Rafi Mohammed

Long lines, Customers With Open Wallets: Sony Should Have Raised the Price of the PlayStation 3 Right? Maybe Not…

Posted on December 20th, 2006 (0 Comments)

It was a real buying frenzy. Gamers set up camps outside electronics stores days before the on-sale date, police were on hand to control excited crowds, and there was a sense of gleeful anticipation…all in hopes of purchasing a Sony PlayStation 3 (PS 3) on its November 17 release date. As the television cameras rolled, lucky customers gloated about the profits they would earn from reselling the hot holiday gift of the season. My dejected friends, whose kids had listed the PS 3 on the top of their holiday wish list, moaned that they would have to purchase a PS 3 from a reseller - no doubt at a healthy premium. It truly became ingrained in our psyche...the PS 3 is hot. All of my economist friends shook their heads in disbelief and mumbled their demand/supply mantra: “raise PS 3 prices.” I must admit, with all of the hype, I too wondered if Sony should have set higher prices.

Curious about how hot the PS 3 really is, I checked out the reseller market on eBay today. EBay has a nice feature that allows you to review completed auctions. One caveat is that these completed auction results include those where the product did not sell (e.g., reserve was too high). I found that approximately 90,000 auctions had been completed to date and as a rough estimate, a PS 3 was sold in approximately 55% of these auctions. So to date, approximately 50,000 PS 3s have been resold on eBay.

While eBay is arguably the top outlet to resell PS3s, there are other avenues such as Craigslist and AmazonAuctions. Let’s assume that the sum of these “other resellers” sold 50% of what eBay sold. So in total, 75,000 PS 3 units were resold on the market.

Sony claims to have shipped 400,000 units to the U.S. for the November 17 release and pledged to ship one million units by the end of the year. Skeptics claim that Sony is not meeting these shipping targets. So, let’s assume there are 500,000 PS 3 units in the U.S. today.

Given these back of the envelope assumptions/analyses, approximately 15% of all PS 3s shipped to the U.S. were resold. And while the first few days after the launch PS 3s were commanding $1,400 + premiums (often including extras like games), today (a little over a month after the launch) $150 premiums are the norm…not exactly “going to Disney World profits.”

I guess I’m surprised…given all of the hype, I had expected far more PS 3s to be on the resale market and longer lasting premiums...perhaps Sony did set the right prices for the PS 3! What do you think?

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