How high-price marketing can win in gaming consoles
Tags: Microsoft, Sony, Games, Gaming, XBox 360, Playstation 3, Marketing
We here at Blackfriars like to say that low price strategies are the first choice of bad marketers and the last refuge of good ones. There's some evidence of the truth in that statement in the current rumors about pricing for next generation game consoles.
I noted Sony's high-price Playstation 3 (PS3) strategy -- namely entering the market next year with a just sub $500 platform versus Xbox 360's rumored $299 price point -- in yesterday's posting about XBox 360 challenges in hitting its Q4 launch date. The Inquirer today has an insightful article about why this strategy might actually work for Sony.
So bottom line, by this time next year, we'll have at least two next-generation gaming platforms slugging it out in the market. XBox 360 will have a three to four months lead in the market (best case -- as we've noted, there's lots of risk and little slack in Microsoft's development and launch schedule), and a likely pricing advantage of around $150 or so. However, XBox will have updates required to develop all of its features -- it was announced this week that Xbox 360 will feature DVD-HD disk drives, but won't have those in time for Christmas this year. And Microsoft will likely be selling Xbox 360 at a loss of between $50 and $100 per console.
PS3, on the other hand, will enter the market in a more complete and less huried launch, a higher-performance platform with backward compatibility with PS2 games, a more mature and debugged development platform, a larger stable of games and developers, and a lot of time for good marketing. And the high price, rather than putting buyers off, is likely to create a premium value halo around the product, while allowing Sony to break even or make a small profit on every console it sells.
Clearly Sony believes that low prices are the last refuge of the good marketer. The question is whether Microsoft understands that concept yet.
We here at Blackfriars like to say that low price strategies are the first choice of bad marketers and the last refuge of good ones. There's some evidence of the truth in that statement in the current rumors about pricing for next generation game consoles.
I noted Sony's high-price Playstation 3 (PS3) strategy -- namely entering the market next year with a just sub $500 platform versus Xbox 360's rumored $299 price point -- in yesterday's posting about XBox 360 challenges in hitting its Q4 launch date. The Inquirer today has an insightful article about why this strategy might actually work for Sony.
When the PS3 arrives it will be – by all accounts – technically superior to the Xbox 360. Sony wants this one to last 10 years – twice that of the PS2 – so expect it to be packing everything but the kitchen sink.... you're only going to be buying one over the course of a decade. At worst, that's around £25-a-year for one of the most eagerly anticipated electronic devices on the planet. So, when people have an online spasm over the projected cost of the PS3, remember that obsessions have no price limit and kids have no patience. They'll be using every suck-up and emotional blackmail technique to ensure Mommy and Daddy and Step Mommy and Step Daddy have their chequebooks at the ready. After all, it worked for the PS2.
So bottom line, by this time next year, we'll have at least two next-generation gaming platforms slugging it out in the market. XBox 360 will have a three to four months lead in the market (best case -- as we've noted, there's lots of risk and little slack in Microsoft's development and launch schedule), and a likely pricing advantage of around $150 or so. However, XBox will have updates required to develop all of its features -- it was announced this week that Xbox 360 will feature DVD-HD disk drives, but won't have those in time for Christmas this year. And Microsoft will likely be selling Xbox 360 at a loss of between $50 and $100 per console.
PS3, on the other hand, will enter the market in a more complete and less huried launch, a higher-performance platform with backward compatibility with PS2 games, a more mature and debugged development platform, a larger stable of games and developers, and a lot of time for good marketing. And the high price, rather than putting buyers off, is likely to create a premium value halo around the product, while allowing Sony to break even or make a small profit on every console it sells.
Clearly Sony believes that low prices are the last refuge of the good marketer. The question is whether Microsoft understands that concept yet.
posted by Carl Howe at
1:42 PM
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