Sony defies Activision ultimatum over PS3 price cut

Sony says it has no plans to cut the cost of the PS3, despite threats by one major games producer to boycott the console until it becomes cheaper.

Last month, Bobby Kotick of Activision (the firm behind Call of Duty and Guitar Hero) said the high price of the console meant those who do buy it tend to buy fewer games than with other machines. He said it was much more profitable to make games for the Xbox 360 and Wii, and that when considering development plans for 2010 and 2011, “If we are being realistic, we might have to stop supporting Sony.”

That’s a pretty powerful threat as Activision claims to have paid Sony $500 million in royalties for 2008. That’s a serious chunk of Sony’s income considering the firm’s games division is reported to have lost $597 million last year.

Howard Stringer (pictured), the chief executive of Sony, told Reuters the threats would not work. “He likes to make a lot of noise,” Stringer said, when asked about the comments. “He’s putting pressure on me and I’m putting pressure on him. That’s the nature of business”

While most analysts agree that the PS3 is too expensive compared with rival consoles and needs a price cut to boost sales, the biggest problem may well be Sony stockholders. None of the three major manufacturers are making any serious profits on the consoles themselves: Sony may be making a small loss, and it would have to take a serious loss per unit to come anywhere close to matching the price of the rival consoles.

However, while people who follow the games industry can see the logic that selling cheap consoles may be worth the loss because it increases the audience for games (and thus the royalties), stockholders looking at an already loss-making division might not see it that way.

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14 Responses to Sony defies Activision ultimatum over PS3 price cut

  1. It maybe true that a cheaper console would sell more, but the PlayStation 3 is no way just a console. In fact, after compounding costs to elevate the 360 or Wii to the same features of the PS3, you actually pay less for a PS3. Plus, Sony is worried about their bottom line. If gaming for them dies a slow death at least they don't have a massive manufacturing bill to pay for unsold PS3s.

    I think the real problem isn't about cost, its about this slowly building bias against Sony (and maybe even Japan) and everything they do. I mean just the other day someone was quoted as saying Japan can't keep up with Western game development. Or even the fact that Microsoft is capable of doing no wrong with the 360 even though they knowingly screwed everyone (i.e; RRoD). Another example is Valve with their "its too hard" to develop for and its not just them making these statements.

    In my opinion, Sony and the PS3 are suffering from a bad rep. I'm even inclined to say a anti-Sony internet meme.

  2. It maybe true that a cheaper console would sell more, but the PlayStation 3 is no way just a console. In fact, after compounding costs to elevate the 360 or Wii to the same features of the PS3, you actually pay less for a PS3. Plus, Sony is worried about their bottom line. If gaming for them dies a slow death at least they don’t have a massive manufacturing bill to pay for unsold PS3s.

    I think the real problem isn’t about cost, its about this slowly building bias against Sony (and maybe even Japan) and everything they do. I mean just the other day someone was quoted as saying Japan can’t keep up with Western game development. Or even the fact that Microsoft is capable of doing no wrong with the 360 even though they knowingly screwed everyone (i.e; RRoD). Another example is Valve with their “its too hard” to develop for and its not just them making these statements.

    In my opinion, Sony and the PS3 are suffering from a bad rep. I’m even inclined to say a anti-Sony internet meme.

  3. I agree with the above comment, and I would add that stockholders aren't as short-sighted as this article suggests they should be. They know more about what's at stake, and what the continued strategy is, than anyone.

    The PS3 and its accoutrement are long-term strategies. There is an end-goal, and profit is most certainly on that billet. But even at a loss, the cost of not having a continued foothold in the several billion dollar gaming industry is potentially catastrophic for an established & successful brand like Playstation.

    Simply put, Sony can't afford not to be a player, even if it means losing money for a while on a console generation.

    Shareholders may not be jumping for joy over the current fiscal state of the PS3, but they would never dare to do anything to meddle drastically with the long term formula. They'd have to be stupid to do that, considering the history of the Playstation brand as a successful cash windfall.

