Leave it up to the genius mind of Sony to remind us that the PlayStation 3 is nothing like the Wii. I’m glad they’re here to say so, because without them, I would have assumed they were exactly the same console. Sony Computer Entertainment Australia’s Managing Director Michael Ephraim finally made it all so clear:
Back to the Wii comment, we have to compare apples with apples. They do not have these kind of applications. We think PS3 is not a product to be compared with Wii, it is a completely different product. This is a digital hub, that is a games console.
If you want to look at comparisons with our other competitors, to maximise Xbox 360, you need Media Centre, you need a PC. And now if you want to play high-definition movies (and we can argue which format is going to win) you have to spend another $249. Xbox is significantly dearer than PS3 for what it can do straight out of the box. Then you have Media Centre, HD-DVD drive, wireless adapter.
People have to get to know this system, and they will realise that it delivers a much broader entertainment position than our competitors, and then the price becomes, to say cheap would be bold, an insignificant factor.
Hit the jump for the rest of the eye-opening interview from The Age Blogs.
Full interview:
At last week’s Australian media launch of PlayStation 3, Screen Play sat down with Sony Computer Entertainment Australia’s Managing Director Michael Ephraim to explore issues surrounding PS3’s unprecedented price.
As usual, Mr Ephraim supplied some eyebrow raising quotes: “Xbox is significantly dearer than PS3 for what it can do straight out of the box”, why the price “becomes an insignificant factor”, how PS3’s innovation will open up a “bigger market” than Wii, and how his BMW’s price tag is “completely obscene”.
The full interview transcript is below…
$1000 is an unprecedented price for a games console. You famously described Wii as pricey, why is PS3 good value?
I think anybody in the theatre today (last Thursday’s launch) that saw the applications that PS3 has would have been impressed. For core gamers, we have some killer new IP with MotorStorm and Resistance. You heard what Ted Price had to say about delivering the online experience for core gamers. So let’s assume we’ve ticked that box.
There is no product on the market that offers this kind of a digital content device and a Blu-ray player at this price. We firmly believe that once demonstrated, the price becomes almost insignificant. A Blu-ray player currently is $1500 and above. Just on the Blu-ray alone, there’s value. Research in America shows 75 per cent of the people that have bought PlayStation 3 intend to use it as a Blu-ray player. So that alone adds significant value to the device.
And of course Blu-ray is not just for movie playback. As you know, games will come out on Blu-ray which allows the developers to create whatever they want with 50 Gigs (of storage).
The other thing is, a digital hub in the home with such an intuitive operating system like the Cross Media Bar is just not available anywhere.
Back to the Wii comment, we have to compare apples with apples. They do not have these kind of applications. We think PS3 is not a product to be compared with Wii, it is a completely different product. This is a digital hub, that is a games console.
If you want to look at comparisons with our other competitors, to maximise Xbox 360, you need Media Centre, you need a PC. And now if you want to play high-definition movies (and we can argue which format is going to win) you have to spend another $249. Xbox is significantly dearer than PS3 for what it can do straight out of the box. Then you have Media Centre, HD-DVD drive, wireless adapter.
People have to get to know this system, and they will realise that it delivers a much broader entertainment position than our competitors, and then the price becomes, to say cheap would be bold, an insignificant factor.
Our task with retailers, with media, with whatever we do, is to get people to actually see the full suite of applications. When that happens, all the people I’ve talked to today say price is not even an issue.
Remember also that PlayStation 2 seven years ago launched at $749. So when we look at the price difference and what you get, again you think its pretty good value. And you saw what we did with PS3 when the volumes did hit.
But given that 99 per cent of PS3 buyers are going to have broadband, and therefore a PC, they already have a lot of the PS3’s functionality already in their home (photo viewing, web browsing, digital music, downloads, etc). Isn’t that a problem in regards to “value”?
But you have to look at what is the experience. You might have something, but you’re watching it on a 19-inch monitor in a room on a desk. What we’re delivering is PC applications, like being able to download content like movies, pictures, music, you can play DVDs or Blu-ray (which on PC is currently very expensive), and we offer it in the lounge room with 7.1 channel surround sound. PlayStation 3 sits in the lounge room for the family to enjoy the entertainment from computers in the environment that entertainment should be enjoyed in.
If they have a PC in the home, we think the PC will continue to be tasked to do the work applications and PlayStation 3 in the lounge room will be what they use for entertainment. We called it PlayStation because it’s not a workstation.
There are a lot of hardcore gamers out there, and these will be many prospective early adopters, who aren’t interested in anything but playing games. These people are paying a premium for PlayStation 3 over your competitors. What can you say to them to justify the higher price?
Our feeling is that it’s an investment. Blu-ray will give them a gaming experience far beyond what they can get right now. There’s a premium attached to that because it’s 50 Gigs of information available.
