stevo

Today was the launch of Sony's PlayStation 3. It's retailing for $600.00. What I don't understand is why Sony has fixed the price at $600.

Demand far exceeds supply. Only 400,000 units are available between now and Christmas. It is near impossible to get one. There were 500 people lined up outside Circuit City in Tallahassee last night to receive one of six raffle tickets that would allow them to purchase on of the 6 units Circuit City received (they received 10, but employees already purchased 4).

The game console is selling for over $3,000 on eBay.

I would say at least 90% of the people in line last night only wanted the system at $600 so they could sell it for $3,000 today. But that begs the question, why doesn't Sony just set the retail price for the first 400,000 units at $3,000? That’s what the market is dictating. Is it a public image issue? Does it have more to do with marketing and PR than it does strictly economics? Do they not want to seem like they are 'gouging' the public?

We hear over and over that companies lose money on the consoles only to try and make money on the games. Well, they wouldn't lose money if they priced the systems at what the market demands. If the 400,000 units were priced at $1,200 they would still sell out today. Priced at $2,000 I'm sure they would sell out by Christmas.

An accurate pricing would remove the gray market, scalpers, and eBay resellers. While eBay allows for anyone willing to buy the PS3 before Christmas at $2,800-$3,400 (the range I've observed), Sony is losing out on a lot of profits.

Can anyone offer any reason as to why the experts would set the price at $600?

__________________
"If I am such a genius why am I drunk, lost in the desert, with a bullet in my ass?" -Otto Mannkusser

Carno

Somehow I doubt that they could sell 400,000 PS3's for $1200 each, but maybe..

__________________
http://how-to-spell-ridiculous.com/

kutulu

I don't know, maybe they didn't want the bad publicity that would go with gouging their customers? Maybe they feel that $600 is a fair price for the product. It's about putting your most loyal customers above the assholes with so much moey they can pay whatever price it is.

Products should sell for a fair price. Period. Somewhere along the line we forgot that.

stevo

They've already sold 400,000 for $600 each. In a matter of minutes after midnight.

What is a fair price? Who determines what is fair? When there is a limited supply and an extreme demand who determines who gets what?

I would also add, that if I were CEO of Sony, my most loyal customers would be the ones with the most money. period. Who gives a shit about a customer without a dime? Doesn't make for a good customer, now, does it?

__________________
"If I am such a genius why am I drunk, lost in the desert, with a bullet in my ass?" -Otto Mannkusser

cyrnel

Most technology is priced based on perceived value vs. the competition. Flagrant opportunism doesn't build loyalty which is critical to platform success.

Premiums for product scarcity will always be added by the fly-by-nighters to addicted consumers, but that's not something a large company wants to be seen promoting or even drawing attention to. They need to build the base, not get a quick fix. Think about cheap crack.

Consider the difference in news coverage if Sony started at $3k, micro-managing it exactly to demand. Instead of reports about flocks of fans lining up for days you'd see a very different and and unflattering picture revolving around the price and Sony's ethics. The excitement would evaporate.

__________________
There are a vast number of people who are uninformed and heavily propagandized, but fundamentally decent. The propaganda that inundates them is effective when unchallenged, but much of it goes only skin deep. If they can be brought to raise questions and apply their decent instincts and basic intelligence, many people quickly escape the confines of the doctrinal system and are willing to do something to help others who are really suffering and oppressed." -Manufacturing Consent: Noam Chomsky and the Media, p. 195

ratbastid

Bingo. Sony has already burned (in some cases literally!) a lot of customer loyalty over the last year or two. Opening the PS3 price at what could be perceived as a gouging price wouldn't be smart PR. They probably could sell through their 400k units at $3k apiece, but consumers wouldn't be happy with them.

Besides--if they retailed for $3000, wouldn't that just up the price in the secondary market to match?

Glory's Sun

The machine was already overpriced. People have been talking about how crazy it was to pay $600 for a machine when they got the 360 for what.. $300+? By raising the price to $1,200 Sony would have to wait for a return on their production costs and would lose market shares daily to microshit and nintendo. Sony put just enough cost on it to where they would sell out and stay afloat in the market while maintaining demand.

stevo

That's got to be it. You're right about building the positive coverage. Everyone sees lines of people wanting one, no one is complaining about the price. If they did mark them at $3,000, sure they'd sell, but most people who can't afford them would be pissed. Economics be damned!

