Sony Allows Retailers to Profit on PSP Go
If you’ve found yourself longing for the kind of high caliber exclusive content that only PlayStationLifeStyle can deliver, well friends, you’re in luck.
Back when the PSP Go was first announced, retailers far and wide pulled no punches when expressing their discontent towards Sonys new money maker. Not only does the Go demand more at the register than retailers believe consumers are willing to part with, but the business model on which it’s based fundamentally succeeds at depriving retailers of profits they’ve come to expect from the sale of software. Of course Sony disagrees and even tried spinning the Go’s premium price to appear in both the consumer and retailer’s best interests. Despite the negative feedback, all but a few who refused to buy into Sony’s corporate rhetoric agreed to stock the Go on their shelves, but why?
Since Amazon’s not-so-great-but-hey-it’s-something price cut hit the airwaves, and the most recent Fry’s ad appeared in our inbox, we’ve been a little skeptical as to exactly what incentive retailers have for shaving up to $50 off the MSRP. At the time, it was assumed that the Go, like all other consoles before it, was sold at cost and offered retailers a non-existent profitable margin, leaving the sale of software and accessories to fill that void. However, the following images, sent to us by an anonymous tipster whose name may or may not be Micheal — wink, wink — has convinced us of the contrary as they tell a very different story.
If you haven’t already noticed, the regular and employee price of all gaming hardware are identical with the exception of the Go (and the PS2, but more on that later), which is offered to employees a solid $13.74 less. In addition, it’s currently believed that the price Bestbuy pays for products in contrast to the employee price is a difference of 5%. Based on these figures, we consulted our recently hired for situations such as this in-house mathematician who scrupulously calculated the amount Bestbuy pays for the Go, revealing a price point of approximately $224.76. Essentially, this shows that because profit margins on software are expected to reside within the scope of $4 to $10, the PSP Go offers Bestbuy potentially higher profits than they would ever receive from the sale of a few games.
It’s hard for us to understand why some retailers would be unhappy with the Go’s introduction considering it seems like they’re getting a pretty sweet deal. Previously, because consumers can opt to buy software or accessories from a different store in search of a cheaper price, any profit made off the sale of these goods with the purchase of hardware wasn’t exactly guaranteed. The PSP Go alleviates that problem by giving retailers a definite supplementary profit stream.
With regards to the PS2, we can only speculate that because it’s growing a little long in the tooth, and software sales or profit margins aren’t at the level they use to be, Sony has granted retailers a small profit to be made as a way to help balance things out.
Of course, it wouldn’t surprise us if Sony was giving Bestbuy and other significant, high volume retailers (read: Amazon, Walmart, etc.) a price break on each unit while leaving low volume, less influential retailers to pick up their slack, which would explain why we have yet to hear any complaints from the former. Nevertheless, this entire situation which stems from the fact that the PSP Go no longer depends on physical media prompts a serious, thought provoking question: could a digital download oriented future cause prices of video game consoles to remain high and the occurrence of price drops to become increasingly less likely as a way to offset the loss retailers experience from the absence of physical software? Hopefully they can work something out before it’s too late.