The Price Of Success

I’m not a fan of analysts. For those who haven’t a clue why, an analyst is someone paid to predict the way a certain market will turn. They’re paid to make guesses basically. The very best analysts aren’t the ones who make the most accurate guesses though, they’re the ones who push the market in a single direction. Of course, not all analysts are in a position to push the market in different directions like that and as the position of an analyst is mostly behind closed doors we rarely get to see them in action. It’s because of this that analysts have been commenting on current events in their field to any news organisations that will listen, partly to boost their own image and partly to show the people that their wisdom is solid. Of course, there’s a fine line between honest insight into a market and damned foolish statements.

It almost feels like Sony designed a product for a world where smartphones and tablets don’t exist. It costs more than most phones and the same as most gaming consoles. It is hard to say who is the market for this. You have to wonder how big a misstep this may be for Sony and does this mark the last of these type of devices?

Hmmm, I wonder who the market could be for a high-end standalone handheld gaming device that links to the PS3 for a host of features. PS3 owners perhaps? With 60 million of them out there waiting to be tapped into, a market is definitely there. How about owners of previous PSP hardware? Many of those don’t own a PS3 and would be likely to upgrade their handhelds then possibly move on to the home console as a secondary purchase to support the handheld in other ways. Of course it costs more than most phones as the hardware involved is more expensive than that used in most phones. The only phones that are on par with the hardware used in the PSP Vita cost well over twice what the handheld costs if bought off contract. If the analyst is counting on contract prices then he really should be adding in the prices of those contracts for their terms as they all heavily subsidise handsets. It’s almost as if our tech analyst was simply trying to come up with something to make himself sound clever ad get people agreeing with him, but surely that can’t be the case? Gartenberg then went on to say that Sony might want to consider a price cut as Vitas would be flying off the shelves at $79 or $99 each.

No Shit Sherlock!!!

Who could have guessed that a piece of hardware that is currently selling at $249-$299 would probably sell better at a third of the price or less? Next you’ll be telling me that luxury sports cars will sell better at £50 than £750,000. A reminder here, Michael Gartenberg has been in the tech industry as an analyst for ten years. Somehow in that ten years he has forgotten how things work. Sony are already taking a loss on every single PSP Vita sold and are hoping to make it up in games sold. As the price of the hardware goes down and the user base increases (which inevitably leads to more games sold) they’ll be recouping that money and eventually moving into profit with the device. It’s a risk that tech companies like this take all the time and the prices are calculated accordingly. Sure, the PSP Vita would probably sell many more copies at the $79 mark but that would equate to Sony losing much more money on each console and needing each consumer to buy dozens of games simply to get their initial loss back rather than the one or two that the current pricing reflects.

You’d think an analyst would know all that. Instead he’s decided that soundbites are more important than the reality of the business he’s trying to analyse and regressed to the level of “that bloke on the street who talks loudly but doesn’t really understand what he’s talking about”. As a bloke on the street who invariably knows what he’s talking about, I’m holding off on the PSP Vita until it hits a comfortable price level of £100-£149 which is about half what it is now and about twice what Gartenberg thinks it can sell at.

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