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Behind the price cut: The long, strange saga of the $599 PS3

Kyle Orland

If the recently rumored $100 price cut for the PS3 turns out to be true, it will end the era of one of the most controversial pricing moves in the history of consumer electronics.

The writing was on the wall early on, with former SCE President Ken Kutaragi hinting way back in July 2005 that he hoped gamers would "work more hours to buy [a PS3]." When the price was officially announced at Sony's E3 2006 press conference the first wave of ridicule was practically immediate. Kutaragi's comment that the price was "too cheap" for what consumers were getting just stoked the fires, leading at least one Joystiq blogger to call the company "out of touch." Hey, $599 is pretty cheap if the thing is made of uranium.

Yet by launch time there were some signs that the high price wasn't really a deterrent. Despite some launch window reviews saying the system "just isn't worth it yet," the initial stock of PS3s sold out to mobs of fans who waited in the November cold to drop up to six Benjamins on a game console. Many of those who managed to get one of the limited initial allotment put them up on eBay, where some fetched ridiculously inflated prices. Maybe $600 was a bargain after all.

The holiday magic wore off quickly, though. First the online demand began to wane. Then reports that some stores had stockpiles of systems began the filter in. Early sales numbers in North America were decent, if not dominant, but the PS3 lagged in comparison to the competition throughout early 2007. The news was even worse in Japan, where the Wii routinely outsold the Xbox 360 and PS3 by large margins. Some at Sony hoped the delayed European launch would bring better sales numbers for the electronics giant, but initial enthusiasm was tempered when British sales dropped precipitously just one week after the early fanfare.

With sales lagging, the calls for a price drop came fast and furious from analysts, developers, consumers and, um, more analysts. Despite reports that Sony was already selling the hardware at a heavy loss, rumors persisted that better laser supplies or streamlined production could lead to a lower MSRP (indeed, Sony's production problems just recently ended).

Officially, Sony maintained for a while that there was no pressure to drop the system's price and that they had no plans to make an adjustment. Game Informer even got SCEA chief Jack Tretton on the record saying that PS3 price cuts would not be as soon or as drastic as the PS2's.

But the bluster soon gave way to realism. First came word from Sony President Ryoji Chubachi that a price drop was a "possibility." Then came a comment from Sony CEO Howard Stringer that the company was looking to "refine" the price. In the news business, that's what we like to call a trial balloon.

If the PS3 price drop does come on July 15, the system will have spent 236 days at its initial price. For historical comparison, the PS2 took 565 days to drop from $299 to $199, while the original PlayStation took 250 days and the original Xbox took 181 days to make similar drops. The GameCube took 176 days to drop from $199 to $149 while the Dreamcast took 245 days to likewise fall. On July 15, the Xbox 360 will have gone 600 days without a price drop in North America.

If the rumors are true, Michael Pachter gets the clairvoyance award for his May prediction of a "summer" drop. Goldman Sachs' March call for an October drop would fare less well.

What about the rest of the world? The price in Japan was slashed before the system even launched, and an unnamed "senior executive" said back in January that more cuts could be coming. Europe recently saw a smaller price cut from at least one retailer and some say an official reduction will come within the year. Others say it's just inevitable. And they're right. If there's one thing you can count on with technology, it's that the price will always be lower at some future date.

[Special thanks to Matt Matthews for some research help.]

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