RAY MAGUIRE ON PS3 PRICE CUTS

Three Speech’s Steve Boxer interviews Ray Maguire, Sony Computer Entertainment’s UK managing director, about the PS3 price cuts. Over to Steve (and Ray).

So, as of next Wednesday, the PlayStation 3’s life will begin in earnest, at least in the UK, as it will finally be possible to buy one for less than £425 - £299, in fact, if you buy a 40Gb one with the card slots, two of the USB ports and, controversially, PS2 backwards-compatibility removed; or £349 if you fancy the bells-and-whistles 60Gb version with two games. We sought out Sony Computer Entertainment’s UK managing director Ray Maguire to talk us through this move and describe the thinking behind.

Before the outcries begin, let us say a few things. Of course, it’s painful if you bought a PS3 for £425 and can walk into a shop and see the same machine on sale for £349 – but all early adopters, of every single console ever released, had to pay a premium. And Maguire’s explanation that Sony now feels there are enough PS3 titles on sale – and enough seductive blockbusters in the pipeline for next year – to justify a version which won’t play PS2 games (oddly, PlayStation One compatibility still holds) is fair enough. And the move is about generating a bigger installed base for the PS3, which has a knock-on effect for all of us, as Maguire points out – the more PS3s there are out there, the more juicy PS3 exclusives we’ll get. Anyway, here’s the full transcript of our interview with Maguire.

Q: So the PS3 as of Wednesday will come in two skus: a 40GB entry-level one at £299 and a 60Gb Value Pack at £349?

Ray Maguire: I’ll take you through it. We’ve been listening to our consumers over the last few months, to find out what they feel about PlayStation 3 and some of the barriers to getting into the next level of gaming. Quite clearly, although there has been a massive uptake in PlayStation 3, there is a bigger swell of opinion underneath which says: “I really want to get into PlayStation 3 but it’s just too expensive.” With that in mind, we went back and had a look at how we could get that entry-level price down.

What we’ve done is create a brand new sku, which has a 40Gb hard disk, and we’ve taken out some of the components from the 60GB sku. The first things we took out were the Memory Stick slots. And we reduced the USB ports from four down to two. We’ve taken out backwards-compatibility as well. The reasons for doing these things are thus: with the memory slots, there are many peripherals on the marketplace now which give you all that functionality at a reasonable price. As far as USB is concerned, USB hubs are now widely available and also extremely cheap. So people who want that functionality can upgrade if they choose.

Regarding the backwards-compatibility issue, we felt it was reasonably important at launch, when there weren’t that many titles on sale, that backwards-compatibility was included to some degree in the PS3. There is a cost associated with that for us though. We feel now, going into Christmas, with about 65 titles, there is sufficient choice that instead of looking at backwards-compatibility, we can use that money better to get the entry-level cost of gaming down. What we have now is a 40Gb PS3 with the features I’ve just been through at £299.

Of course, not everyone wants to have different devices underneath their TV. So the other offer we’ve got is that the Starter Pack that we’ve got at the moment, which has an extra controller and two games, is being replaced by the 60Gb PS3, with just one controller and two games, for £349.

Q: Are all the original components on that 60Gb version?

RM: Yes: that’s with the fours USB ports, the memory card slots and backwards-compatibility.

Q: Is the 40Gb PS3 backwards-compatible with PlayStation One games?

RM: Yes. When we launched, we said we would focus on forward production rather than backwards-compatibility, but there was more of a need for backwards-compatibility six months ago. So, from here on in, there are no plans for backwards-compatibility in PlayStation products.

Q: Was this price-cut eased by the recent Sony Japan IPO?

RM: I can’t really comment on that, because I don’t know about the internal workings of what they did with that finance.

Q: So it’s purely a UK initiative?

RM: This is a PAL territories initiative, so it’s European, although I have to say our 60Gb offering is UK-only.

Q: Obviously that puts you in much better shape for the Christmas market. Have you revised your targets regarding how many PS3s you want to sell?

RM: Clearly there will be an uplift in sales as more people gain entry to the PlayStation 3. There’s no uplift in our forecast, as we forecast this many months ago, and it’s been three months in production, so you can see how far ahead we have to plan to bring these things to market. But the most exciting thing here is that people now have a choice of how to get into the marketplace: I think £299 is a great price-point for the world’s most powerful high-def gaming machine and Blu-ray movie player.

Q: Recently, the PS3 and Xbox 360 have been pretty neck and neck, until Halo 3 came out, and the Xbox 360 had a sales spike. Are you looking to outsell the Xbox 360 for the rest of the year?

RM: Obviously, there was a big price differential between us and our competition, and that has now been eroded. With that, and looking at price elasticity, one would expect us to start outperforming them, yes.

Q: What are the heaviest-hitting first-party titles you’re lining up for Christmas?

RM: For me, the most exciting are Ratchet & Clank and Uncharted: Drake’s Fortune. One because these products are starting to become more cinematic and story-based. And then as far as Ratchet is concerned, I think the environments are just absolutely glorious, and start to show what you can do when you tap some of the Cell chip’s power. Because we only have to focus on the PS3, I think we can be a little bit more pure in how we produce our games. I think you’ll see another example of that in Killzone next year and in GT5. I think that transition starts now. We had a great start with MotorStorm and Resistance: Fall of Man, but then it seemed that we went back a bit, as we were looking at people who had already developed on other platforms. Now, I think we start to stand up again, with some of our first-party games and some of the third-parties who are starting to make the change to focusing on PlayStation 3. Giving an installed base over Christmas will help that investment – will help those people commit the amount of money that’s required for PlayStation 3 development.

Q: And LittleBigPlanet and Home must be vitally important for you next year?

RM: Yes. We’re investing a huge amount of money here to get this entry-level price-point. And I think it’s worth it, because loads of people will enjoy what is available already. But PlayStation 3 is such a complex machine with so many features that you only start to unravel them after you’ve been playing on it for some time. I think once people have got through Christmas and the early months of next year, they’ll be ready for some of the new games and features that will start to bring it even more to life.

Q: Sony has taken flak on the internet for the PS3’s price – even from people who were committed to the PlayStation brand. Do you think this price-drop will help bring them back into the fold?

RM: Yes I do. But price is a big issue for everyone. You only commit to something once you decide it’s worth it. For the early adopters, they are the ones who understand every part of our product and what it can do. For the people who are one step behind on their understanding of what PlayStation 3 can do, price is a big factor. But we’ve listened to that, we’ve reacted to it, and we’ve produced a product which addresses all those needs.

Q: And the two new PlayStation 3s will be in the shops next Wednesday (10 October)?

RM: Yes.

Q: Will it be obvious in the shops that there are two different PS3s on sales?

RM: Yes. They come in different boxes, and they’ll be clearly differentiated.

Q: Will people be able to choose which two games they get with the 60Gb version?

RM: Where retailers can, that will be possible. They have a list of games from which consumers can pick and mix. But some retailers don’t have the ability to do that, so they will formulate their products and deal with two defined games. The retailers are thrilled, because this year had an amazing start. But this is our first Christmas with PlayStation 3, and it’s exciting to be going into Christmas with a competitive and aggressive price-point. Already, the year was shaping up to be the biggest ever year for gaming, and I think with this news, it will definitely now be the biggest year in gaming history.

Q: Nintendo has said that there may be shortages of Wiis at retail this Christmas. But you’re not anticipating any shortages of PS3 inventory are you?

RM: We’ve always had the right amount of stock – we came into criticism for having the right amount of stock at launch, bizarrely enough. But again, this is about doing the right thing for the consumers.