Sony Drops Price of PS3... in Japan Only

[Damion Chaplin]

<div class='os_post_top_link'><a href='http://news.yahoo.com/s/ap/20060922/ap_on_hi_te/japan_sony_playstation' target='_blank'>http://news.yahoo.com/s/ap/20060922/ap_on_hi_te/japan_sony_playstation</a><br /><br /></div><i>"Sony Corp (NYSE:SNE - news). said Friday it will slash the price of its much-anticipated PlayStation 3 video game console in Japan by 20 percent, heating up the competition in the next-generation gaming war against rivals Microsoft and Nintendo. The announcement comes just days after Microsoft Corp. announced that it would roll out an external high definition DVD player for its Xbox 360 in an effort to match the PlayStation 3, due to be released in November with its own Blu-ray DVD technology. Sony Computer Entertainment President Ken Kutaragi, speaking at the Tokyo Game Show in Makuhari, just east of Tokyo, said the move was in response to consumer complaints the upcoming console was too pricey. Sony will cut the domestic price of its basic PlayStation 3 model to 47,600 yen, or about $410, from an originally planned 59,800 yen, or $515. That puts the PlayStation 3 in the same range as the combined basic Xbox 360 and HD DVD player in Japan, where the duo will sell for 49,600 yen, or $427. There are no plans to lower prices in the U.S. or other markets, Sony spokeswoman Nanako Kato said. In Japan, the game will hit stores on Nov. 11."</i><br /><br />Well, apparently Sony's feeling the heat now. I expected them to drop their price as we come closer to release date (at least temporarily for the holidays), but with no price drop in the announced anywhere else but Japan yet, they may find themselves with a less-than-stellar marketshare come January 1st. What do you think? Should we still expect a price drop in the US? Will this affect your PS3 purchasing plans? Personally, if I were in the market for a PS3 (I'm not), after hearing price drops in Japan, I would probably wait for a similar announcement for the US before I decided to buy one. You?

[Felix Torres]

Expect no price cut outside Japan any time soon.

Sony's announcement was a knee jerk reaction to a quintuple coup MS delivered at the TGS:

First, they introduced a 360 core package at a price that is effectively cheaper than the Wii.

Second, they added the HD-DVD drive at a price that undercut Sony by over $100 for the combo.

Third, they took away Sony's 1080p bragging rights by matching it with a software upgrade, confirming that the 360 has always been able to render games at 1080 (there are dozens that do so right now) and upping the ante with DVD upscaling to 1080p via VGA.

Fourth, they drew massive crowds at the show (bigger than Sony's) with the unveiling of Blue Dragon and Lost Odyssey (in playable form, no less) as 360 exclusives, showing the 360 could deliver high-quality Japanese-style gaming with PS3-or-better graphics.

And finally, for the knockout, they announced that Blue Dragon would ship as a pack-in with the 360 from day one. A killer-app game free from day one. (For impact, imagine Halo 3 going out free with new 360's from day one.)

Sony *had* to offer up something and the price cut on the low-end model was it. They're still more expensive than the 360+HD-DVD (never mind the 3 games bundled-in) but at least the price is comparable.

This is not particularly meaningful because Sony already announced the split between low-end and high end is going to be 80/20 in favor of the most expensive model (which isn't going to be dropped in price and, worse, has no sugested price at all; dealers will be free to charge whatever the market will bear) and that they would only ship 100,000 units for launch. Even if they can get 1 million units to japan (optimistic) that would mean only 200,000 low-end units and, at most, a $20 million cost for the gesture. Impact outside Japan? Zero. This is a defensive move. And a fairly cheap one; matching it outside Japan would be too expensive and create too much of a split between the low-end and high-end model. As is, the addition of HDMI to the low-end box now renders that model even more expensive to build and Sony cash-flow doesn't allow bigger price cuts on PS3--the only thing that allows it is the extremely low shipping volume of the low-end model at intro.

As the saying goes: don't let them see you sweat.

Well, Sony is sweating bullets over Blue Dragon and they let it show; it might be the tipping point in getting XBOX established in the japanese market. And if it doesn't, it would make it abundantly clear that only the american origin of the box keeps it from thrashing Sony in their home market.

Of course, MS has yet to show the rest of its hand.
That comes this week in Barcelona.

Best guess? A shipping date in march for Halo 3. World-wide.
Other nasty possibilities? Music and Video d/ls, Zune tie-in details, more must-have Live Arcade Games...

