Sony: 80 percent of PS3s will be higher priced models

The PlayStation 3 has not had the smoothest of rides to its November 2006 (March 2007 in Europe) launch date. Concerns over the availability of Blu-ray chips and rumors about Cell processor yields have been blamed for the delays that have moved the PS3 back from its original Spring 2006 launch date. Recently, Sony revealed that it will only have 400,000 units available for the North American market at launch and a mere 100,000 machines for Japan at the same time.

Now, Sony is saying that it plans to allocate 80 percent of its US retail PS3s for the $599 “premium” sku, with the remaining 20 percent left for the $499 “core” model. The premium PlayStation 3 comes with a 60 GB hard drive, built-in Bluetooth and 802.11g wireless, and one HDMI output. The core model drops the hard drive capacity to 20 GB, has no HDMI output, and no built-in WiFi.

Sony is clearly anticipating that demand for the “core” PS3 will be much lower than the premium version. But is this a realistic assessment? The Xbox 360 also launched with two different skus, so there is a a prior example to compare with. While Microsoft has not released exact numbers, it does appear that far fewer customers wanted the cheaper Xbox 360 core system. Early on, when supply problems constrained the availability of the 360, some customers purchased the Xbox 360 core even though they wanted a premium system, with the intent of upgrading later by purchasing the hard drive addon.

However, unlike the Xbox, there is no planned upgrade path from the $499 PS3 to the $599 one. People who really want an HDMI connector, WiFi, and a larger hard drive will have to hold out for the premium model. There may be an option of adding WiFi support, but this has not yet been made clear.

There is some sense in offering a stripped-down version of a popular product even thought it might not be in high demand: the concept of “upsell.” Many people look first at the price of a product before going into a store, and only after seeing the product in person will start to think about features they are looking for. The idea is to provide a product at a low price to get people to come to the store, then when concerns over availability or lack of features come forth, the consumer is convinced to pay more for the “good” model. Many companies have had some success with this method (think of Apple with the Mac mini) and it seems to have no downsides—even if someone does buy the lower-end model, a sale is still a sale. Microsoft, in fact, also limited supplies of the Xbox 360 Core system when it was first launched, giving retailers many more Premium systems (some estimates from retailers had the ratio as high as 10:1) on the first day.

So Sony’s decision appears to make sense. While the added features (most significantly HDMI output) on the top model PS3 are not necessarily as desirable as in the equivalent Xbox 360—the latter requires a hard drive for all sorts of things, from certain types of games, to downloadable content on Xbox Live, and even the ability to run older Xbox games through backwards compatibility—most people are still going to want to purchase the more expensive version. After all, once you’ve put down $499, an extra $100 doesn’t seem like that much, especially once you factor in the extra cost of games, extra cables, and so forth. Sony still has to worry that cost-conscious buyers might defect to the Xbox 360 instead, but that concern would be present regardless of their sku allocation plans.

News source: ARSTECHNICA


Please enter your comment!
Please enter your name here