PlayStation Vita: 'Sony Can Afford to Lower The Price'On June 6, Sony invited hundreds of journalists into the Los Angeles Memorial Sports Arena for its annual pre-E3 press conference. The place was packed. Even worse, it was hot, the result of so many warm bodies crammed into tiny seats, an untold number of cameras and little to no air conditioning.
Not that it mattered. Despite tributaries of sweat inching down our backs, we sat there impatiently awaiting news on the company’s upcoming handheld, PlayStation Vita, specifically the price. Almost three months prior, Nintendo had released its 3DS at $249.99, which drew plenty of criticism from both fans and analysts who were quick to accuse the big N of both arrogance and poor judgment.
Knowing this, Sony was put in a strange position. The publisher clearly had the superior hardware, a portable device just a few steps below PlayStation 3 in terms of raw horsepower. Many expected the system to cost at the minimum $299, and that was the unit being sold at a loss. How else could Sony compete while delivering a five-inch OLED touch screen, a rear touch pad, SIXAXIS control and a host of other high tech features? Three hundred. Seemed like a done deal.
"Diehard Sony fans will be there at launch to buy this device but I doubt it can appeal to the broader consumer at the current price point." - Asif Khan
Well, the system did cost $299 if consumers wanted 3G. Everyone else, we heard, could pick up a Wi-Fi only Vita for just $249.99.
The place erupted as Sony executives basked in a sea of flashbulbs. Just $249.99, the same price as 3DS. This wasn’t madness. It was the bargain of all bargains. At that specific moment, Sony made us believe the handheld war wouldn’t be as lopsided as the previous battle between DS and PSP; roughly 150 million DS systems compared to 72 million PSPs.
Looking back, that presentation feels like ancient history. Two months later, Nintendo dropped the price of 3DS to $169.99. Then, in October, Apple released a 16GB iPhone 4S at $199, and Amazon entered the tablet market in November with Kindle Fire, also retailing at $199. And during that time, Sony went from being competitive to having the most expensive handheld on the block.
Whether or not this is an issue as we approach the machine’s February 22 U.S. and European launches depends on whom you ask.
“We have the most powerful handheld device on the market,” said Kyle Shubel, Sony Computer Entertainment America’s executive producer of international software development. “The OLED is the best screen available. One million to one contrast ratio blows anything else out of the water. Couple that with the fact that we have the most sensitive SIXAXIS controls. We also have the front and rear camera. We are made for games. We can do a lot of other stuff, but games are the life of the Vita.”
He may be right in that regard. We spent considerable time with Vita’s launch games, and were impressed with high quality titles like Uncharted: Golden Abyss, Wipeout 2048 and Lumines: Electronic Symphony. One thing’s certain: Vita is one incredible piece of hardware.
That doesn’t mean, however, that consumers will bite. In 2005, Sony was successful selling PSP (the company’s first portable video game system) at $249, but at the time, DS was the only form of competition.
Today, we have iPhone and Android powered smartphones, tablets from a variety of manufacturers (more notably Apple with iPad 2), and of course, Nintendo and its 3DS, the handheld nearly left for dead five months ago – the same 3DS that surpassed the first year of DS sales in just eight months.
That aside, most feel Vita is a well-built machine. There’s no concern over lack of quality.
“The Vita is probably fairly priced on a sum of the parts basis,” said Asif Khan, CEO of Panoptic Management Consultants. “It seems like Sony dumped all of its intellectual property on the table and jammed it into the device. That being said, $250 is a lot of money for increasingly cash strapped consumers. You can get an Amazon Kindle Fire for less, and that $200 price point is definitely the line in the sand for a lot of consumers.”
Well, at least it was, back in the days of Sega’s Dreamcast (1999) and Nintendo’s GameCube (2001), neither of which are handheld systems. The majority of Nintendo portables, by contrast, have sat in the $100 to $180 range.
Of course, not everyone has a problem with Vita’s price.
“The current pricing structure is reasonable,” said EEDAR analyst Jesse Divnich. “Keep in mind, of course, that the mark-up retailers place on accessories is quite high. In fact, accessories carry the largest margin across any product line-up, with markups two to three times the retail cost. Of course, since retailers do not make any money from the sale of hardware, it would be expected they make up the loss of margin in other categories.”
Sony, without question, mastered this with the original PlayStation through DualShock controllers and memory cards, a practice it continued on PlayStation 2; who can forget the infamous horizontal stand?
In fact, the company hopes most Vita owners will rush out to stock up on memory cards, which come in 4GB, 8GB, 16GB and 32GB sizes that some feel come at the expense of their wallets. The 8GB card, for example, will retail for $39.99. It’s in stark contrast to the $199 iPhone 4S that comes with 16GB of storage built in.
