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