sunnysideup
Banned
If ms takes a hit. sony needs to take a hit.
Otherwise they will loose half of their market.
Otherwise they will loose half of their market.
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Why wouldn't Sony aim for a $399 PS5?
- Thread starter Sosokrates
- Start date
Golgo 13
The Man With The Golden Dong
The AMD hardware-test leak that predicted the specs of the Xbox Series X (which thus far makes it the most accurate and credible leak we have regarding this new generation of hardware) squarely put Sony’s machine at 9.2TF.
Again, it’s worth repeating that the production process makes it impossible to change any hardware components (aside from something small like adding some RAM or bumping up some clocks speeds) for these new consoles about 18 months before they’re scheduled to ship. There’s too many kinks to iron out. In other words, Sony can’t change their hardware to react to whatever Xbox is doing, it’s all pretty much set in stone And has been for awhile.
So if their machine is 9.2TF, you bet your ass they won’t be talking about specs. Will they still have killer games? Probably. But they’d better price aggressively if they’re not going to be competing on specs.
GenericUser
Member
I'm no expert, but I'd say it's currently impossible to build a 12 TF machine for 400 bucks. But they need to match microsoft, so I don't have a problem with them going up to 500 or even more.
daemissary
Member
Ok, sorry I don’t want to come across as a douche but I am a literal cost accountant so this is actually what I get paid to do for a living. And while I don’t know Sony’s specific internal data I can tell you that you are making some horrific baseline assumptions when you are calculating their revenue streams.
Firstly, the PS4‘s lifetime attach rate is very high for a console and it is only roughly 10 games...total not yearly. You assuming that the average PS5 consumer will buy 5 games a year is laughably high, it’s more like 2 at most and probably even less on average if you’re looking at a more price sensitive consumer.
Secondly, you can’t assume that 50% of new PS5 console sales will drive a new PS Plus user. The most recent data I could find shows that roughly 36% of PS4s have a PS Plus membership and not only that but many of your PS5 users will be migrating over from that service. If they drop the launch price and get people to buy a PS5 earlier, this is not an increase in revenue for them if the consumer would’ve been content to wait a year and play with PS Plus on their PS4.
You can’t just look at net revenue or gross margins in a vacuum...you need to look at those things against what you believe they would be given the alternative. Sony will never take a loss on the console at launch if they believe the alternative is selling the console for a profit to the price sensitive consumer at a later date when their costs go down and they can naturally lower price The math just doesn’t work. However, Sony could very conceivably take a loss on the console if they believe the alternative is permanently losing that customer to Microsoft.
sunnysideup
Banned
The first 10 million users are informed buyers. And not casuals. They have alot of money and its those who decide who wins the generation.
Sony does not release ps5 in a vacuum. They need to match What ms is doing
Sony does not release ps5 in a vacuum. They need to match What ms is doing
Zoro7
Banned
5 games a year is laughable? Lol what? Stopped reading after that. Good job "Cost accountant".
daemissary
Member
The PS4’s release date was Nov 2013, so it has been out for roughly 6 1/2 years and its attach rate is just over 10 games per console sold. So yeah, the average consumer is buying significantly less than 5 games a year.
Most people aren’t nerds on video game message boards like us.
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Bonfires Down
Member
Sony is in a good position so I wouldn’t take a loss if I could avoid it. Bundle a game instead and drop to $400 as soon as it’s possible.
Stiflers Mom
Banned
I would either go the console that sells 399 and is good enough, or pay more for crazy powerful.
But then it needs to be convincingly crazy powerful.
If what the XSEX shows off looks really better than what the PS5 delivers, lots of those first 10 million buyers will go the MS route, I think.
But then it needs to be convincingly crazy powerful.
If what the XSEX shows off looks really better than what the PS5 delivers, lots of those first 10 million buyers will go the MS route, I think.
Knightime_X
Member
Sony got people to buy a $400 console and then buy another $400 pro with trivial improvements.
Shouldn't have any problems with $500.
Shouldn't have any problems with $500.
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HaveButOneLife
Banned
Exactly what I've been saying, especially if Microsoft is making history repeat itself price wise.
Eliciel
Member
You are fully right, the main revenue of PS5 depends on their ecosystem. Full Stop.
However, the question we are currently evaluating is correct price positioning of a gaming console in 2020. The question we want to answer is what is the maximum price people are willing to pay. Willingness to pay is defined by many factors. At the end of the day it is also relative pricing vs. competition. In case of Sony's competition the XSEX is almost 100% available on PC and people that are going to buy the console are going to buy to have a timed exclusivity on e.g. Halo Infinite. This makes it even more attractive to Sony to sell their console with the most anticipated content at an attractive pricing point for their side as well. They have system selling games up their sleeves - not just 1.