    This is setting aside the fact that Sony is making up the difference and more in game sales.

  4. I agree with the above comment, and I would add that stockholders aren’t as short-sighted as this article suggests they should be. They know more about what’s at stake, and what the continued strategy is, than anyone.

    The PS3 and its accoutrement are long-term strategies. There is an end-goal, and profit is most certainly on that billet. But even at a loss, the cost of not having a continued foothold in the several billion dollar gaming industry is potentially catastrophic for an established & successful brand like Playstation.

    Simply put, Sony can’t afford not to be a player, even if it means losing money for a while on a console generation.

    Shareholders may not be jumping for joy over the current fiscal state of the PS3, but they would never dare to do anything to meddle drastically with the long term formula. They’d have to be stupid to do that, considering the history of the Playstation brand as a successful cash windfall.

    This is setting aside the fact that Sony is making up the difference and more in game sales.

  5. @Shawn:

    "Considering the history of the Playstation brand as a successful cash windfall" is not really a viable argument, as Sony fans learnt when they played the "considering the history of the Walkman brand as a successful cash windfall" card back when the iPod was a new thing.

    The iPod came and blew away competition, just as other games consoles can do and are doing to the Playstation. The Walkman brand hasn't gone away, but it's nowhere near as successful as it once was, and I see the Playstation brand going the same way in the next few 'generations' of consoles.

    The Wii is revolutionary for a home console and the 360 is only as good as the PS3 but it got there first and is cheaper. So the PS3 doesn't have a lot going for it. I can see it still being a solid brand for Sony in a few years, but not necessarily 'the' console in the games industry just as the Walkman is no longer 'the' player in the music industry.

    • Your branding of PS3 users as 'Sony fans' leads me to believe that you're perhaps of the type divide people into camps and judge people you disagree with you as fan-boys, in this I hope I am mistaken. So I'll reply with this hope in mind and I apologize if my assumption was unfounded.

      The PS3 is a better console, with less hardware failures, more features built in and better hardware overall. Unfortunately the better hardware was a bit of a mistake on Sony's part, as no game developer wants to make the effort to optimize 8 different processors to run at full efficiency. Perhaps the developers will slowly learn to utilize the technology, then obviously the PS3 will take off in terms of quality, but I just don't think it will ever happen. So in the end it's a moot point, but in frivolous, essentially irrelevant terms, the PS3 is a better console.

      If only people realized as previously mentioned that to bring the 360 up to the same level as the PS3 you'd need more money. Buy a 360 and then a blu ray player separately and you're spending way more. This seems obvious to me, and yet people insist on saying the 360 is cheaper, which is only partially true.

      With all that being said, I would buy a 360 for the exclusives if I didn't own a decent gaming computer, I have nothing against it as a console, but it doesn't offer me anything that a computer doesn't.

      • Sorry, I didn't mean to pull the 'fans are ignorant' card and I really didn't mean it that way. I hate being pigeon-holed because I have a Mac, so I'm in total sympathy with people who took it the wrong way.

        All I meant is that people who stuck up for Walkmans when the iPod was released are clearly learning no lessons now that the same thing is happening to their console line.

        And the PS3 might be an amazing console, but that doesn't change the fact that two other major consoles are competing and actually earning more and more of the market.

        "Perhaps the developers will slowly learn to utilize the technology, then obviously the PS3 will take off in terms of quality, but I just don’t think it will ever happen. So in the end it’s a moot point, but in frivolous, essentially irrelevant terms, the PS3 is a better console."

        Not only is it moot, but you said it yourself – it probably won't ever happen that the PS3 will live up to it's name. When that happens, other products step in. Which is all my post was saying.

        Playstation won't ever go away. It'll still be a major part of Sony, it just won't be the console everyone raves about anymore like it was 10 years ago. Much like the Walkman when the iPod stepped in.

