[quote name='K_G']I'm not picking a fight, but just looking at gross dollars isn't that helpful.
I don't know what Sony's costs are for building/distributing/retailers cut on the PS2 is but I'd hazard it somewhere around $70-80 per unit, so lets say its $75. At $130 MSRP, that means Sony would be getting 'gross profit' (not covering overall marketing costs, other corp overhead, and Sir Howards plane tickets back to the UK each month) of $55 on each unit. at $100 MSRP, that 'gross profit' is only $25
112,000*$55=$6,160,600
172,000*$25=$4,300,000
Even if you work at the PS2's net cost being at $60, the numbers still don't look all that great either.
112,000*$70=$7,840,000
172,000*$40=$6,880,000
Even if you work at the PS2's net cost being at $90, the numbers still don't look all that great.
112,000*$70=$4,480,000
172,000*$10=$1,720,000
Now if new PS2 users enter the market at the new hardware price point, and they buy new games, Sony makes additional revenue through games sales (which can grow their overall profit faster than at the previous higher PS2 hardware price point). However, if these new users just buy a bunch of used games at Gamestop or are current customers who have just replaced older hardware without buying additional new games, then some of these new purchases are not all that helpful towards Sony's overall bottom line. Given the smaller level of shelf space/just a handful of new PS2 releases in the future, I think this is likely much better news for Gamestop than Sony.
But that said, this is only one month of data and it is quite possible that sales could grow at a faster rate as time progresses, but it is clearly not the slam dunk you think it is.
If you cut your margins in half, you need to DOUBLE sales vol. to just EQUAL the net profits at the old price[/QUOTE]
You're right about having others $ take in. However, you're not taking into account how much lower sales may have fallen (not to mention the 172,000 was in 4 months to 112,000 in 5 months). Yes, there was Easter, but that seemed to have no effect on any other consoles.
You're also not taking into account whether Sony could have lowered the amount that others get off each system. I would not be surprised if they could do this since others would make it back because more systems are being sold. They also may have made some further reductions to production costs too. I didn't say it was a slam dunk, I've said it was a good idea. Say they did not do the cut and this month went down to
90,000.
112,000*$55=$6,160,600
90,000*$55=$4,950,000
172,000*$25=$4,300,000
Then add in the amount of software sales made at 172,000 compared to 90,000. Say each of those groups bought 5 games on avg eventually where Sony made $15 on average from each game (this takes into account some not buying any, some buying more, less, etc).
$4,950,000+(90,000*$75=6,750,000)= 11,700,000
$4,300,000+(172,000*$75=12,900,000)= 17,200,000
And what if net cost was $50? You would have an even smaller difference between each sales comparison before taking into account software sales.
90,000*$80=7,200,000
112,000*$80=8,960,000
172,000*$50=8,600,000
Then factor in software.
Also, factor in getting more people buying and becoming familiar with the Playstation brand who may then decide to buy a PSP or PS3 in the future, who avoided their competitors system's when buying PS2 and avoiding competitors in the future.