If you are going to answer this question as a Executive Officer of Sony you are not going to be paid for saying "Our ecosystem will create gazillions of $ either way" - this is not what you are being paid for. Pricing Strategy is essential for maximization of outcome and a console that creates a positive outcome or stays flat is much better than a console that needs 3 years to stay flat on the cost side.
It's all about those small differences that makes a console a big value creator for a company, because you have to make up for at least 2-3 years of losses if you position a console like XSEX or PS5 at $399. It is not just 1 year you will be losing money as the most important parts of those consoles are in REALLY high demand (e.g. Processor, GPU, RAM)
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Ar¢tos
Member
A 8-10tf machine would be useless in 2 years*. They would spend the first 2 years being humiliated in face-offs and the rest of the gen being completely ridiculed by the media.
Sony is not Nintendo, they have a strong 1st party but they can't survive on 1st party alone.
Selling cheaper =/= staying competitive.
*I'm guessimating and rounding up the amount of time it will take for 3rd party devs to get fully familiarized with the hardware, when the differences will really start to show up.
Sony is not Nintendo, they have a strong 1st party but they can't survive on 1st party alone.
Selling cheaper =/= staying competitive.
*I'm guessimating and rounding up the amount of time it will take for 3rd party devs to get fully familiarized with the hardware, when the differences will really start to show up.
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darkinstinct
...lacks reading comprehension.
I think we are pretty much in an arms race for the future, it's a great spot for us to be in with two giants battling each other for our support. There's a good chance that both PS5 and XSX end up at 399 because of that. They both want to sell their services and for that they need market share. That Microsoft talk about "we don't care where you play our games"? Forget about it, they don't want to sell Steam games, they want to sell Xbox Store games and Game Pass Ultimate. And above all else they want to position themselves for the streaming future. The more I think about the market, the more I think Phil Spencer is going for that same 1-2-punch that Sony did to Xbox One. With people expecting 500 and more for a 12 TF console a 399 at E3 will blow them away and they will kill it in preorders. You have to nail everything. The power. The games. The price. We have only seen one piece of the puzzle so far.
Looking at Sony I think they would like to be at 399, but right now they don't want to because of part cost. So they are waiting for Microsofts move. They can do 449 against 499. Or take the loss and do 399. But things get crazy for Sony if Microsoft aims for 399 at a $100 loss per console and Sony has to go to 349 because of the performance gap. It limits your ability to react to the market. If you take a $150 loss right from the start you can't do price cuts to increase sales. That's why I think both might launch at 399.
Of course that only applies to a 9.2 TF PS5. If Sony has indeed the same performance as XSX, it will cost more. APU will be the same. UHD will be the same. RAM will be the same or close enough. But Sony's SSD will be more expensive because Microsoft went with a DRAM-less SSD, which saves them around $10 on every console. And they have a cheaper cooling solution thanks to the tower design. So if both are equal in power, PS5 will be more expensive to produce.
Hostile_18
Banned
It's best to forget 299-399 its just not going to happen. Honestly people that think that arnt basing it on any kind of reality when you look at the costs involved.
@realSausageFlask
Banned
I didn't upgrade PS4 to Pro and I wont be upgrading the PS5 either, so I want it to have decent power right out the gate.
I think Sony can get away with charging more to begin with, as probably said, people spend more on shitty iPhones and the like.
I think Sony can get away with charging more to begin with, as probably said, people spend more on shitty iPhones and the like.
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SuperLupeRap
Banned
Would you rather game on a 9TF machine or a 12TF machine? That's pretty much it.
PocoJoe
Banned
Do you have vendetta against the BEAST or why do you continue to push this "8-10 tflops" agenda?
Sony isnt MS, they dont need to cheap out and/or use slower tech to sell consoles
And most powerful havent won?
Ps4 won xbox one (no point to count x/pro).
Ps3 won 360 (with cell coding gurus it is stronger)
Seems like simple things wont make sense to you
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Zannegan
Member
You're right, but it's a balancing act: they want enough power to last out the generation (and to wow people into buying) but at price low enough to maximize their user base as you've said. They'd almost certainly be very successful at $500. The question is, would they be more successful at $400, even with a weaker console? Like you, I'd guess yes, but it's hard to say without market research and knowing exactly how much weaker we're talking.
