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Does the PS3 need a price cut?

To clarify the question: Do you think the PS3 needs a price cut to stay competitive and sell well relative to other consoles this holiday season?

Personally, I have no idea. There is an elaborate art behind consumer electronics pricing issues such as this, and I lack the market research, pricing theory, and the business experience to give a definitive answer. However, I can provide the basic ups and downs of each side:

Arguments For: The PS3 DOES need to cut price to stay competitive this holiday

  1. Many buyers, particularly gift shoppers buying for a family member, just care about the upfront purchase price and don’t think about other costs until later such as hard drives and WiFi adapters and online acess charges. They need a low price to get them in the door.
  2. Look at the success of the Wii at $250, and the continued success of the aging PS2 at $129, and of course the success of the Nintendo DS, and the PSP. Clearly, budget pricing is where the volume sales are happening.
  3. The bulk of gamers aren’t enthusiast adults with large disposable incomes, but a younger audience in the 5-20 age range which are far more price limited. Often, the actual buyers are parents and grandparents who are heavily influenced by price point and marketing.
  4. There is a large difference in the entry prices of these systems. The base PS3 model will now be completely double the base 360 price and is still slighlty less than double the Wii price.

Arguments Against: The PS3 does NOT need to cut price, and will remain competitive with their current pricing structure.

  1. In general, gamers are notoriously opinionated about their console preferences. Lots of people have their mind set on a particular console brand, and a mere price cut certainly isn’t going to change their mind. Of course, many gamers buy all the consoles, and many gamers really are “swing-buyers” that chose consoles based on cost, but they are the minority.
  2. The success of the Wii has more to do with Nintendo’s success at connecting with a certain type of consumer rather than its price. Many Wii consumers didn’t want a cheaper PS3 or 360, they wanted a completely different product with a completely different brand identity.
  3. Quality is more important than price. And the PS3 arguably has a much better software lineup this year than the competition and has made more progress in terms of base system functionality as well.
  4. The PS3 is still very competitive in the short term. A 360, with fairly basic add-ons (hard drive, WiFi, and first year of online service) still costs as much as a base PS3, and the PS3 still has blu-ray, a larger hard drive, better upgrade options, and permanently free online access.
  5. Obviously, they will drop price, the question is when. Beyond price, another barrier to more mainstream adoption is the physical size and weight of the PS3. Maybe it would be better to time a price cut alongside a slimline PS3? Or maybe after they switch to cheaper production techniques? Or after they roll in some new mainstream feature, that is not game related?