__________________
"If I am such a genius why am I drunk, lost in the desert, with a bullet in my ass?" -Otto Mannkusser

Cynthetiq

Wasn't also most of the purchases with bundles so the total out the door cost was closer to $800?

__________________
I don't care if you are black, white, purple, green, Chinese, Japanese, Korean, hippie, cop, bum, admin, user, English, Irish, French, Catholic, Protestant, Jewish, Buddhist, Muslim, indian, cowboy, tall, short, fat, skinny, emo, punk, mod, rocker, straight, gay, lesbian, jock, nerd, geek, Democrat, Republican, Libertarian, Independent, driver, pedestrian, or bicyclist, either you're an asshole or you're not.

stevo

Que? are you saying if they retailed at $3,000 they would sell on ebay for more?

__________________
"If I am such a genius why am I drunk, lost in the desert, with a bullet in my ass?" -Otto Mannkusser

Miss Mango

Winning bid @ $5,100.00

http://cgi.ebay.com/Playstation-3-60...QQcmdZViewItem

stevo

wow. for a 20gb system. And the demand isn't there (sarcasm). They could have priced them at $2,000 and sold out today.

__________________
"If I am such a genius why am I drunk, lost in the desert, with a bullet in my ass?" -Otto Mannkusser

ratbastid

I've got to think so, yeah. That is, if $3000 became the "fair" price for it (or, god forbid, $5100) then there'd be some subset of the gamer lunatic demographic who would be willing to go two or three times that on eBay.

kutulu

I'm not going to play that game with you. I highly doubt you are so stupid that you cannot understand the concept of a fair profit.

Zyr

this seemed semi-relevent: http://vgcats.com/comics/images/061012.jpg

__________________
"Oh, irony! Oh, no, no, we don't get that here. See, uh, people ski topless here while smoking dope, so irony's not really a high priority. We haven't had any irony here since about, uh, '83 when I was the only practitioner of it, and I stopped because I was tired of being stared at."

Omnia mutantu, nos et mutamur in illis.
All things change, and we change with them.
- Neil Gaiman, Marvel 1602

Sage

I imagine that people at Sony did a HUGE study into how much they should sell their PS3's for, looking at demand and what would turn them the best profit. There was a big article in Wired a few months back about how Sony is on the verge of going belly-up unless the PS3 just knocks everything else the hell out of the water. I suppose we'll know over the coming weeks if that $600 was worth it or not.

__________________

Mister Coaster

But if you figure people ARE paying $3000+ on eBay for the system, and presumeably they are happy about the purchase, why would they be UNhappy paying that price at BestBuy or Wal Mart? Money spent is money spent, I doubt that if you have resigned yourself to pay such insane prices for a game platform, do you care who gets it?

Honestly I think it would be better for Sony to have the profits for themselves instead of Joe Shmo Linesquatter.

But the reality is that the PR for Sony would be really bad if they priced the units that high. I dunno, I have no plans to buy one, but it will be interesting to see what happens between now and Christmas.

__________________
If you have any poo... fling it NOW!

Lasereth

What this thread is missing is the quite obvious fact that the people who pay $3,000 on eBay for an PS3 are a huge minority. It's not like everyone who didn't get one is willing to pay $3k for a PS3. It's just a few rich parents who want to satisfy their kids. Nothing more, nothing less. Stating that Sony could raise their price to $3,000 and see the same sales is absurd. The actions of 1% of the buyers market is not the same as the rest.

Hell, most of the people in line to get a PS3 aren't even there to sell it on eBay. They're waiting in line because they want to be the first to obtain and experience the new generation of consoles which is always a big deal.