If Lockheart really is a thing, even a weaker PS5 wouldn't have to worry about the quality of ports and multiplatform games, and the power-whores among us could always pick up the mid-gen refresh down the line. The rumors right now are certainly in favor of your theory, though I'm personally hoping they're wrong.
The people railing against you and calling for $600+ consoles are out of touch with market realities, IMO, though they may get their wish with the XSX. IF all the rumors are true (i.e. Lockheart's real, Sony coming in with less power, having trouble keeping bom down, etc. etc.) we may be looking not at a $500 XSX and $400 PS5; but a $600 XSX, a $500 PS5, and a $400 XSS.
If Lockheart really is a thing, even a weaker PS5 wouldn't have to worry about the quality of ports and multiplatform games, and the power-whores among us could always pick up the mid-gen refresh down the line. The rumors right now are certainly in favor of your theory, though I'm personally hoping they're wrong.
The people railing against you and calling for $600+ consoles are out of touch with market realities, IMO, though they may get their wish with the XSX. IF all the rumors are true (i.e. Lockheart's real, Sony coming in with less power, having trouble keeping bom down, etc. etc.) we may be looking not at a $500 XSX and $400 PS5; but a $600 XSX, a $500 PS5, and a $400 XSS.
ZywyPL
Banned
It's such a bad strategy that every single console manufacturer has always done it in the past three decades or so... You obviously have no clue of how the business works, abut the development costs alone, revenues from the hardware (if there is any to begin with) and software/service sells. The revenue reports are all there, publicly available each year and even each quarter, so maybe instead of spending all the time on posting your personal (irrelevant) beliefs and trying to act like a wise guy you should jus go read them and get actually informed on the topic?
DaleinCalgary
Member
This is the correct answer.
Agnostic2020
Member
so do you expect PS9 in 22 years to be 399$? with this mentality it has to or it will fail. as the time passes value of money is lowered due to inflation. so its natural that the price rises based on their BOM
JLB
Banned
you should advise your mate to wait for series xInsane how good of a value consoles are compared to a PC.
Should've told my friend not to jump on that ship too soon
MiyazakiHatesKojima
Banned
M1chl
Currently Gif and Meme Champion
That's Xbox All Access...
Blood Borne
Member
Agreed. I wish they launch with both PS5 and PS5 Pro.
Something like:
9TF PS5 $399
12TF PS5 Pro $499
daemissary
Member
Apparently I’m much more informed on the subject than you since you think “every console manufacturer has always done it” completely ignoring that Nintendo has only done it twice in their entire history, once when they were forced to immediately price cut the 3DS and once on their biggest failure, the Wii U.
Lots of consoles have done it in the past because they are forced to by their competition. A kind of mutually assured destruction if you will. That doesn’t mean it was good business for them...that just shows why price fixing scandals exist. Both Microsoft and Sony are making money but both would make more money if they could price their console to make a profit from day 1 without fear of permanently losing consumers to each other.
It’s the reason market competition is so great for the consumer. These companies are forced to make bad financial decisions for themselves just to remain competitive.
009EspadaSageJay
Member
Because the cost of this thing is already passing the $400 price range on production alone? The system by itself cost $450-$480 to make thats without including the box,manuals,hdmi cables,controller,usb charging cable ect. And thats before we factor in advertising cost for specific stores and shelf and store space since you have to pay for both of those upfront. If they sold this system at $400 there already eating a $100-150 loss on all units good luck making that money back anytime fast unless sony raises the price of ps plus and locks behind BC with ps now then that could subside some of the manufacturing and advertisement cost.
JLB
Banned
He told me he already has a mini-fridge in his room
a 12tf fridge!? that would freeze beers in no time
SmoothRunningGun
Member
Eating almost $100 on each console might be tough. Need a high attach rate to make that up.
Azelover
Titanic was called the Ship of Dreams, and it was. It really was.
The time for that is gone already. The loss leading strategy happened a while ago, because they thought videogame consoles would take over the living room. And that was going to mean some SERIOUS business afterwards. Now we're in the age of the smartphone. Those extrapolations are no longer applicable.
They might wanna lose some money to get some ground, but not to the same extent they were doing it a few gens ago. I highly doubt it.
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SoullessApples
Member
As long as it’s below 650 I’m fine. I honestly think 450-499 is reasonable ( Id prefer free.99) since it’s a big jump in specs
Vawn
Banned
You take a "hit", but you don't lose hundreds of dollars per unit sold.