    • <blockquote cite="">"The Walkman brand hasn’t gone away, but it’s nowhere near as successful as it once was, and I see the Playstation brand going the same way in the next few ‘generations’ of consoles."<cite>

      Pray tell what evidence you have for this statement.

      <blockquote cite="">"The Wii is revolutionary for a home console and the 360 is only as good as the PS3 but it got there first and is cheaper. So the PS3 doesn’t have a lot going for it. I can see it still being a solid brand for Sony in a few years, but not necessarily ‘the’ console in the games industry just as the Walkman is no longer ‘the’ player in the music industry."<cite>

      The Wii is indeed revolutionary, and fortunately the target market for that product is different.

      The XBox360, on the other hand, with a 1 year head start, has sold 30 million units worldwide. Good job, but the PS3 has sold 22 million units worldwide in about 2/3 the time.

      So, the real competition for the PS3 isn't exactly crippling Sony. 22 million units in 2.5 years is a good sales rate no matter how you slice it.

      Imagine the number of games they've sold, considering Playstation's attach rate is much higher than Microsoft's and Nintendo's? Games are where the real profit is.

      • "The Wii is indeed revolutionary, and fortunately the target market for that product is different."

        Only the same in that the iPod revolutionised portable music and back then, people were saying 'only professional musicians want one, CD players will still be dominant'. Yes, a regular d-pad/joystick controller is dominant right now, but it's an fallacy to assume that's always the case and that the market will always be different.

        "The XBox360, on the other hand, with a 1 year head start, has sold 30 million units worldwide. Good job, but the PS3 has sold 22 million units worldwide in about 2/3 the time. So, the real competition for the PS3 isn’t exactly crippling Sony. 22 million units in 2.5 years is a good sales rate no matter how you slice it."

        So basically, you are saying that the PS3 (with history on it's side) has only managed to shift consoles at the same rate as the 360? Roughly 10m a year.

        I'm not saying that the competition is crippling Sony right now, just that the once-dominant console line cannot use history to stake it's claim in the market. If it carries on, though, Sony won't be 'the' console anymore than the Walkman is 'the' music player.

        All my point is is that a new console can sneak up from behind Sony and take the same amount of sales from under it's nose with a rising figure yearly. You proved me right.

        "Pray tell what evidence you have for this statement."

        Your own statistics that both consoles sold around 10m a year so far, with the PS3 clearly not being able to dominate the market anymore like it used to. Which was my exact point.

  6. @Shawn:

    “Considering the history of the Playstation brand as a successful cash windfall” is not really a viable argument, as Sony fans learnt when they played the “considering the history of the Walkman brand as a successful cash windfall” card back when the iPod was a new thing.

    The iPod came and blew away competition, just as other games consoles can do and are doing to the Playstation. The Walkman brand hasn’t gone away, but it’s nowhere near as successful as it once was, and I see the Playstation brand going the same way in the next few ‘generations’ of consoles.

    The Wii is revolutionary for a home console and the 360 is only as good as the PS3 but it got there first and is cheaper. So the PS3 doesn’t have a lot going for it. I can see it still being a solid brand for Sony in a few years, but not necessarily ‘the’ console in the games industry just as the Walkman is no longer ‘the’ player in the music industry.

    • Your branding of PS3 users as ‘Sony fans’ leads me to believe that you’re perhaps of the type divide people into camps and judge people you disagree with you as fan-boys, in this I hope I am mistaken. So I’ll reply with this hope in mind and I apologize if my assumption was unfounded.

      The PS3 is a better console, with less hardware failures, more features built in and better hardware overall. Unfortunately the better hardware was a bit of a mistake on Sony’s part, as no game developer wants to make the effort to optimize 8 different processors to run at full efficiency. Perhaps the developers will slowly learn to utilize the technology, then obviously the PS3 will take off in terms of quality, but I just don’t think it will ever happen. So in the end it’s a moot point, but in frivolous, essentially irrelevant terms, the PS3 is a better console.

