Wii VS PS3

A presentation on the most updated TV game players

Agenda

• Introduction of the Products

• Pricing strategies used by both producers

• Strengths and weaknesses of 2 products

• Recommendation and Conclusion

Comparison between Wii and PS3

Wii PS3

Producer Nintendo Sony

Size 55.4 mm (W) x 44 mm (H) x 225.6 mm (D)

(size of 3 standard DVD cases)

325 mm (W) x 98 mm (H) x 274 mm (D)

Remote Wiimote +

(Nunchuk /

classical

controller)

WirelessController

Backward compatibility

Nintendo

GameCube

Most of the PlayStation and PlayStation 2 games

Comparison between Wii and PS3 (Con’t)

Wii PS3

Disc Driver -Slot-loading disc drive

(for Wii Optical Discs & GameCube Optical Discs)

-Blu-ray disc drive**

(for Blu-ray discs, DVDs, CDs and SACDs)

Built-in Memory 512 MB 20GB or 60GB

Other storage SD Card

(Up to 2GB)

Memory Stick / SD / Compact Flash

(60GB version only)

Connectivity WIFI**

Bluetooth

WIFI

Bluetooth

Comparison between Wii and PS3 (Con’t)

Wii PS3

Output Up to 480p(NTSC) or 576p (PAL/SECAM), will work with any TV or projector

Up to 1080p

->HDMI Output

Number of Product Versions

1 (But Planning to develop another version with DVD-player)

2(Basic-20GB

Premium-60GB)

Target Customers Families (Including girls and elderlies)

Hard-core (less than 10% of the market)

1st selling Date and Price

November 19, 2006

USD$249.99 November 11, 2006Basic-US$499Premium-US$599

Video Watching

Pricing Strategies of PS3 & WiiPricing Strategies of PS3 & Wii

Price

Xbox 360 PlayStation 3 WiiLow- end model $299 $499 n/aMainstream model $399 $599 $249

Pricing

Xbox 360 PlayStation 3 Wii1st Party Release Price

$49.99-$59.99 $59.99 $49.99

3rd Party Release Price

$49.99-$59.99 $59.99 $49.99

Game

Price below cost(PS3)• Sony loses: 20GB model : $306.85 60GB model : $241.35 (According to Electronics supply chain researcher iSuppli)

• Pricing significantly below cost

• Is it cheap enough to establish a critical mass of installed base?

Public’s reaction(PS3)• High launch price ->much criticism from analysts and developers

• Ubisoft’s president has warned “Sony must be prepared to drop the price point of the PS3 in 2007.”

• Highest price among the three

-> Significantly more expensive than Microsoft's Xbox 360 -> less expensiveless expensive than PS3 EVEN bought alongside external HD-DVD drive

Price strategy• Sony Computer Entertainment head Ken

Kutaragi said “We don't say it's a game console, the PS3 is

clearly a computer unlike PlayStations so far."

(According to Japanese computer magazine PC Watch)

• PS3 as a computer platform - with new features and capabilities on a constant

basis

• Problem with computer strategy: - prices do not come down

Pricing strategy

• General practice

- not upgrading to the latest technology

- prices fall significantly over time

• Sony’s strategy:

- continuous upgrading in processing power and capability

- no great fall in price

• Sony is pushing “the envelope of innovation”

- Newness of the technology

-> console expensive to assemble

-> components in short supply

Problem:• Do consumers see it as a computer?• Are they willing to pay the price of a computer

for PS3?

Ans: customer’s value on processing power, capability and graphic

Two-sided market for PS3

ExpensiveHardware

& software

A small baseof consoles

Software houses notwilling to write

games for the system

HighManufacturing costs

Price (Wii)

Wii’s pricing strategy

• Cheapest among the three

• High hope to a much larger installed base

-> new game players

-> current game players

• Cheaper game price

Two-sided market for Wii

Cheap Hardware& Hit games

A larger baseof consoles

More software housesMore gamesBetter games

Drive downManufacturing costs

PS3 is coming!!!

• Why PS3? – Expensive – Limited games

• What are PS3’s strengths?

• Is it very attractive to you?

Strength of PS3

PS3 is in possession of advanced technology:

-> amazing Graphic and Processing power

-> so-called “Engineering masterpiece”

Strength of PS3

• Price below Cost!Price below Cost!

• PROMOTION!!!Sony is aimed to create a profitable cycle in long-run: More PS3 sales = More games sales = More profit

IF it is true.

HD-DVD (Blu-Ray too) is pricing at about $1000.PS3 is pricing at $599. Like PS2, you use play station to watch DVD.

Strength of PS3

• Who is going to purchase PS3?

The answer is: Hardcore CustomersHardcore Customers!

PS3 is highly focusing on their Hardcore:

Sony could be familiar with customers’ taste

Game can be very very interesting and real with no need to worry about complicated controls, because customers are experts!

• Will PS3 be successful in the future?

Not Sure!

PS3 has its obvious drawbacks.

Weakness of PS3High market price:“The high version price of PS3 is $599!!!”

• prices of PS and PS2 :$350• Xbox 360: $399 (high version)

The cost of PS3 is extremely high.

So, why is PS3 so expensive?

