Activision CEO Warns Sony That the PS3 Needs a Price Cut

Bobby Kotick, President and CEO of Activision, one of the largest game companies in the world, has come out with a none-too-subtle warning to Sony that they need to seriously consider a price drop on the Playstation 3. Rumors have been circulating for months that such a drop was forthcoming, but Sony has staunchly denied that they had any plans to drop prices, Kotick said, "The PlayStation 3 is losing a bit of momentum and they don't make it easy for me to support the platform. It's expensive to develop for the console, and the Wii and the Xbox are just selling better. ... They have to cut the price, because if they don't, the attach rates [the number of games each console owner buys] are likely to slow. If we are being realistic, we might have to stop supporting Sony." While it's unlikely that Activision would follow through with such a threat, it definitely adds to the pressure Sony is feeling to lower the PS3's price. Sony issued a brief response which said nothing of consequence.

Comments

When planning on lowering prices, best to shut up

[BadAnalogyGuy]

Sony execs aren't dumb. They aren't going to announce price cuts until they happen.

http://en.wikipedia.org/wiki/Osborne_effect

The PS3's problem is lack of games.

[yourassOA]

Not being overpriced. The 40GB models are comparable in price to an Xbox and it is a simple matter to change the HDD . Mine is 320GB.

Re:The PS3's problem is lack of games.

[macshit]

Hmm, not sure I agree.

My typical procedure is to pick up a console when I come across a game I really want. I think that while the PS3's game lineup is hardly the best history's seen, it has some pretty good stuff. But every time I think "oh maybe I should just get it", the price of the console itself smacks me in the face and I end up thinking I'll just wait.

There's a vague price threshold below which I buy stuff without worrying too much about the price, and the PS3 is comfortably above that threshold. It isn't a impulse purchase, and I think that in many cases, that's the kiss of death.

What % of people will buy with lower prices?

[Anonymous Coward]

As someone who's been around since the Atari 2600/Intellivision/ColecoVision days, this is the first generation of consoles that I've skipped buying. And as a prior owner of a 3DO, that says a lot. Why? Two reasons.

1) This generation of consoles feels like too small of an improvement over the last to justify the purchase.

2) With the enjoyment of seeing a generational leap in graphics being non-existent, I feel like, for the first time, I can turn to any one of the billion casual gameplay sites out there for a quick 10-minute to an hour gaming fix at no cost.

Sure, I still play an Oblivion, a Half-Life, or a Fallout once in a while, but for the most part I like getting a quick fix and moving on to something new the next day, week, or month. Casual gameplay sites (for now, anyway) let me do this extremely cheaply.

I'd probably look into getting one of this generation's consoles for $100. Money isn't the issue, the enjoyment:money ratio is.

Re:What % of people will buy with lower prices?

[sznupi]

That's a misconception originally promoted by some to feel more elitist, I guess, and nowadays mostly to point fingers at consoles and yell "they dumb down our games!"

There are also "hardcore" (as you put it...whatever that means) games for consoles. And there was more of them in the past. As is the case for the PC.

Simply an effect of marginalizing early and "mid" adopters, now that both types of platforms have became much more mainstream.

Also, thank MS for bringing them so close together that it's "obvious" for publishers to aim games for both. Which means: the need to be compromise on both platforms, cutting out things that work great on one, but are not really doable on the other. "Jack of all trades..." and all that...

Activision BLIZZARD can afford to be dicks.

[Sarusa]

Why does everyone just say 'Activision'? Uneasy about dragging your beloved WoW into this? It's Activision Blizzard, and that 'Blizzard' along with Call of Duty and Guitar Hero are why Kotick can afford to be the huge raging prick he is.

He's got a long history of being a total @#$hole to squeeze profits, and it's worked. He's the reason you're going to be paying for Starcraft II three times instead of one, no matter what lame excuses they feed you. He's got no compunctions about selling you multi-hundred dollar overpriced plastic controller sets to go with his games while he complains about PS3 prices. His unbridled douchebaggery works quite well, at least in the short run, and it might work in the long run because Blizzard can get away with anything.

Now of course he knows that Activision Blizzard paid Sony $500 million dollars last year in per-game royalties and other crap, and I'm sure he's looking to shave some of that. That's what this is really about. And Sony is vulnerable - just the suggestion that a major publisher could drop the PS3, even if they wouldn't, is hugely damaging when they're in third place in the largest markets. I'm sure fanbois will sneer that they don't need Activision, but someone's sure buying their stuff on PS3.

I'm not giving them any money because of the Brutal Legend fiasco (part of Kotick's deliberate cockmongering), but I realize that's sort of quixotic. In general you people (forgive my broad brush) will continue to bend over and spread wide for Call of Duty and WoW and Starcraft and Diablo III.

Re:When planning on lowering prices, best to shut

[DrXym]

Sony execs aren't dumb. They aren't going to announce price cuts until they happen.

Especially with a slim model on the way. Anyway its fairly likely what Sony will do since they've done it before. When the new model appears they'll dump the price on the old model, bundle the new model with some goodies and sell at a premium. Then when the old are cleared out, unbundle the new model and continue selling at the new lower price.

Developing for Cell Processors . . .

[PolygamousRanchKid]

. . . is probably a royal pain in the ass. Any /. Cell developers care to comment?

Kotick said, "It's expensive to develop for the console." Read that as time, people and money, when compared to other platforms.

I would think that Sony would be bending over backwards to support developers.

