Michi Knows

It’s now being widely reported that Sony plans to cut the price of the PS3.

Cutting $50 to $100 off the price of the PS3 right now would mean that losses per unit would increase from the current estimate of up to $240 per console to over $300.

But do you know what makes this news worthy of a Stupid award if such a thing existed?

You don’t announce, leak, or even hint at price drops on a product before the drop actually happens! How many would-have-bought-it consumers is Sony going to defer while this rumor spreads? Nobody would buy their console if they believed a price cut of $50 was immanent.

And anybody that would buy it if it were $50 cheaper is going to buy it when the price drops either way.

So What Does Sony Think They Have to Gain by Leaking This Information?

Well, there is an upside, but it is proof that they are extremely, extremely desperate.

By announcing a price cut, you get current on-the-fence consumers to hold off on buying a competitor. So while Sony hurts their own sales by announcing this, their hope is to stall uptake of their competitors. They are hoping that they can stall the growth of their competitors, much like the person who screams, “If I can’t have it, no one can!!!!”

Of course, if this sort of strategy actually worked, everybody would use it. Nobody does because it’s moronic. By floating the news, you also give your competitors time to plan a counter-measure. And when I heard this news, the first thing I thought was, “Wow, here comes price cuts for the Wii.” The day Sony does the price drop, Nintendo and Microsoft would be ready to drop their machines by the same percentage, effectively killing Sony’s “edge.” A $200 Wii is a no-brainer. A $350 360 is an awesome deal. And that leaves the PS3 at a combined price of the Wii and 360 all over again; their advantage is gained and lost overnight.

Announcing, leaking, or hinting price cuts hurts you in every perceivable way. What is Sony doing?