Monday, July 06, 2009

Sony CEO shrugs off mounting pressure to cut PS3 price



Sony Corp. CEO Howard Stringer has shrugged off Activision's demand to either cut the price of the PlayStation3 or risk losing the Activision portfolio. Stringer spoke to Reuters about the threat issued by Activision CEO Robert A. Kotick:


He likes to make a lot of noise. (...) He's putting pressure on me and I'm putting pressure on him. That's the nature of business.


Reuters then asked Stringer about the logic of not giving in to the demands and cutting the price, to which Stringer mysteriously replied:


I (would) lose money on every PlayStation I make -- how's that for logic.


This statement is an odd one because Sony has lost money on every unit sold from day one and still is, according to Sony CFO Nobuyuki Oneda. Referring to the end of March, Oneda stated that Sony still subsidized each console sold with around $42.

I contacted the author and editor of the article to verify how and why the word ´would´ was added. This is the reply I received.


I think you can use the story without the word "would". It was probably added in the editing process in an attempt to clarify the quote, which was "I lose money on every PlayStation I make -- how's that for logic."


So what did Stringer mean? Was he self-critical of his company's business model of subsidizing consoles? Confronted with the assertion that there is no logic in not cutting the price, did his reply insinuate that there is already no logic in Sony's business model of heavy subsidies? Please discuss.

The pressure on Sony to cut the price is certainly mounting. Only days ago, the CEO of Tecmo Koei, Kenji Matsubara, chimed in on the debate in an interview with CVG:


Whenever I discuss this with Sony reps I always ask them: "Please cut the price", but I don't have a clear view on Sony's situation. Yes, from a publisher's point of view we would welcome a price cut for PS3, and we are waiting, definitely.

It's definitely a way of boosting the PS3 market, but it's Sony's strategy and I don't know their cost structure. Sony introduced cutting-edge technology in the PS3, that's why people in the industry accept that the PS3 cost is so high, but we'd welcome a price cut.


In 2007, Ubisoft CEO Yves Guillemot and Square Enix president Yoichi Wada were the first to criticize Sony's pricing and marketing strategy, respectively.

Sources: Reuters, CVG
Thanks to: idahoblue, Some Guy

41 comments:

kolt said...

I think the whole "We loose money on every console we sell" is pure marketing bs.
Maybe they lost money 3 years ago, when they launched.
But today all used components will only cost a fraction of the price they cost 3 years ago, so I bet they are making good money with every console sold.

Falafelkid said...

Hey Kolt.

Wow, have I got a guilty conscience for not getting in touch earlier, especially because you launched your cool new music video platform.

Today all used components will only cost a fraction of the price they cost 3 years ago, so I bet they are making good money with every console sold.

Sony's CFO pretty much confirmed that they were still losing approximately $42 on each console at the end of March in Japan. They were also losing up to $300 on each unit sold at launch according to reliable estimates. So it's not unlikely they are still losing money today.

M. Ferreira said...

Sony put themselves into a very familiar position - they tried to go too big, too fast. They figured that, with the Blu-Ray endorsement, they'd sell the consoles left and right.

However, with the world economy in a slump, nobody's buying Blu-Ray. The medium only has a 7% adoption rate in the market (as opposed to the "loser", HD-DVD, which actually had about 10% adoption rate when Toshiba pulled out). This hurts the PS3 because Sony obviously depended on movie sales, in addition to software sales, to make up the difference.

[Source]

Sony took a gamble on an emerging technology. While it paid off for Blu-Ray (kind of), it's still hard to call them successful with the PS3 when they're in last place and hemorrhaging cash.

I think it's safe to call the PS3 a business blunder in this light. :) Sure, it moved 20 million units worldwide... but they still haven't made a cent off a single unit sale.

Falafelkid said...

Hi M. Ferreira.

I think it's safe to call the PS3 a business blunder in this light. :) Sure, it moved 20 million units worldwide... but they still haven't made a cent off a single unit sale.

I agree. It's important to note that Nintendo moved only about 22 million GameCubes last gen. But at least they made money on each unit sold and they raked in plenty of cash with first party titles. Sony pretty much did neither. The little money they get in first party software sales and license sales from third parties is nowhere near enough to recoup the billions lost in research and development and especially console sale subsidies. I still think that it is far from certain whether Sony will dare to invest in a PlayStation4.

M. Ferreira said...

Quite true. The whole arms race between Sony and MS has really pushed the whole "razor and razor blades" business model to extremes. I'm honestly surprised that Sony's higher ups didn't take a step back and truly evaluate the situation; look at the charts and say "we're never, ever going to make it up if we sell this."

I'm inclined to agree on your predictions about a potential PS4. So far, we've seen two retail bombs in a row from Sony*. The board can't be happy about that at all.