But we do need to look at that statement because core gamers I would think are into technology as well. Maybe it has not been a function that they thought was necessary, but once they see the simplicity of the other functionality, I’m sure gamers have digital content they want to utilise, and they will realise they can utilise this device in areas that they didn’t think a videogame device could deliver on. Maybe we can change the mindset of gamers.
Gamers are tech-savvy. As I said before, 75 per cent of those buying PS3, and they would have to be gamers, they know about Blu-ray. They want the best screen, they probably already have some sort of high-definition display, and the HD display J-curve is going through the roof right now in Australia. All I can say is that thing’s change. We have to be the agents of change to first explain what it does.
There are a lot of Australians who will look at the American and Japanese price of the PS3, do the currency conversion and think we’re getting a bad deal. GST and freight can’t account for the differences in price. What other factors make up the difference?
If you look at any other products it’s the same. I drive a BMW and I pay a price that is completely obscene – 80 per cent higher compared to the US. There are all kinds of issues here. Smaller population base, cost of doing business, tax, and so on.
Also, for the history of Sony Computer Entertainment, we report to London. Compared to Europe and the UK, we’re right in line. We can have an endless argument about who do you compare price with: US or Europe. If you compare to Europe, our price is spot on.
So that is a factor, and there are other cost implications about running a business in Australia. We do not have the critical mass, and that applies to all kinds of products in all kinds of categories.
It’s a long-standing debate, but I can assure Australians that we have in the past formats brought the price down as quickly as we could.
Consumers also need to understand that Sony has spent US$ billion on the development of the Cell chip, the R ‘n D for PS3, and the logistics of bringing this product to market. A lot of analysts have commented that Sony is losing money on this device every time we sell one. So at least we can assure the punters in Australia that we’re not ‘ripping them off’ if we’re selling it at a loss. We’re in line with UK and Europe, comparable products cost more in Australia, and we will do our best to bring the price down as soon as we can.
Speaking of that, consumers are very smart. Many will wait for the price to fall. But if everyone does, that creates big problems for Sony. Your revenues will be hurt, it’ll be harder to cost reduce from economies of scale, and third-party publishers will drop support. How can you stop this from happening?
Sony is very good at bringing future technology into a box. We’re wearing losses, but we’re very good at consolidating technology in a box, going from three chips to one chip or whatever, which they did with PS2. They are hard at work now looking at the manufacturing benefits they can gain to bring the price down over time. We’ve proven that we can do that.
But didn’t that happen because PSone and PS2 had healthy initial sales? What if that doesn’t happen this time – there’s a lot of talk about stock sitting on the shelves overseas.
But if you look at NPD just reported January sales, Wii was number one, PS3 and Xbox 360 were almost equal. There was stock constraints early in the piece, but as regards to stock sitting on shelves, you hear different stories from different people. I’ve got people in the US who say they can’t find it. Obviously if we do not deliver the units that is in our business plan we’re going to have issues, but we’re very confident that over the next year or so, we will deliver the product and consumers will buy those units.
We have been blessed by being first and innovative in PSone and PS2. We’re now not first, but we think we’re very innovative, so we have a job to do to ensure consumers buy the product to the levels that we are forecasting by demonstrating it and selling to different segments in the market. We think that we have more potential to do that than our competitors. Not knocking any of them, Wii is very innovative, but our innovation will open up a bigger market. High-definition screens are going to grow exponentially in this country, and Blu-ray movies, based on the support that it has, will be a winning format. That alone will create new sales for PS3 that as the (pretty much) pure gaming consoles that were PSone and PS2 didn’t have. The stars are lining up.
How many units are you going to have available at launch? The numbers thrown around this week (11,000) were not very high…
We will surpass that number by far. We’ve gone through every launch with this issue and I’m almost over this “day 1 quantity” problem because we’re talking Day 1 and then we’re talking another 10 years.
Well, can you tell me how many units you expect to sell this year?
We’re still in the process of doing our budgets, but I have been vocal in the past about what we will sell. I don’t have a number yet to discuss but I’m more than willing to talk about it early to mid March when I get my budgets firmed up.
But the 11,000 unit rumour, I will personally guarantee you that we will exceed that dramatically. That is just a completely incorrect rumour. Our pre-sales, and I’m not going to tell you that number today, exceeds that number already.
Our retailers all know the quantities that they are getting and 95 per cent of our retailers are saying “We’re going to go for it and push the hell out of this thing ’cause you’ve given us the stock. I’m very comfortable having been through three launches that there will be PS3’s out there in ample quantity, but we don’t know how big the demand is.
There’s a lot of demand for this product. Blu-ray player, HD device, how much sales does that add? But we are committed to keep bringing a consistent flow of stock to the market. I am just as confident, if not more confident, about Day 1 and the first few months than I was with any other format we have launched. I don’t think its going to be an issue. Eleven is way low.
