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Sunday Showdown: Was dropping the 20 GB PS3 a sound decision?


The Saturday Sunday Showdown continues a day late again this week. We were just too busy playing games yesterday. Each week we'll pick a topic, flip a coin to see which OT writer gets which side to debate, and then we present it to you. This week? Whether or not dropping the 20 GB PS3 was a good idea.

Frank: This week, Sony announced that the 20GB model of the PlayStation 3 was going to be discontinued—a move that had been rumored for quite a while. I personally think that this was a good idea for Sony from a business perspective. The reality of the situation here is that Sony has been consistently losing money on the PS3 (and, to a lesser extent, in general), and by discontinuing the lesser-sold model, they're going to save themselves some much-needed cash. Given the target audience that Sony defined—the high-end videophile and tech enthusiast—the 60GB was already the preferred choice, so I see very little difference between "then" and "now" in the end; nobody was buying the 20GB anyway. This has been evident for a while now, as retailers were getting fed up with stocking the immovable units. Now you have one unit, one choice: this makes the entire buying process simpler, especially for those outside the target demographic that Sony specified who may have been intimidated by the differing versions. Ultimately, the 60GB has always been the "real" PS3, and with the growing interest in HDMI and high-def playback that apparently fueled the recently-announced Xbox 360 Elite, I believe Sony has done a smart thing that may end up keeping them afloat long enough to wade through the heavy waters of the system's current software drought.

Ben: Remember that Sony wants this to own your living room. Your PS3 is supposed to be your movie player, your web browser, your gaming console, your home for distributed computing (natch), and later they'll probably be rolling out the music and movie download services. There are many ways you can leverage the PS3 to make you money, and the only thing holding back the promise of all these profit pools is the challenge of getting millions and millions of these systems into homes around the world. After that, you can pump 'em for money as much as you want; it's the adoption that's the struggle. You need great games, good support, and of course you have to get people to think your system is worth the money. That's hard at $500, no matter what kind of consumer electronics you're selling. For a game console, it's even more difficult. Now that Sony's only choice for consumers is going to be a $600 console, many of these ideas and profit streams might never happen. No matter what the system can do, no matter what features it has, it's still $600 for what most people are going to consider to be a toy to play games. This is a de facto price increase, and it's being done by the console that's in the worst position to raise the price of their hardware.

Frank: This main concern—that the 20GB was the cheaper and thus the more-accessible entry target for those not totally convinced of the PS3's worth—should have been alleviated by the recent news that Blu-ray is doing well. All of a sudden, the Blu-ray drive has increased in value, and thus the PS3's inherent value rises. This newfound value makes the console an easier purchase to justify. The biggest obstacle with regard to overcoming the "it's just a toy" mindset is the need to somehow appeal to the audience beyond Sony's originally-stated target demographic. I've said it countless times: the core product isn't the problem with Sony's PlayStation 3 business plan: it's the ludicrous marketing campaign. They have a few good commercials—the MotorStorm one in particular elicits "oohs" and "aahs" from viewers that I've seen—but ultimately, the mass market doesn't recognize the value of the PS3. This is the fundamental problem with the product now, not its price. The people who aren't going to buy it at $600 because it's just a toy probably weren't going to buy it at $500 anyway, so it's a moot point. Ultimately, if Sony can focus in on selling the single SKU for the PS3 now and marketing it properly, then they'll do just fine (though of course, the software needs to be there eventually.) Choice may be good for the consumer, but I'd argue that simplicity is even more important and by simplifying the PS3 as a platform, it may open some eyes to the purchase as the value continues to rise.

Ben: Frank, who is the customer for this system? Think about everyone you know; how many of them are in the market for a $600 movie player? Blu-ray is doing good in relation to HD DVD at the moment, but when you stack it up against any other format, it's still in the very earliest stages of adoption. Those numbers jump up when the players get cheaper, not more expensive. When your average Blu-ray player is under $300, you're going to see a mass-market adoption of the format. Until then? It's boutique. It's niche. Killing the lower-priced model of the PS3 hardware pushed the system further towards a niche market. The value can be through the roof—you can throw in a few free movies, a game, an HDMI cable, and maybe a pizza or something—but $600 for a console is above and beyond what most people are willing to pay. The smart move would have been to drop the price on both models and then more aggressively go after the content market to get the profit margins up. This just further marginalizes the PS3, and makes Sony's future in gaming even cloudier.

So what do you think? Was the decision to drop down to one PS3 SKU a good one for Sony? Or is this just a "too little, too late" admittance of a mistake on their part?