Does Sony's PS3 value argument hold up?

March 17th, 2009, 19:16 Posted By: wraggster

PlayStation 3 pricing is in the news again, thanks to a report from Bloomberg that cites developer complaints over the price of the console. According to the story, developers are calling on Sony to drop the price of the PlayStation 3, so more people will buy the console, and thus their games.

"Sony obviously still has a ways to go with their pricing," Peter Moore, sports game chief at EA, told Bloomberg in an interview. He went on to say that even though Sony hasn't dropped the price of its console just yet, he expects it to happen shortly.


Value or price? You decide.

(Credit: Sony)A few weeks ago, Mike Hickey, an analyst at Janco Partners, said he expects Sony to cut PS3 pricing $50 to $100 in coming weeks, since the $399.99 version of its console costs $200 more than the Xbox Arcade version and $150 more than the Wii.

For its part, Sony, which has experienced three straight months of declining PS3 sales, shot back at developers and analysts. The company's senior vice president of marketing, Peter Dille, told Bloomberg that while Sony has no plans to reduce prices, "everybody in the development community would love for the PS3 to be free, so they could just sell razor blades."

Sony executives aren't doing enough to make their case. Whenever you look around the Web, the same basic argument is made: the PS3 is too expensive. But on numerous occasions, I've had the opportunity to discuss this issue with Sony representatives. During those calls, they've articulated their point to me about PS3 pricing and value.

Sony is well-aware that the PlayStation 3 costs much more than the Xbox Arcade version or the Wii, but we can knock one competitor off immediately: the company doesn't really consider the Wii a competitor. Pricing against that console doesn't matter much, they say.

But Microsoft is very much a competitor, and although Sony likes to play with percentages and comparisons whenever NPD sales figures are made public, the Xbox 360 is winning in a big way. And most folks believe it's because of its price.

But instead of looking at price as the determining factor of purchase, Sony wants us to look at the value. Sure, the PlayStation 3 is more expensive if you consider initial cost, but over the life of the console, is it really the most expensive video game machine on the market? Sony contends that it's not.

To prove it, Sony officials, in a previous phone conversation, compared the Xbox 360 60GB version for $299.99 with its 80GB $399 console. The initial difference in price is $100, but Sony contends that after you sign up for Xbox Live for $50 a year and consider the fact that the Xbox 360 doesn't have a Blu-ray drive--a possible future purchase for Xbox 360 owners--the PlayStation 3, with its free online gameplay and built-in Blu-ray drive, is actually cheaper over the life of the console.

Not to mention, if you want to turn your Xbox 360 into a Wi-Fi-enabled console and have rechargeable controllers, which come standard with the PlayStation 3, both accessories will add another $120 to the price of the Xbox 360. In just one year, Xbox 360 owners might spend $470 to buy the console and upgrade it before they even consider buying a Blu-ray player.

Though it's a bit more difficult to make this argument, Sony also contends that its $399 PlayStation 3 is cheaper over the long haul than Microsoft's Xbox Arcade version, which retails for $199.99. The company contends that to make it worthwhile, you'll need to install a hard drive, which will run you $100, bringing the real price of the console back to $299.99, where Sony can rationalize the PlayStation 3's cheaper cost as before.

Sony's argument is tenuous, at best, and assumes that users will sign up for Xbox Live, want a Blu-ray player, and buy accessories. But if they do, the PlayStation 3 actually is more affordable over the long term. Whether or not people actually care is another story.

But home finances aren't always run on spreadsheets, and initial cost will remain a major concern to the parent who can only afford to buy their child one gift for their birthday. Furthermore, the Xbox Live offers a more robust online experience than Sony, although Sony has made significant strides over the past few months. And the argument over whether or not Blu-ray is really worthwhile can rage for hours.

Regardless of where you stand on this issue, there is more value in the PlayStation 3 with Blu-ray installed, and the console does have the extras the Xbox 360 doesn't. But it seems that the biggest problem Sony is facing is that most consumers either don't know about that value argument or they just don't care. In either case, Sony's losing money.

And that's why it needs to decide where it stands. Is it going to promote the value argument more effectively than it has in the past or will it concede and appeal to consumers on price? It's a tough decision, but one that needs to be made soon. The PlayStation brand has enjoyed better days and things might only get worse after Killzone 2's allure dies down.

Is it about price or is it about value? Sony execs need to figure that out. And then, somehow, get consumers to see things their way.

http://news.cnet.com/8301-13506_3-10197958-17.html

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