OS/2 was a better OS than Windows, but there were not enough applications for it, so folks flocked to Windows.

I'm curious to hear how the Cell development environment is: "Great, Challenging, or Run Away!"

Re:Developing for Cell Processors . . .

[hattig]

The majority of the cost of writing a game is in media creation, not programming. Media = textures, videos, 3D objects and animations, maps, structures, music, sound effects, etc.

The media can be reused across different platforms - typically 360, PS3 and PC. A Wii version might use scaled down versions of the same media.

On top of that, you usually develop a game on top of a game engine, so if you re-use that engine across titles, the per-platform development cost goes down even further.

The PS3 has plenty of games, many of then unique to its platform. Its sales rate is the same as the 360 across the world, and if you exclude the USA it's outselling the 360. The 360 does have a year's headstart on its side, hence its 7m extra sales. Most game developers have got the hang of the PS3's hardware to the point where the games are now no worse than the 360, with promises of more improvements to come.

If anything, this entire article says more about the standard of programmers at Activision.

However I do think a price drop on the PS3 hardware would benefit everyone. I do suspect that they're creating a slim-line version using 45nm components. This is when the sales will take off (as with the PS2 slim), especially if GT5 launches at the same time. Right now Sony must be making a profit on the hardware, given how much the price of BluRay drives has dropped.

Re:When planning on lowering prices, best to shut

[madsenj37]

The wikipedia article you point to has Sony benefiting from the reverse-Osbourne effect. When they announced the end of PS2 hardware emulation in the PS3, sales of the 60 GB PS3 with PS2 Hardware soared.

Re:When planning on lowering prices, best to shut

[BadAnalogyGuy]

Yes. As I said, Sony execs aren't dumb. They leak info that helps them.

Osbourne effect:
company: Next generation models are going to be faster, cheaper, and better!
consumers: We should definitely wait for the next one.

Reverse Osbourne effect:
company: Next generation models are going to slower and less featureful!
consumers: Oh shit! We better get while the getting's good.

Re:Politics wouldn't have anything to do with it,?

[Anonymous Coward]

Bzzt. Try again.

Nobody outside /. cares about the fact that Sony is part of the MPAA and RIAA.

Sales are down because just about everyone that's willing to buy one at $399 has already done so. Sony is just playing chicken with the fence-sitters, because they know they can get more money if they wait it out.

Personally I plan to buy one the minute it goes under $350, and I don't care how long it takes. Longer just means more good+cheap games in the greatest hits collection.

Re:attach rate info is wrong

[Xest]

Unfortunately reality seems to disagree with you.

http://kotaku.com/5222086/ps3-attach-rate-overtakes-wii-attach-rate

From a year ago:

http://playstation.joystiq.com/2008/04/25/npd-releases-home-console-attach-rate-ratios-ps3-not-so-hot/

There has not been any period at all where the PS3 has had a higher attach rate than the 360 and it's only just very recently managed to overtake the Wii.

The closest I could find to your claims was this:

http://www.gamasutra.com/php-bin/news_index.php?story=23186

But it really doesn't make any sense, attach rate is number of games purchased per console, not number of units of certain cherry picked titles sold per console. I suppose if you're completely unobjective and a total Sony fanboy you might take away from that in your mind that Sony has a higher attach rate, but if you step back and be objective and look at the first link you'll notice that regardless of what Sony says and how they twist a few figures the cold hard truth is that they do have a lower attach rate even when adjusted for console lifetime on the market. Nintendo could play a similar game to Sony taking games that were really built for the Wii but ported to other consoles anyway and suggest they have a higher attach rate, but still, the reality is that they don't. Effectively what Sony is abusing is the fact they have a much lower selection of titles on their system, so the good titles get a higher ratio bought for their console than for the other consoles, but this makes no sense because attach rates aren't about specific individual titles. It also ignores the fact their system has sold much fewer of the titles they've cherry picked overall too which should be the real measure of per-game success on each platform. If they have sold less of a specific title because they have a smaller install base that doesn't mean anything in terms of how well they're doing, in fact, it only exagerates the problem of having a smaller install base. If you can make up for that smaller install base with greater profits from game sales (i.e. real attach rates) then you may be able to live with that, but the problem is Sony is struggling in terms of both install base AND attach rates. It looks like they're improving things on the attach rates front, but they're certainly nowhere near Microsoft and they're certainly even further from having a big enough lead on attach rates against Microsoft that they can make up the profit differences from a lower install base.

At the end of the day all a publisher like activision sees is the amount of profit gained per console they publish for, and the fact is, Sony's mangled statistics don't change that one bit, it's simply an attempt at improving PR.

Really, if you have any sources that show the PS3 really does have a higher attach rate than the other two consoles rather than a bunch of cherry picked mangled stats that actually have nothing to do with attach rate because attach rates are game neutral I'd love to see it, but I've yet to see anything that shows this and certainly nothing from independent and product neutral sources like NPD.

I don't expect you to change your mind and accept that Sony doesn't have the highest attach rate, because the fact you came out with that unsourced and clearly untrue comment in the first means you're probably not open to the idea that the PS3 isn't doing as well as it should be but it seems silly to leave such an incorrect comment uncorrected. Still, if you can somehow prove your comment then I'll step back and accept I stand corrected but mangled statistics that are effectively meaningless from the marketing department of the company you're referring to don't really count for obvious reasons, it needs to be objective 3rd party stats that really tell us something about profit from games sold per console.