• 26 Jul 2007 at 12:44 PM
  • Sony

Sony’s 83-year Plan to Reestablish Console Dominance

sony.jpg Sony is on the cusp (in the glacial sense) of reemerging as the dominant home console maker with a hefty 21% gain in PS3 sales from May to June. It looks like chopping $100 off the staggeringly short-sighted $599 “I can buy two Wiis and two games for this” initial price worked. The Blu-Ray revolution is here, a format so innovative that it can properly eulogize the Mini-Disc and UMD.
The PS2 is famously cited as selling over 100 million units, averaging over 15 million units sold per year. To contrast, Sony sold 98,500 PS3s in June. SeekingAlpha points out (was not too lazy to do the math) that at this pace, it will take 83 years to sell 100 million consoles, a shade off the 5-6 year time frame Sony execs projected. Monthly PS3 sales would have to increase over 1500% to about 1.65 million to hit the century mark by 2013. That 21% sales “surge” looks a little empty in context.
Sony reports that its $100 price cut has shot (unreleased) PS3 sales up 135%, although the slashed $499 console is soon to be phased out, displaced with a “new and improved” $599 version. “New and improved” defined by Sony is 20GB more on a hard drive, boldly charging $100 for about a $10 manufacturing cost difference (got to make up those negative margins somewhere).
Microsoft balked on announcing an Xbox 360 price cut during E3 this year, but there are rumors that Microsoft will slash $50 sometime in August. The Core Xbox 360 costs $299.
The Wii-coup is almost complete, and Nintendo holds almost half the next-gen home console market, completing the first to worst to first circle. The Wii sold more than twice the number of Xbox 360s sold last month, which sold more than twice the number of PS3s.
Game Over For Sony In The Console Wars [SeekingAlpha]
PS3 Price Cut Is Fake [DigitalBattle]
Xbox 360 Price Cut Coming? [SlipperyBrick]

  • 03 Jul 2007 at 9:32 AM
  • Apple

Why the iPhone is no PS3, but should try to be more like it

iPhone-Launch-Day-1-Tuesday-15.jpgOne of our first thoughts when the iPhone was announced was, “Have U.S. gadget makers learned nothing from the PS3?” You would think companies would get a hint (hint: the average American consumer gets priced out of the gadget market at around $500), or at least avoid Sony’s PS3 price point blunder for karma reasons.
Then we heard that Apple ominously copied the PS3’s stellar price point strategy with a $499 iPhone and a $599 model with a bigger hard drive, all before signing your soul over to AT&T. That’s it, Steve Jobs jumped the shark, or had some vestigial impulse left over from when he was charging $4,000 for high-end PowerBooks and not considered the iJesus of tech. Remember, Apple was copying the same price poinit strategy that in one product generation singularly relinquished dominance of the home console market.
One teenie difference that sets Apple apart from Sony in this case is that Apple is unloading the iPhone at double production cost. The more expensive iPhone costs $266 to make, with 13 components spread across 9 manufacturers. Samsung provides 3 chips and accounts for 31% of component costs.
The PS3 is a different story with an initial production cost between $800-$850 depending on the hard drive. That means that Sony takes at least a $250 hit per unit. The Wii, on the other hand (is fun?), you can grab for $200 in Japan, and Nintendo turns a per console profit.
The iPhone is selling well and has had a successful opening weekend. Analysts have opening weekend iPhone sales pegged somewhere between 500k-700k units, beating the 200k estimate some predicted. Apple will sell 4.5 million units by year’s end and a bajillion (30 million) units by 2011, according to ISuppli estimates (you know it’s unbiased because the “I” is capitalized in a totally Apple agnostic way). That’s certainly impressive for a new product, but the iPhone is an expensive new product that had an unprecedented marketing push and is trying to break into a completely new market. And it’s not clear that the iPhone is a desired substitute for the 100+ million iPods out there. That’s why Apple needs to slash prices significantly (which many analysts are expecting fairly soon).
To put things into a mobile telecommunications market perspective, Nokia shipped 91 million units in the first quarter. In order to penetrate the cell phone market in any meaningful way or provide a more digestible iPod replacement for when your Mini breaks, Apple will have to get used to thinner margins (and probably thinner than the 40%+ made on most iPod models).
Pricing items at approximately double production costs seems to be the Apple benchmark for new product launches. The video iPod, for instance, cost $150 to make and started retailing for $299.
Apple’s IPhone Sells for Double Costs, ISuppli Says [Bloomberg]

The Sony Blu-ray BDP-S300 player, already flying off the shelves at the speed of irrelevance, is now $100 cheaper, representing one of the fastest price declines in the consumer electronics industry, the Wall Street Journal reports. Whereas the old price of $599 certainly Blu, it’s unclear whether consumers will exactly jump on the less costly device, as it still isn’t as cheap as the equally un-purchased Toshiba HD DVD players which retail for less than $300. The media disc format wars are still in limbo, with Playstation 3 not yet tilting the balance in Sony Blu-ray’s favor, although Hollywood insiders claim that Blu-ray has the most support thus far.
Sony Lowers Price Of New Blu-ray Player [Wall Street Journal]

  • 01 May 2007 at 2:10 PM
  • Sony

If you don’t buy this console, we’ll kill this goat

sonygoatMS2804_468x448.jpg What can save Sony’s console franchise? A bacchanalian festival with decapitated goats and topless women! Unfortunately, not every consumer is on board with the new marketing strategy. Sony has recalled the 80,000 print run of its Playstation Magazine for an article about the “God of War II” European launch party. From Gizmondo:

The article, based on a Sony Press release, shows more vivid pictures from the event under headlines such as Topless Girls! and Flesh Eating? It asks readers how far they would go to get hold of Sony’s next-generation console, the PlayStation 3.
“How about eating still warm intestines uncoiled from the carcass of a freshly slaughtered goat? At the party to celebrate God Of War II’s European release, members of the Press were invited to do just that…”

What a party, although people were overheard saying, “I bet killing this goat would’ve been more fun with the Wii-mote.” Sony’s party defense is two-pronged:
-Sure there’s a decapitated goat – but the goat was already decapitated when the company found it
-Sure you can see a woman’s nipples – but she is wearing a “top” of fresh body paint
Slaughter: Horror at Sony’s depraved promotion stunt with decapitated goat – [Daily Mail]

  • 25 Aug 2006 at 11:38 AM
  • Sony

Groping Grouper

david_samuel.jpgDid you realize that the grouper guys only started doing video yesterday? Or, well, in December 2005? That means it took them less than nine months to lure a Sony in to buy them for $65 million. No bubble here, move along folks.

Q&A with Grouper co-founder David Samuel
[VC Ratings]