      If only people realized as previously mentioned that to bring the 360 up to the same level as the PS3 you’d need more money. Buy a 360 and then a blu ray player separately and you’re spending way more. This seems obvious to me, and yet people insist on saying the 360 is cheaper, which is only partially true.

      With all that being said, I would buy a 360 for the exclusives if I didn’t own a decent gaming computer, I have nothing against it as a console, but it doesn’t offer me anything that a computer doesn’t.

      • Sorry, I didn’t mean to pull the ‘fans are ignorant’ card and I really didn’t mean it that way. I hate being pigeon-holed because I have a Mac, so I’m in total sympathy with people who took it the wrong way.

        All I meant is that people who stuck up for Walkmans when the iPod was released are clearly learning no lessons now that the same thing is happening to their console line.

        And the PS3 might be an amazing console, but that doesn’t change the fact that two other major consoles are competing and actually earning more and more of the market.

        “Perhaps the developers will slowly learn to utilize the technology, then obviously the PS3 will take off in terms of quality, but I just don’t think it will ever happen. So in the end it’s a moot point, but in frivolous, essentially irrelevant terms, the PS3 is a better console.”

        Not only is it moot, but you said it yourself – it probably won’t ever happen that the PS3 will live up to it’s name. When that happens, other products step in. Which is all my post was saying.

        Playstation won’t ever go away. It’ll still be a major part of Sony, it just won’t be the console everyone raves about anymore like it was 10 years ago. Much like the Walkman when the iPod stepped in.

    • “The Walkman brand hasn’t gone away, but it’s nowhere near as successful as it once was, and I see the Playstation brand going the same way in the next few ‘generations’ of consoles.”

      Pray tell what evidence you have for this statement.

      “The Wii is revolutionary for a home console and the 360 is only as good as the PS3 but it got there first and is cheaper. So the PS3 doesn’t have a lot going for it. I can see it still being a solid brand for Sony in a few years, but not necessarily ‘the’ console in the games industry just as the Walkman is no longer ‘the’ player in the music industry.”

      The Wii is indeed revolutionary, and fortunately the target market for that product is different.

      The XBox360, on the other hand, with a 1 year head start, has sold 30 million units worldwide. Good job, but the PS3 has sold 22 million units worldwide in about 2/3 the time.

      So, the real competition for the PS3 isn’t exactly crippling Sony. 22 million units in 2.5 years is a good sales rate no matter how you slice it.

      Imagine the number of games they’ve sold, considering Playstation’s attach rate is much higher than Microsoft’s and Nintendo’s? Games are where the real profit is.

      • “The Wii is indeed revolutionary, and fortunately the target market for that product is different.”

        Only the same in that the iPod revolutionised portable music and back then, people were saying ‘only professional musicians want one, CD players will still be dominant’. Yes, a regular d-pad/joystick controller is dominant right now, but it’s an fallacy to assume that’s always the case and that the market will always be different.

        “The XBox360, on the other hand, with a 1 year head start, has sold 30 million units worldwide. Good job, but the PS3 has sold 22 million units worldwide in about 2/3 the time. So, the real competition for the PS3 isn’t exactly crippling Sony. 22 million units in 2.5 years is a good sales rate no matter how you slice it.”

        So basically, you are saying that the PS3 (with history on it’s side) has only managed to shift consoles at the same rate as the 360? Roughly 10m a year.

        I’m not saying that the competition is crippling Sony right now, just that the once-dominant console line cannot use history to stake it’s claim in the market. If it carries on, though, Sony won’t be ‘the’ console anymore than the Walkman is ‘the’ music player.

        All my point is is that a new console can sneak up from behind Sony and take the same amount of sales from under it’s nose with a rising figure yearly. You proved me right.

        “Pray tell what evidence you have for this statement.”

        Your own statistics that both consoles sold around 10m a year so far, with the PS3 clearly not being able to dominate the market anymore like it used to. Which was my exact point.