*The PSP moved 48-ish million units, yes, but the system has a huge problem moving software. Developers are shying away as of late, as well.

Anonymous said...

PS3 FAILS!!!!!!

Sorry.
Most immature of me.

Falafel, great work.
You've obviously done your homework.
That combined with the insightful comments so far I just had to
bring some foolishness in here.


I do want the PS3 to do well
but it really doesn't look good for them.
I knew it once that I saw that Dragon Quest and Monster Hunter
hunter were going to Nintendo now.

http://kotaku.com/5310264/dragon-quest-ix-pre+orders-top-2-million-in-japan

So Falafel and co. I have a question.

I feel a lot of gaming sites are negative towards Nintendo.
Some reviews of The Conduit I find infuriating. It's not the score.
It's the general bias against the wii.
The common and insulting use of the term "Waggle" is now in common use at Kotaku.
A site I used to enjoy visiting.

Where and why is the wii hate coming from?
There are obviously many happy nintendo wii owners.

And does Dragon Quest/Monster hunter for Nintendo really spell doom for the PS3?

-INK STUD

The Man In The Mirror said...

@falafelkiddy
You got to face the man in the mirror!
;))

Anonymous said...

kolt ;; DREAM ON MY FRIEND PS3 AND PSP BLEED MONEY THAT IS FACT ONLY NINTENDO SELL HARDWARE AT PROFIT.....PS3 IS HARDLY CUTTING EDGE IN REAL WORLD TERMS BLURAY NOT SUITED TO GAMING AND FAST LOADING DUALSHOCK 3 GENERATIONS OLD AND CELL IS A MEAR INLINE NUMBER CRUNCHER NOT A GAMING CPU its all cell/bluray HYPE in console form to guessed yet CON THE COBSUMERS,,,into sony worship 0h look cell rocks cough oh look bluray has replaced dvd cough they used gamers to attieve there own agender NOT FURTHER ARE GAMING ENTERTAINMENT,,,FACT ONLY NINTENDO IS DOING THIS,,,,WAKY WAKY SMELL THE COFFEE GAMERS DO I HAVE TO KEEP SPELLING IT OUT ITS COMMONSENSE sony tried to bend us all over and shaft us all redraw with playstation brand power to gun to are heads bluray and playstation instead of download/solid state and computers and streaming THE TRUE FUTURE 0F MEDIA sony tried to UMD away flashcards solid state and mp3 and ipods with psp AND FAILED ps3 is the same failervin home console form IF SONY TRULLY CARED ABOUT GAMING WHY BLURAY AND CELL INSTED OF NEWER WAYS TO PLAY ANFVA TRUE LEAP FORWARD IN WHAT GAMING IS oh yes that was nintendos plan YET THERE SLANDERED FOR DOING THE RIGHT THING see sony for what they are GOD DAM U SONY FANS PLEASE WAKE UP

Anonymous said...

continued core/casual/bridge support for wii continued upping of wii graphics followed by a wii+(HD) say end 2010 or 2011 with HD and newer nunchuck wiimote continue wii support phase in wii+ support PRESTO PS3 SCREWED WAKY WAKY PS3 ZOMBIES.......

kolt said...

hey falafelkid,
no problem, we're both busy being fathers I guess ;)

Still, nobody will ever see the bills that Sony gets from its suppliers.
So nobody will ever be able to proove how much a PS3 costs Sony.
So we have to believe the Sony PR.
And of course they want to make us believe that the hardware is still more worth than it costs ;)

Anonymous said...

ps2 wasnt profitable untill its end years and guess what the ps3 has already lost more than ps2 ever made AND THATS SIMPLY HONEST FACT long loadtimes/dualshocks=NOT CUTTING EDGE

Falafelkid said...

Hey Kolt.

We have to believe the Sony PR.
And of course they want to make us believe that the hardware is still more worth than it costs ;)


True. However, Sony (or Microsoft, for that fact) don't really go public with the fact that they are subsidizing their consoles. While it might make good PR, it would also scare investors. That's why Sony hardly ever speaks about that. It's analysts who estimate how much the hardware components cost. You are quite right in suggesting that Sony may get far better deals than those analysts believe.

