PS3 super slim could "shift the tides in Sony's favor"

PS3 "super slim" (PS3-4000) has been rumored for some time now, and it's starting to look more real. While the new PS3 doesn't appear to be making its official appearance at gamescom next month, the rumors suggest a 16GB model based on flash memory for possibly as little as £99 ($150). If Sony does indeed go forward with the aggressive pricing move, it could have a huge impact on Sony's competitors and the industry as a whole.

"A dramatic price reduction to $150 for PS3 would be terrific for Sony and for the industry overall.  A value-priced PS3 could rapidly increase the base and would free up more consumer revenue for higher software sales volume," M2 Research analyst Billy Pidgeon commented to GamesIndustry International. "Sony already has a strong edge in Europe, but the economy is weak and generous hardware price cuts will have big impact.  Microsoft would suffer deeper market share loss in Europe and with value pricing PS3 could outsell Xbox 360 in the U.S. where Microsoft has dominated monthly hardware sales."

"I think that the success of the 4GB Xbox 360 should have been emulated a long time ago"

Michael Pachter

"Microsoft is less likely to reduce console prices this year with already strong hardware sales and Halo 4 coming out in Q4, but should Sony price PS3 at $150 this year, Microsoft could see stronger incentive to cut Xbox 360 prices sooner in retaliation."

Michael Pachter, analyst for Wedbush Securities, believes Sony should have taken action with a cheaper PS3 SKU a while ago.

"I think that the success of the 4GB Xbox 360 should have been emulated a long time ago.  You're right that flash memory is cheap enough to allow Sony to price pretty competitively; I don't know how badly it will hurt Xbox, given that the PS3 has been cheaper than the core Xbox 360 for almost a year without significantly cutting into market share. However, a cut to this price range would almost certainly prompt a response from Microsoft, and if both of them are significantly cheaper than the Wii U, they will impact sales," he told us.

"This sounds logical to me. I think that Sony is probably spending around $150 to make the box without the hard drive, so selling at £99 would likely be below cost, but it's possible."

Lewis Ward of IDC Research is excited by the possibility of the PS3 super slim, but he also believes that selling for anything less than $200 would be foolish for Sony.

"I think it is a big deal if the 4000 SKU as currently outlined is real.
Things are moving fairly quickly in the console hardware space right now and this design appears to be a major step toward making game consoles like plug-and-play living room appliances and set-top boxes. Storage is moving to the cloud. Not only does it allow for software piracy checking but it's more efficient (and saves money) since many HD console owners today don't wind up using all the onboard memory they have. Of course, Sony could also sell add-on memory.
 I have no idea about the bill of materials but my understanding is that flash memory is disruptively inexpensive to manufacture. I don't think it makes a lot of sense though for Sony to deliver a SKU that retails for much less than Microsoft's 4GB Xbox 360 bundle, ~$200," he remarked.

"If these rumors are true, it could shift the tides into their favor into 2013"

Jesse Divnich

"Perhaps this offering will be Sony's final bid to drive up the PS3 installed base beginning this holiday season before turning its attention to the PS4. If the SKU proves popular it could push the PS4 launch window back to late 2014. I also think the PS3-4000 as outlined will put more pressure on the Wii U because then both its major competitors will have fairly compelling entry-level SKU priced in the $200 range. They'll be competing in Nintendo's historical kitchen as it were."

EEDAR's Jesse Divnich agrees with Pachter that a cheaper PS3 akin to the 4GB Xbox 360 is overdue, but he also questions the rumored price tag.

"The potential for new hardware seems plausible this far into the PlayStation 3 launch, and most certainly the PlayStation 3 has suffered by not having an entry-level SKU.  I am, however, shocked by the rumored price. If these rumors are true, it could shift the tides into their favor into 2013," Divnich said.

"Currently, the entry level SKU represents about 20 percent of Xbox 360 sales, which throughout the year adds up to a significant amount of units.  A competitor at the entry-HD console price point would not only benefit Sony, but the entire industry. It would be a move that the industry would welcome, but again the price point seems a little unbelievable."

If the pricing does turn out to be completely off, Sony could always use the strategy of bundling more into the SKU, Pidgeon noted. On the other hand, if the pricing is roughly accurate, then what happens to all the inventory of the current model in the channel? "Managing the price of the stock in channel and at Sony warehouses of the current version would be a balancing act," noted Nick Parker of Parker Consulting.

What is clear, even if PS3 super slim doesn't bring about a $150 console, is that a PS3 price cut is waiting in the wings. "A price drop of the current PS3 has been built into most end of year forecasts anyway," said Parker.