for $599. Sony cuts the 60GB model to $499 and introduced an 80GB model for $599. Sony then discontinues the 60GB model. 90% of PS3 sales continue to be the 60GB model until it runs out of stock. Then Sony cuts the 80GB price to $499 once all the 60GB models are sold AND introduces a new 40GB model for $399!

    Sony! WTF! You should have just priced the original thing at $399 and be done with it. You realize that you just screwed over the people who were buying BOTH the 60GB and 80GB units for the past 3 months? People were buying the 60GB model for $499 and if they waited they could have got the 80GB model for $499. And people were buying the 80GB model for $599 but if they waited they could buy it for $499? Way to go.

    So now we have a 80GB at $499 and a 40GB at $399. I am calling right now that within 6 months the 80GB will be $399 and the 40GB will be $299. And the Xbox 360 + Wii combo that I have recommended from the start will STILL be kicking Sony’s price point confused ass.

  • Actually I just noticed – in Canada? Price drop of $160 bucks to $499 to bring it in line with the USD price.

    That’s the loonie for ya.