The "good" news for Sony is MS is not likely to drop prices before march; they really really want to hit profitability with the 360 ASAP.
The bad news? 360 Price cuts are a certainty some time next spring, just as Sony starts to fill the pipeline with $600 PS3s.

When nationalism is your last hope in your home market, you know you're in serious trouble and Sony is in *serious* trouble with the PS3; the hardware isn't all that bad, as a console, but their costs are so high that, as of now, the only thing that can save it is BD-ROM. The very thing that is dragging it down.
It truly is an all or nothing bet.

[alese]

Maybe I'm wrong, but I guess part of the reason why Sony did it, was the fact that they expect bulk of the sales in 2006 to come from Japan market, so they have to "make sure", Microsoft won't spoil this with some special offer...

[Felix Torres]

Uh, if they expect the bulk of sales in Japan, then why ship 80% of the launch units to the US?

They're launching with 400,000 units to the US and 100,000 to Japan.
The price cut will only affect 20,000 launch units.

This was strictly a defensive move: MS made a better showing at the TGS that they expected and they panicked; they felt they had to respond. They saw their advantages vanishing before their eyes:
- HD-Video playback, matched
- 1080p output, matched
- droolworthy graphics, matched or bettered
- japanese must-haves, matched
They felt they *had* to match MS pricing or at least reduce the pricing advantage a $250 system (with three good to great bundled games) has over a $600 system with no games.

But by responding, they made it clear to everybody that they are *reacting* to MS initiatives, rather than controlling the market. That's a *big* change from "The next generation begins when *we* say it does."

Think about it: less than a month from announcing PS3 pricing and taking flak for it, after a whole month of defending the pricing, *now* they cut it?

What changed?
Blue Dragon and Lost Odyssey is what.
Sony thinks MS now has a genuine shot at the Japanese market.
Now, these guys have been wrong before so they may have panicked over nothing.
But if they happen to be right this time...

PS3 has a lot going for it but Sony has been so busy promoting Blu-Ray they've forgotten the PS3 is first and foremost a gaming console. Consider TGS2006 their wake up call.

[alese]

Uh, if they expect the bulk of sales in Japan, then why ship 80% of the launch units to the US?

They're launching with 400,000 units to the US and 100,000 to Japan.
The price cut will only affect 20,000 launch units.

...

100.000 Units is mighty small number IMHO. If other launches (PS2) are any indicator, this won't get them through the weekend.

Don't get me wrong I completely agree with you that this is defensive move, maybe even little panicking, but I'm pretty sure they can sell whole 500K units in Japan during first week...

On the other hand, since they can be pretty sure that Japan market is still their, it is understandable to send 80% of the units to USA where the real fight is going to take place...

[Felix Torres]

100.000 Units is mighty small number IMHO. If other launches (PS2) are any indicator, this won't get them through the weekend.

Don't get me wrong I completely agree with you that this is defensive move, maybe even little panicking, but I'm pretty sure they can sell whole 500K units in Japan during first week...

On the other hand, since they can be pretty sure that Japan market is still their, it is understandable to send 80% of the units to USA where the real fight is going to take place...

Oh, they could sell a couple million easily in the first week.
(Second week, not quite as much...) ;-)
100K won't get them through an hour--there's 20 million PS2s in Japan so surely more than half a percent of their customers want PS3s on day one.
But what they announced is 100K for Japan; 400K for the US, zero for Europe. (With a promise of 4 million, cummulative, by march.)
That's all they can build by Nov 17.
(They haven't started production yet, did you know?) :roll:

In fact, last week I saw a report where apparently some developers are telling Sony to just stop.
Cancel the november intro and wait until March when they can:
a- get the price down
b- ship reasonable quantities
c- the games are ready
Apparently, as of last week, only one of the launch games was 100% done. Most were 70-80% ready.

And you're right that their home market is probably still theirs; that is in fact why a month ago they figured they could shaft the locals. (Nintendo is doing something similar; they launch in the US before launching in Japan).

But that was a month ago: last week, they were concerned enough to increase the production cost of the low-end model and eat an extra $20 million in losses to protect their market.

The real story here, to me, anyway is Sony's zig-zagging.
Too much backtracking and changing strategies. Makes you wonder if those guys even know the time of day. That sort of thing rarely ends well...

But, going back to the original point: as of yesterday, Sony had no intention of dropping the price outside Japan. That can easily change after we hear from Microsoft at X06 this week. Sony is not done zig-zagging...

[Felix Torres]

Here's what Sony is afraid of:

http://www.next-gen.biz/index.php?option=com_content&amp;task=view&amp;id=3877&amp;Itemid=2

If you're impatient, jump to the head of the line...