Is Sony on the right track with its PS3 strategy?
Sony has said, once again, that it doesn't plan to drop the price of the PlayStation 3. But can another strategy help the company capture more market share?
When Activision CEO Robert Kotick told reporters last month that his company might stop game development on the PlayStation 3 if Sony doesn't drop the price of the console, some were wondering how Sony would respond.
We didn't have to wait long.
Sony CEO Howard Stringer told Reuters earlier this week that he has no plans of dropping the price of the PlayStation 3, regardless of comments made by developers.
"He likes to make a lot of noise," Stringer said to reporters about Kotick's statements. "He's putting pressure on me and I'm putting pressure on him. That's the nature of business."
When pressed about PS3 price cuts, Stringer was more direct. He explained that if Sony dropped the price of its console it would "lose money on every PlayStation (it) makes. How's that for logic?"
Stringer echoed comments that I've heard numerous times from Sony representatives. Although the company is cognizant that its console is the most expensive on the market, it just can't drop the price of the PS3 for financial reasons.
I get that. And although I think it was poor strategy that got the company into this mess in the first place (being the biggest and baddest console doesn't always matter, after all), I do believe that there is a way out if Sony doesn't want to drop the price of the PlayStation 3.
PS3 Slim to the rescue?
There have been numerous rumors swirling about the possibility of Sony releasing the PS3 Slim. Those rumors suggest that the console will feature a smaller footprint than the full-size PS3 and could sport a $300 price tag. That makes the console $100 cheaper than the current 80GB PS3 model.
Sony has stayed silent on the possibility of a $300 PS3 Slim, but it makes sense to release it. The Slim will undoubtedly cost much less to develop, which means Sony can afford to charge a lower price.
With a $300 PlayStation 3 on store shelves, it creates a scenario where Sony, for the first time, is offering a console that's cheaper than the Xbox 360 Elite--Microsoft's top-of-the-line hardware--and the same price as the Xbox 360 Pro. When consumers go to the store with just enough cash to buy a single console, they'll finally see an affordable PlayStation 3.
More bundles, please
But Sony can't just offer a PS3 Slim and let that carry it to prosperity. Quite the contrary, it needs to continue offering bundles that ship with compelling titles.
Right now, you can buy a PlayStation 3 bundled with Metal Gear Solid 4: Guns of the Patriots and Killzone 2 for $399--the same price as an 80GB PS3 without the games. And although Microsoft offers similar bundles with its own console, I think most consumers will recognize that the bundle is a good value.
Bundling games with a console is like a price drop without the drop. Both of those titles currently retail for $60, if you buy them separately. If you bought a PlayStation 3 and those two games, you'd end up paying $520 before you even added another controller. But since they both come bundled with the console, you can have $520 worth of entertainment for $400. That's a $120 savings that might make some consumers think twice about the PlayStation 3.
And isn't that the point in the first place? For the last year, Sony hasn't enjoyed a single competitive advantage over Microsoft and its sales have shown that. But now that those bundles are available, Sony might be able to claw its way back into the race, even though Microsoft offers bundles of its own.
A two-pronged approach
But it won't be enough. Consumers who don't want to spend $400, regardless of a bundle's value, will still choose the Xbox 360 Pro or the Nintendo Wii to save some cash. And that's where the PlayStation 3 Slim can come in. If it's priced in the $300 range, it provides Sony with a two-pronged strategy that might just work. The company can offer a cheaper version of its console for those who don't want to spend too much and offer bundles for those looking for value.
If Sony can combine cost effectiveness and value, it could have a winner on its hands.
Now, we need to wait and see if it follows that strategy.
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