Sony’s Kyle Shubel defends this decision.
“We know gamers are on a budget. It’s their choice whether they want a 4GB or 32GB card. We didn’t want the price to go up because of something players may or may not use.”
Not a bad philosophy. We expect Vita games to be in excess of 500MB, so the decision to nix built-in storage appears smart.
Consumers, however, have a different opinion. Consider these reactions from readers, pulled from portable gaming site, Modojo:
“What REALLY REALLY BUGS ME is the price of those memory cards! 25 dollars for 4 gigs of memory is literally the most insane thing I have ever heard. You can get an entire PS3 system with 160 gigs of memory for the price of a Vita with NO memory.”
“They [Sony] are forcing you to buy their expensive cards. So we have a more expensive system, required Memory Card purchase, and maybe more expensive games.”
Not everyone, though, has a problem with the memory cards. If anything, they feel things balance out in the long term.
“Price of the PSV games that are most expensive are on par with 3DS at $39, but you can save a few bucks by downloading it if you want, so this argument is moot.”
Asif Khan disagrees.
“The pricing of the proprietary memory cards will also discourage a number of consumers that just want things to work without add-on costs,” he said.
“Diehard Sony fans will be there at launch to buy this device,” Khan continued, “but I doubt it can appeal to the broader consumer at the current price point.”
This ultimately begs the question, can Sony afford to drop the price? Let’s say the publisher runs into the same wall Nintendo encountered with 3DS, where gamers refuse to purchase either the $249.99 or $299.99 systems. Faced with that sort of pressure to appease shareholders sooner than later, there exists the possibility that Sony may have to take drastic measures to prevent Vita from being a disaster. Is such a thing even doable in less than a year without severe consequences?
“Sony can afford to lower the price of Vita,” said Khan. “The impact would be negative, but that is par for the course at Sony these days. Sony is so big that I am not so sure Vita is the answer to the company’s problems. I continue to think that a management change is required.”
“It all comes down to content, and with strong third-party support, Sony should be able to delay any accelerated price drops,” added Divnich. “Competition is always a concern, but if Sony can release high-quality titles backed by a strong marketing campaign, we see no reason for failure.”
Unless demand for smartphones and games are so high that Sony’s about to walk straight into a buzz saw. Granted, PlayStation Vita games look nicer than what is normally seen on the iPad 2, but we’re not sure casual players will feel compelled to introduce yet another device into their homes, especially with iOS and Android graphics advancing at such a rapid pace.
“In a world where you have iOS and Android games that are damn near free,” said Khan, “software has to be abundant and of a high quality.”
“Another problem Sony and Nintendo face in making handhelds is that smartphone graphics processors are getting better at an alarmingly fast pace,” said Khan. “Both 3DS and Vita could be left in the dust graphically in just a couple of years, but at least they have the precise controls that come with buttons and an analog that most touch screen smartphones have failed to recreate.”
In the end, it all comes down to having the best software. It would seem Sony has taken great steps to ensure a stellar launch lineup, arguably the best we’ve ever seen.
“You guys are going to love this lineup,” said Shubel. “There is nothing to bat an eye over when it comes to games being available, not only on PlayStation Network, but on game cards. People will be challenged figuring out which ones to buy.”
“Whichever vertical you’re in, there will be choices. You’ve got great shooters, sports titles and adventure games. There’s so much to choose from. It’s the strongest lineup we’ve ever had.”
That sounds wonderful, but will it be enough? We look forward to picking up our systems on launch day and spending hours playing Escape Plan, Ultimate Marvel vs. Capcom 3 and FIFA Soccer 12, but can Sony attract a big enough crowd to make Vita a success, and will they do it with the priciest handheld on the market?
“The Vita is the perfect platform to satisfy the needs of hardcore gamers who enjoy technologies with superior bells and whistles,” said Divinich. “For a tech geek, the Vita is hard to pass up.”
“When it comes down to it,” Shubel finished, “you have a very powerful device that’s dedicated to games. Price is an advantage. You could buy two Vitas for the cost of an iPad.”
Khan was less than enthused.
“I wouldn’t be surprised to see the 3DS outperform Vita in sales next year as Nintendo’s cheaper device was given a head start and can ramp up software releases. Missing the 2011 holiday sales season could prove to be a big mistake by Sony.”
To that end, he offered Sony this advice:
“Invest in a time machine, go back to when they were in the development stage of Vita and make it a smartphone.”
Ultimately, we’ll find out how well PlayStation Vita performs in the coming months. Can Sony release enough first party content to keep players interested? Will third parties deliver top-notch software? Can everyone involved leverage Vita’s many strengths?
Sony must answer yes to all of these questions. Otherwise, it’ll be the one sweating.