__________________
"A Darwinian attacks his theory, seeking to find flaws. An ID believer defends his theory, seeking to conceal flaws." -Roger Ebert

zed wolf

I agree that most of the initial buyers that waited in line to buy a ps3 were excited to own the next gen console and planed to keep and play it. I also think that it is a minority of people that are willing to pay 3k for the new system. to think Sony could permanently market it for that price or even half of that is rather absurd. I for one would love to have one but cant afford it now. I feel $600 is way over priced for the unit. I mean come on, how much dose it cost to manufacture the thing?
Oh well, the only game I have any interest in playing on it Gran Turismo HD is still being developed so I have some time to come up with the money to get one.

Intense1

I'm not very hip to the ins and outs of econ, but is Sony trying to mega create a future market demand for this product by only offering such a small number of units at the most opportune time? If they create this overwhelming demand, aided by the PR value of news reports of people camping out to even get a chance at getting one, will the PS3 actually make enough profit for them to emerge from the economic doldrums they are in? I mean, how much does Sony need to get from this product in order to break even, much less make a decent, company saving profit - does anyone know?

(flashes in my memory of Cabbage Patch Dolls, Tickle me Elmos, etc....)

Ah, the consumer bug bites us in the butt here in the US, does it not?

__________________
(none yet, still thinkin')

Asuka{eve}

deleted. I don't think I had anything useful to say.

Miss Mango

Theyre selling the console at a loss so they need to get as many out there as possible and get people buying games. Games are where they make their real money. My understanding is that they are getting so few out due to manufacturing problems and with Wii coming out and Xbox360 out for a year they simply couldnt afford to wait any longer.

My opinion.

blade02

So a quick search for "PS3 console" on Ebay returned roughly 4000 hits. (I did not filter for listings already sold, or were not actually the console itself) So roughly 1% of the 400,000 PS3's are on Ebay. Even taking into account things such as PS3's being auctioned off/sold else where and PS3's already sold, I find it hard to imagine that it all adds up to more than 5%.

From the ebay search results, I am more inclinded to think that most of the PS3's bought were for personal use and not to resell for profit. I would think that having an initial sales price of $2k would have A) had the gaming world laughing at them. B) Would have created huge ammounts of negative publicity and C) Would have resulted in lower sales.... remember 100% sold at $600, but right now (from the ebay search) less than 1% are selling for $2k.

edit: $2k figure is the highest bids I am seeing for the auctions that are the closest to ending. Though oddly, auctions with DAYS left before ending have prices upwards of $10k. (I'm not an ebay pro or anything, so I figure the auctions ending NOW have a more realistic price, someone feel free to correct if I am wrong on this.)

Daniel_

http://cbs2.com/topstories/local_story_324085857.html

(this is my emphasis, but it seems relevant...

__________________

╔═════════════════════════════════════════╗
Overhead, the Albatross hangs motionless upon the air,
And deep beneath the rolling waves,
In labyrinths of Coral Caves,
The Echo of a distant time
Comes willowing across the sand;
And everthing is Green and Submarine
╚═════════════════════════════════════════╝

Shauk

http://www.vgcats.com/comics/?strip_id=212

you think they'd learn

Deltona Couple

Personally I am just amazed by the stupidity of the rich sometimes. I personally think it is Assnine to pay such rediculous prices for a freaking GAME CONSOLE! Sounds to me like having more money than sense!

__________________
"It is not that I have failed, but that I have found 10,000 ways that it DOESN'T work!" --Thomas Edison

streak_56

I'm sorry... but a friend of mine got one... and is intending on keeping it... and I nearly cremed my pants when he let me touch it. And it really is as good as the price dictates. I think the PS3 was going for 600 because the X Box 360 lowered its price to 100 to hopefully gain some sales.

ASU2003

I think that their pricing should be flexible as well. Unless scalpers and eBayers bought out all of them, and sold them for more than they paid, the system would keep them afraid at buying at the top. If you had an auction at each Best Buy, Circuit City, CompUSA, GameStop, etc... One person could only bid up so high and get one system. How do they know that paying $3000 at their local Best Buy action would net them $4000 on eBay next week? The crazy parents that 'need' this system to make their kids happy would be able to give the $2000-$3000 to Sony and the big box store(or Sony could put a few on eBay each day). The people looking to make a (tax free) fast buck wouldn't risk paying a lot of money and not being able to sell it at a higher price, especially if Sony had staggered the release (every Friday some more PS3's came in).