Anonymous said...

currently playing crises @ 480p max settings solid 60 frames LOOKS LUSH

OH I DIDN'T NO I NEVER I THINK I JUST DID I DID IT DIDN'T I

I JUST PROVED RESOLUTION IS NOT GRAPHICS

OH THE EMBARRASSMENT OF BEING A BRAINWASHED SONY/MICROSOFT FAN AND THINKING RESOLUTION IS GRAPHICS

480P GREAT GRAPHICS 16X AA @ 60 FRAMES IS NOT AS GOOD AS 25 FRAMES NO AA LOWER SETTING 1080P BECAUSE A RESOLUTION FANBITCH SAID SO


I LOVE BEING A SUPERIOR NINTENDO FAN WHOS A ACTUAL CORE GAMER NOT A HARDLY CORE PRETENDER COUGH X360 OWNERS COUGH PS3 OWNERS

AS IF LONG LOADTIMES AND OUTDATED CONTROLS ARE COUGH CORE

ROLLING MY INFORMED EYES AT THE MISS INFORMED

Anonymous said...

Wow, Nintendo fanboys have truly gone mad...

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Video Game Schwagger said...

I still won't buy a PS3, love my Wii.

M. Ferreira said...

indavao:

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Anonymous said...

yes, sony has had it hard this gen so far but out of all the systems i own i prefer my ps3 the most. Nintendo fanboys are pathetic this gen. They claim anyone who doesn't enjoy a wii is a casual gamer. That doesn't even make sense. People need to grow up and get along. Also, falafelkid, post the damn nibris article already.

M. Ferreira said...

Maybe you should rephrase that to "ALL" of the fanboys are pathetic this generation. I've seen just as much derogatory name-calling on all three sides of the yard. To single out just one group is fairly silly. Of course, fanboys in general are silly, as well. ;)

xbox revolution said...

i don't remember where i got this from, but i like this comment...

"sony is so bad at format wars that even if they win, they lose"

hahahahahahahahahahahah!!!

sony FTL!!

M. Ferreira said...

Thanks for proving my point, xbox revolution! ^_^

xbox revolution said...

im proud to be an xbox fanboy because we have sony by the balls.

we have better online, better games, and better core base. sony ain't shit compared to microsoft.

sony fanboys can go and die.

M. Ferreira said...

...proud to be a fanboy. Have to admit I've never heard a person wear that label with pride before, since it implies that the person is biased, arrogant, and for lack of a better word, childish. :)

Your comments are pretty much the typical fanboy posts, though. ;)

Me? I prefer to be called an "enthusiast." I own a 360 and a Wii, but I also would like to own a PS3 once the price becomes manageable. I prefer my Wii, but I simply cannot discount the amount (and quality) content on any of the three platforms. Of course, I'd gladly debate the pros and cons until the cows come home. ;) I abandoned my fanboy cap when the Genesis died in the early '90s.

Some Guy said...

Hi Falafelkid,

What are your thoughts on GamesCom in Cologne ( the successor to Leipzig Games Convention)? It seems this convention could turn out to be quite the event. With EA, Square-Enix, Microsoft (Lionhead), Konami and Sony all promising exciting lineups. Some in the Gaming media are even calling this event Europe’s E3.

Do you think GamesCom will live up to the hype?

Anonymous said...

im proud to be a xbox fanboy=STU-FUCKING-PID.....,

im proud to be a sony fanboy=STU-FUCKING-PID...

the xpad= d-pad,analog,buttons,rumble=STOLEN FROM NINTENDO,,,XBOX=POOR BUILD QUALITY,,,LONG LOADTIMES

xbox= d-pad,analog,rumble,buttons STOLEN FROM NINTENDO,,,SONY= LONG LOADTIMES,,,SONY=POOR BUILD QUALITY....

what im trying to say is this WHAT ARE YOU FANNING if what a gameconsole is isvset in stone by nintendo and nintendos controlsvarebalways best and there build quality and only nintendo EVOLVE THE EXPERIANCE and ALL CONTROLLER STANDARDS,,,then why fan sony or microsoft...

there concept and there controllers exists only because of NINTENDO so nintendo give you what today you take as granted a games console YOU FAN SONY OR MICROSOFT....

that in its self is just BIZZARRE...itbwould be like fanning maradona and wearing a brazil shirt as you do it INSANLY STUPID.....

NINTENDO IS D'game and everything in it.....,sony and microsoft are mear gate crashers to someone elses party i would neverbfan them as im a true CORE GAMER i embrase short or no loadtimes and evolving controllers i do not bash the same dualshock for 3 generations wait for dreadful loadtimes to end THEN GO ABOUT THE PLACE BIGGING UP POOR DESIGN POOR ANAOLG STICKS COPYING AND SONY BADGES..


monster hunter 3 = over half a million sold 1st 2 days of release...wii at 100k sold in a week 10x ps3 sales JAPAN ps3 is walking dead

Some Guy said...

PS3 Slim coming September for $299.

Link

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Free Wii Games said...

I still won't buy a PS3, love my Wii.

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WiiPoints said...

man how PS3 blows and fails hard. the wii and the xbox 360 are the way to go

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