Weakness of PS3According to iSupplimost costly components:

Misc. Com&Manu: $148Reallty synthesizer: $129Blu-Ray drive: $125CELL CPU: $89

The cost of Xbox360 = $715 The cost of Xbox360 = $715 The cost of PS3 = $840The cost of PS3 = $840

Difference between Xbox360 and PS3: Blu-Ray drive

Weakness of PS3

QUESTION:

–Is Blu-Ray REALLY REALLY worthy producing?

–Do customers really need Blu-Ray?

–Do customers really want Blu-Ray?

Weakness of PS3NeedNeed or or WantWant?

What kind of benefits can Blu-Ray drive bring to us?

1, High-quality of the picture

2, Huge storage space

3, Fast processing speed

What kind of games benefit most from the Blu-Ray drive?

1, RPG/ARPG game (Role-playing Game)

2, First-personal visual angle game

• Final Fantasy XIII

RPG

Devil

May

Cry 4

First personal

Weakness of PS3

• Do a higher-quality of picture mean a better game?

• Do you feel uncomfortable while using several CDs for FF10?

• Do you want to buy an expensive PS3 for playing expensive games?

Weakness of PS3

There is a very important thing to mention:

Human’s eyes are not as sensitive as ears! To achieve a obvious advanced graphic quality: You have to buy a HDTV!!!

Anyway, the cost related to purchase of PS3 is really too high. Don’t forget, Microsoft is selling Xbox360 for $399.

Weakness of PS3Even the price is high, Sony is losing money from every product it sells.

– PS3 mainly focuses on Hardcore customer, which is only equal to 10% of the total market

Because PS3 is for Hardcore, its control will be very complicated and hard to master. Then it will be not approachable for new players.

Weakness of PS3According to a survey made by Yahoo Japan:

– only 7.74% Japanese customers are willing to buy PS3,

– however more than 70% of them claim that they won’t buy it or buy it later when PS3 is making a discount.

Can Sony succeed in selling PS3 for around 4 million?

CEO feels a little sad, so he changed the numbers into 2.3 million.

Weakness of PS3

• more than 200 games for PS2 is not compatible with PS3, how do the hardcore customers deal with their PS2’s games?

Sony is not afraid of that they will throw PS2’s game away, but they get fear of that they won’t buy PS3 finally!

Now, games for PS3 is very limited, and developing new games need more money and long time.

Weakness of PS3Even existed games, are there anything else attractive for players besides high graphic quality?

->Still, the essential question is: Is Blu-Ray really wanted by consumers?

-> PS2 : the sale of PS2 with DVD function (double media pattern) ->pretty successful and marketable. ->because DVD was already popular at that time

-> PS3: Blu-Ray (single medium pattern) -> was not widely accepted by consumers -> still a new concept

•PS3’s revolution is PS3’s revolution is RISKYRISKY..

Who is Sony’s competitor?

Microsoft/ Nintendo

PS/Xbox: target consumers are same

“Two dogs fight for a hone, and a third runs away with it.”

-----A smart strategy made by Nintendo

Strength of Wii

Wii : $249.99!!!

• Nintendo makes a profit when every Wii it sells• CompUSA lists its cost for the Wii at $237.50• While Nintendo’s actual cost is likely closed to $200.

Strength of WiiPS3 & Xbox360: fighting for hardcore’s market shares

Wii: focus on different target consumers: Senior citizens, girls, kids, people over 25 years old

Hardcore: less than 10% of the market!!!Also, Hardcore can play Wii for fun!!!

Peter Moore, the vice-president of MSMS, says: people will buy two consoles, one is Xbox360, the other one is Wii.

Phil Harrison, the president of SCESCE, also says: people will buy two consoles, one is PS3, the other one is Wii.

Strength of Wii

Because of its own target consumers, Wii’s characteristics are:

–Cheap consoles and games!–Easy to play!–Funny games!

not complicated and no need for high graphic quality

–A brand new experience of playing game!

Strength of Wii

• Low cost

• Simple to control

• Large demand

• New experience of playing games

Suggestions to PS3• Backward compatibility should be enhancedBackward compatibility should be enhanced -> only few PS2’s games are compatible to PS3

-> problems had been found when using PS3 to play famous games like Final Fantasy, Tekken 5 of PS2-> Special controllers like the guitar

controller of Guitar Hero of PS2 is not compatible for PS3

• If PS2’s games are compatible to PS3, then there will be more choices of games.-> this may boost the sale of PS3

• Focus on Players’ experiences than Focus on Players’ experiences than just quality of visualjust quality of visual

-> HDTV is not yet popular-> player nowadays concern the amusements of the games than the visual excitement

• If Sony can develop games for leisure players (like girls or families), it can have higher market shares.

• Product differentiationProduct differentiation

-> There are only 2 versions of PS3 now

-> 20GB Basic & 60GB Premium

• If SONY can develop more versions like different color / slimmer console which are limited versions (just like PS2), then more customers can be attracted by these special product.

Conclusion• Profit Margin -> PS3: High price

Price below cost Market share < Wii

High licensing price for game developers

-> less game will be developed -> less network effect

-> Wii: Low price as low cost

Higher market share lower licensing price for game developers

Prediction of Winner:

References

• http://www.gamasutra.com/php-bin/news_index.php?story=10122

• http://www.gamesindustry.biz/content_page.php?aid=18078

• http://www.gamasutra.com/php-bin/news_index.php?story=11740

• http://home.btconnect.com/hgi/nintendo-ds/wii-games.html

Q&A