Sony Cuts PS3 Price, Ignoring Bigger Problems

Not three days after emphatically saying that a price cut wasn't in the cards, Sony (SNE) announces a $100 price cut on its PS3 console with 60GB hard drive - now available for the low, low price of $499. Ok guys, nice move. So now you're forcing Microsoft (MSFT) to lower its prices and trying to re-define the console wars at the high-end of the market. Sure, higher volume, lower margins, pressing for share. Makes sense. But it doesn't address the larger issue - you are now fighting Microsoft for a smaller piece of the pie.

Sure, the pie has been expanded because the Nintendo (NTDOY.PK) Wii is drawing in new buyers - specifically casual gamers - into the console market. But even more than that, the Wii is taking sales away from both Microsoft and Sony due to its fun user experience and low price point (less than half that of the 60GB PS3, even after the price cut).

Bottom line: the Sony and Microsoft "window to the family room" strategy versus the Nintendo "gaming should be fun and accessible to all" strategy is going to keep them at a higher price point, with the hope that people will see value - lots and lots of value - in its other applications. As I've written before, I think this is a big and scary bet with odds that, as an investor, I don't particularly care for.

So Sony, sure, go and engage Microsoft in a race to the bottom (of profits, that is). You are still missing the big picture. It's the product that needs work, guys. Not just the price that needs lowering. And like I just wrote about Electronic Arts (ERTS), it is going to call for a wholesale change in strategy and not merely an incremental shift in tactics.

Comments

[robert99:]

Yup.

2007 Jul 09 09:10 AM

[Tom B:]

MSFT seems to still be in denial about the utter failure of the Xbox franchise. Headlines today indicate that they are not planning to cut the price at this time, at least in Japan.

2007 Jul 09 12:31 PM