Letter to the Editor: ‘Dancing Together: xBox, PS3, and Wii’

timjsmith

Tim J. Smith, PhD
Founder and CEO, Wiglaf Pricing

Published October 1, 2007

I wanted to comment on a couple things from, ‘Dancing Together: xBox, PS3, and Wii‘.

Fist of all I’d like to respond to when you said, “In other words, Sony isn’t interested in offering multiple version of the PS3 but is willing to increase its costs by adding a larger hard drive while not increasing the price.”

Actually, I don’t think this is exactly accurate.  The additional 20 GB is an obvious difference between the old and new mode, and certainly the difference which Sony is promoting.  However, this isn’t the only change.  Another change will actually reduce costs for the newer model.

Like the European released PS3, the new 80 GB Model does not include the “Emotion Engine”, hardware that allows Playstation and Playstation 2 games to run natively on the hardware.  Instead, it will rely on software emulation in order to play the older games.

The typical price difference between a 60 GB and 80 GB drive is very insignificant.  It’s safe to assume that the difference in price between the 2 drives is far less than a $100.  I have no information on exactly how much money is being saved by the omission of the Emotion Engine, however I strongly suspect that the savings outweigh the additional cost of a 20 GB larger hard drive.

This change might also account for some of the increase in sales.  I have not seen any published data comparing the sales of the 2 models, however I think that some of the surge in sales isn’t simply a matter of price reduction but rather many of the more tech-savvy consumers being persuaded to pick up the cheaper PS3 before the Emotion Engine is phased out entirely.  I won’t go as far as to say that this is a primary sales motivator, but I believe it is a factor.

All in all this generation is shaping up to be quite an interesting battle, seemingly being won by one company that chose not to play the same game of the competition.

Anyway, it was an interesting read.  Thanks,

Christopher Lafferty,
Long-time video-game and enthusiast and general technophile.

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About The Author

timjsmith
Tim J. Smith, PhD, is the founder and CEO of Wiglaf Pricing, an Adjunct Professor of Marketing and Economics at DePaul University, and the author of Pricing Done Right (Wiley 2016) and Pricing Strategy (Cengage 2012). At Wiglaf Pricing, Tim leads client engagements. Smith’s popular business book, Pricing Done Right: The Pricing Framework Proven Successful by the World’s Most Profitable Companies, was noted by Dennis Stone, CEO of Overhead Door Corp, as "Essential reading… While many books cover the concepts of pricing, Pricing Done Right goes the additional step of applying the concepts in the real world." Tim’s textbook, Pricing Strategy: Setting Price Levels, Managing Price Discounts, & Establishing Price Structures, has been described by independent reviewers as “the most comprehensive pricing strategy book” on the market. As well as serving as the Academic Advisor to the Professional Pricing Society’s Certified Pricing Professional program, Tim is a member of the American Marketing Association and American Physical Society. He holds a BS in Physics and Chemistry from Southern Methodist University, a BA in Mathematics from Southern Methodist University, a PhD in Physical Chemistry from the University of Chicago, and an MBA with high honors in Strategy and Marketing from the University of Chicago GSB.

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