New, slimmer, more expensive: Sony’s decision not to compete this holiday season

New, slimmer, more expensive: Sony’s decision not to compete this holiday season

Sony hasn’t been afraid to push the boundaries when it comes to pricing; the PlayStation 3 was the most expensive current generation system at launch, and the new PlayStation 3 hardware unveiled last night at the Tokyo Game Show is more evidence of the company’s insensitivity to pricing. The system is now 20 percent smaller and 25 percent lighter than the previous version of the hardware, and will come in two versions: the 250GB model with Uncharted 3: Game of the Year Edition and $30 worth of content in Dust 514, as well as a 500GB model. The 250GB bundle launches on September 25 for $269.99, while the 500B model launches on October 30 for $300. An unbundled version of the 250GB hardware will be offered for $250, but not during launch.

The new hardware certainly looks nice, although it’s unclear how many people were asking for a second revision of the original system. It’s likely that economies of scale and redesigned innards have allowed Sony to create a more efficient and inexpensive manufacturing process, although that savings isn’t being passed onto the consumer. This is one of those fun times that a company has actually raised the cost of their entry-level system near the end of the hardware’s life cycle. A price drop would have been a welcome move, and might have pushed Microsoft to do the same, but a slightly smaller unit that is functionally identical to the current hardware? Everyone can breathe easy going in to the holiday cycle. The boat has not been rocked in any appreciable way.

When value is risky

Bundles are always a risky move and, especially during the holidays, offering less in the box for a reduction in overall price often looks better to price-conscious buyers. Is there evidence of a large market that wants Uncharted 3 and hasn’t purchased it yet? Dust 514 certainly looks interesting, but a game set in the EVE universe is anything but mass market. Raising the price floor of the system is just bad business at this point; being able to advertise a lower price is much easier than trying to convince people of the value of items they’re getting in a more expensive bundle. When you’re getting parents and grandparents into retail stores, they’re going to be looking at price, not hard drive size. This new hardware, and this particular pricing scheme, puts no pressure on Microsoft or Nintendo, and it certainly won’t give Sony a competitive advantage at launch.

There were things Sony could have done to make this hardware more attractive. Offer a free year of PlayStation Plus and harp on the money saved versus paying for Xbox Live. Adding more USB ports would have helped as well; if Sony wants us to think it’s serious about selling us Sony-branded headphones with USB dongles, the PlayStation Eye to use with our Move controllers, or even simply charging multiple controllers at once, why not give us four USB ports as standard? “The system that’s ready to grow with you,” would have been a good marketing move, especially if they were able to offer the system at $199.99, along with a push to get people to buy more accessories. Instead, we just get the two ports as standard.

I still use my original 60GB hardware, which has four front-facing USB ports. Sony has moved backward when it comes to offering expandability in their systems. This is perversion of the normal progression of hardware, as more is offered for less as we move towards the next generation systems. Sure, hard drive size has gone up, but hard drive space is inexpensive; it costs Sony just about nothing to increase storage.

It could be Sony simply can’t afford to drop the price on one of its few well-performing products, even if the system is trailing its rival in sales in the US. “Bad news has been flowing about Sony’s financial health all year. Its credit and debt ratings were downgraded in February on the heels of a massive quarterly loss,” IGN reported. “Such a financial reality caused Sony to outline new plans for the future while planning to layoff 10,000 workers. The maelstrom of bad news caused the New York Times to declare that Sony is in the fight of its life.” Sony may not be in a position to offer low-cost hardware, or to trim margins. That’s bad news for consumers waiting on a Vita price cut.

Unless a price cut happens in the mean time, Microsoft will have a less expensive Xbox 360 on store shelves, and Nintendo will have the benefit of buzz brought by new hardware during the holiday season. Sony is going to be sitting on a system that costs more at the entry level, trying to convince shoppers that the value proposition actually makes sense. It may if you’re more tech savvy, but the hard numbers are often more important during the Christmas season, and the lower the better. Nintendo and Microsoft have to be happy with this outcome; Sony has all but decided not to compete for 2012’s holiday dollars.