Sony could then use that money to reduce the cost of the games $10 or $20 to sell more games and make the console more popular.

I went to the U of M vs OSU football game, and the ticket scalper market works the same way. OSU sells all of the tickets at a set price, and then the scalpers find the true price people are willing to pay. If OSU had sold a lot of tickets in their own eBay type auction, they could have offered a lot of financial aid and scholarships to the current students.

Redjake

??? It's not 100 bucks....?


Amazon.com is having a short Denial of Service Attack sorry, ahem sale this Thursday for the Core system to be 100 dollars, but other than that, it's still 299.99 and 399.99, respectively.

__________________
Off the record, on the q.t., and very hush-hush.

Glory's Sun

*MNSFW*

http://video.google.com/videoplay?do...38642038&hl=en

this just solidifies my desire for a Wii

Sticky

So the other question that must be asked is:
If they kept the price low (this is not really low it is just relative) at $600, and they knew that they could probably get much more for it, then why did they not produce more to satisfy the demand.

I think, as mentioned by someone earlier, it is all about perception.
Pricing it at $600 and holding back on (or not providing enhough) supply.
serves Sony's purpose.

They (artificially) did the following
- They got people to buy it for $600
- They caused the value of the PS3 to be about $3000 without having to actually look like they are gauging the product. 12 year old: if people are paying $3000 for it, it must be awesome. I have to get one.
- They caused people to want it. People want what is scarce.
- The got tons of free publicity
- They bought some time to come up with some more. becuase of all this people will wait a little longer than they would have instead of right away buying a 360 or Wii.

Without anybody actualy playing it, prior to selling it in the stores, they got people to want it and want it real bad.

Now all they need to do is come through with more supply in time to fully benefit from the demand they created.

I think they did a pretty good job.




That video is awesome.


Have you seen this one?
http://video.google.com/videoplay?do...37310048&hl=en

__________________
Sticky The Stickman

Daniel_

Funny film.

__________________

╔═════════════════════════════════════════╗
Overhead, the Albatross hangs motionless upon the air,
And deep beneath the rolling waves,
In labyrinths of Coral Caves,
The Echo of a distant time
Comes willowing across the sand;
And everthing is Green and Submarine
╚═════════════════════════════════════════╝

Gilda

$600 for a PS3 is a bargain, considering that you're getting a Blu Ray DVD player with it. Standalone Blu Ray players are currently retailing for about a thousand dollars.

We got a Wii and skipped the others. Pure Nintendo fun and it's the only one I can actually use anyway.

__________________
I'm against ending blackness. I believe that everyone has a right to be black, it's a choice, and I support that.

~Steven Colbert

aKula

Yes but you must ask yourself, how much is a blu ray player worth for me? As for myself, I'm perfectly happy sticking around with DVD. So no thanks.

__________________
"I am the wrath of God. The earth I pass will see me and tremble." -Klaus Kinski as Don Lope de Aguirre

thingstodo

Without a doubt. The price is always relative. It's not the actual price that matters but the perceived value based on the base price.

On another note, the 400,000 quantity - and don't kid yourself, with electronics they made money at $600 - they got an incredible amount of free publicity. This turned into at least a $40-60 million ad campaign. That added another $100 or more to the net bottom line price of the unit.

Great marketing, demand will still be there for some time and the games will just be gravy. It's all about the marketing.

__________________
If you're wringing your hands you can't roll up your shirt sleeves.

Stangers have the best candy.

pan6467

See this is what I truly don't get.... why people are so willing to spend so much on game systems that the companies make obsolete within 5 years and you have to pay another exorbitant price for the new one, not to mention restocking the whole video game library.

(if the company's were really smart they'd charge maybe a 10% profit on the system itself then hit the people with the price of the games themselves. Ah but the geniuses don't make the games .... pity.)

See my PC gets the graphics I need, if a game needs something I can upgrade my video card a lot cheaper than if I have to buy a new system, and as long as the game uses XP (which I don't see any jumping yet) I'm good to go.

I don't need games so realistic that I lose touch with reality.

There are people teaching their kids to kill us, to hate us and using our ignorances and greed against us......

What are we teaching our youth? Stay inside, don't worry about imagination or being in shape and just vegetate for hours in front of your newest bestest top of the line game system.

No wonder our professional athletes suck and are so injury prone....

I appologize but this is just the height of greed and how truly out of touch with reality this country is. We've lost sight on what truly is important and what Christmas is truly about, love, generosity, goodwill toward men....etc

Worst supporters of this nihilistic, ego driven, selfish, hateful, commercialized season is? The Christians that claim to be so close to Jesus that "Only they will get to Heaven." It's ironic, hypocritical and sad.....

And Jesus said unto them, "You must go out in the season you celebrate my birthday and buy, buy, buy. Pay more for those game systems than you do for your children's schooling. Let those systems be your baby sitter. Worship the dollar and all that it brings..... and forget what the fuck I preached about...it doesn't matter, you "read" the Bible, you profess to believe in me, you'll go to Heaven.... You don't need to live with the ideas I taught in your heart, when you would rather enjoy a love of money and all that it can bring you here."

__________________
I just love people who use the excuse "I use/do this because I LOVE the feeling/joy/happiness it brings me" and expect you to be ok with that as you watch them destroy their life blindly following. My response is, "I like to put forks in an eletrical socket, just LOVE that feeling, can't ever get enough of it, so will you let me put this copper fork in that electric socket?"

iccky

Slate had two article on this phenomenon a year ago. They were very interesting because the first one essentialy admited that economists were stumped, and couldn't explain why console makers underprice their products by hundreds or even thousands of dollars. The second article gives some more convincing explinations, but not a lot better. Here they are, sorry for the length:

http://www.slate.com/id/2132071/

And the followup article:

http://www.slate.com/id/2132988/

hiredgun

It's a question of class and access.

Yes, they probably could allow the market to entirely dictate the price. And then suddenly the PS3 would become a very different kind of product.

They don't want the PS3 to be a luxury good that is restricted to the wealthy. It is intended to be a mass consumer product and for that to work, the average person has to have access to it.

There are both practical and less practical reasons for this.

On the level of principle, it has to do with perceived fairness. You don't want to price the console out of the range of people who you perceive to be your target demographic. You don't want to make it an elite product. If the PS3 is really for everyone then it has to be priced that way.

More practically, the product has to permeate more of society than the top few percent, in order for it to do well in the future. When the price comes down later on, the people who buy PS3's at a discount will be those who have seen it at their friends' houses or heard other people talking about it. If no one in their social circle has access to a PS3, they may not be exposed enough to the product to want to purchase it, especially when far cheaper options are out there (Wii or even 360). Also, someone who can't necessarily afford a $1200 console may still be able to afford a $50 game or two every month, and you want to catch that revenue, not freeze it out by denying that consumer access to the console itself by making it prohibitively expensive.

The upshot of this is that those who wanted a PS3 for $600 can have one, while the secondary markets take care of the high rollers who don't mind paying a few thousand to get one NOW.

ASU2003

Why wouldn't they want the majority of the owners to be kids from wealthy families? If they have $3000 to blow on a console, $50 for a game or two won't be a big deal. Sony would make a ton of profit on each console they sold. Buying stuff in the game isn't a problem either. For me growing up, I had to save for months to afford one $30 NES game.

Then in March, you flood the market with them, and since you might be the first one in your social circle to get one, it will be that much better as you will have a toy that the ‘rich’ crowd had.

Let's say it is a Lamborghini that they are selling instead of the PS3. And if you stand in line, you could get one for $20000. Buy, it's real market price is $200,000. The person that has enough time on their hands to wait in line for 2 or 3 days, probably could use the money. So, none of the people we know would keep it, if they got one. And even though I have never driven it, and I know that it is a toy for the rich, it doesn't mean that I would not love to drive a Lamborghini if I had the money.

filtherton

This is one of the many issues that very handily illustrates the inadequacies of textbook economic theory.