INTERVIEW WITH DAVID REEVES - THE UK VALUE PACK

A certain amount of confusion has reigned since Sony announced that the price of the 60Gb PS3 has been cut by $100 in the US – while in the UK, potential PS3 purchasers will instead get a Value Pack, which throws two games and a second Sixaxis controller into the mix, but leaves the PS3’s RRP at £425. Part of the problem was caused by Sony’s initial reluctance to point out that the 60Gb PS3 is being phased out in favour of an 80Gb model in the US, so effectively, the $100 price-cut will only be temporary.

But the fact remains that while a PS3 officially costs £425 in the UK (albeit bundled with more kit than the Americans get), for a while, it will cost just £250 in the US. We thought that the best thing to do would be go straight to the horse’s mouth, and managed to catch up with Sony Computer Entertainment Europe’s President, David Reeves, who provided a reasoned argument as to why we haven’t had a price-cut in the UK yet (it’s partly because it would annoy everyone who has already bought a PS3) and provided some strong hints that it won’t be too long before we do get a PS3 price-cut over here. Here’s what he said:

Q: So why didn’t we get a PS3 price-cut in the UK?

David Reeves: If you’re a consumer — and we introduced the PS3 in March for £425 or 599 Euros – let’s say you bought one at the end of April and have been using it, playing Resistance: Fall of Man and MotorStorm. We’ve only been on the market for three and a bit months. Our thought process was: “Wait a minute – we’re actually not doing too badly – we’re not selling as well as Wii or DS – but seasonality-wise, compared to, say, PS2 at the same time we launched it in 2001, we’re actually doing quite well on a regional level”. It’s exactly the target that we sought. July is not really a gamers’ month unless you get a big, big title. So we thought if we reduced the price, we’d annoy a lot of people. We did think about it, but we also felt that it wasn’t doing that badly. In the US, they’ve been going for more than six months, so they took the decision that going down in price was a better thing to do than a value pack.


Q; The fact remains that right now, if you want to buy a 60GB PS3 over here – admittedly with an extra controller and game – it will cost you £425, but in the States, it will cost £250. That raises the spectre of grey-market imports, which Sony has been tough on in the past. Is that something that worries you?

DR: The value in there is £120 to £125. We know that most people, anyway are going to buy two to 2.5 games. So when you do the maths, it’s going to be $499, which is £250, plus two games and a Sixaxis controller. So that’s going to come up to £380 to £390. But there’s VAT in Europe, so you have to take 15 per cent off, and there’s GST in the US, and the average sales tax is 8.5 per cent. So when we did the maths, and this is the case in Australia as well, they are exactly the same. We could have omitted the Sixaxis controller and just put two games in, but it wasn’t enough – we wanted to have a level playing field. But not drop the price – because we believe that dropping the price in the summer doesn’t work.

If you drop the price in the summer, the sales rate goes up for a couple of weeks, because there’s not much demand out there, and then the sales rate comes down again until you get to the end of September/the beginning of October, and it all starts to heat up. We’ve had more success doing that either earlier in the year, in March, or later in the year, but doing it in the summer just hasn’t worked for us. We’ve tended to do these starter or value-added packs, and people have come out and said: “You know, that’s not bad”. That keeps us going in the summer. But we realised we had to – to use an old Chris Deering expression – take some air out of the tyres to get to the next level.

Q: But a spanner in the works is that GameStation, pre-Value Pack, were selling PS3s for £399 with a game. There must be something going on when retailers voluntarily slash their margins. Do you think we’ll see more retailers dipping under the £425 RRP?

DR: I think, in the UK, yes. In the UK, there’s intense competition. The situation in the UK is unique – it is so competitive. People are going to come out at £399 with a game, to get people into the store to buy another game and another game. That’s the name of the game. In France, for example, you can’t do that because there’s a law on price-control. In Germany, they hold the prices – you can even go onto amazon.de and they won’t pull the prices down or put offers in. In Switzerland, too. Even in Russia, they’re not discounting. I do think that the UK is a unique situation and you’re going to see all sorts of deals.

Q: Everything you’re saying indicates there will be a price-cut before Christmas – can you comment on that?

DR: We don’t plan these things just from one week to the next –we look at these things in the context of an overall plan and overall budget. Our plans are in place – we know exactly what we’re going to do and when we’re going to do. I’m not going to answer your question, because that would get me into tremendous hot water. But we have a plan and we’re going to stick to it. We are confident but not arrogant about reaching a very, very good installed base on PS3, and having the same momentum that we had with the PS2. We’re not putting our heads in the sand – we know it’s not selling that well, but we know that it’s selling according to the targets.

Q: You’ve spoken about how the PS3 will begin to prevail over its rivals in March 08 – do you think the PS3 will be a major contender this Christmas?

DR: I think each peak is crucial to maximise what you can do, but I don’t think this Christmas is necessarily the most critical one – I think that’s going to be Christmas 08. I see this more as kind of like a tsunami – it starts small and gathers speed, and eventually, after four or five years, it will start to take you over. At least, that’s the way we’ve mapped it out. We’re not necessarily trying to take a scatter-gun approach with all the top titles just before Christmas. Again, it’s like reducing the price in summer – we don’t believe it works to put six or seven of our own games out [at Christmas], because consumers don’t have enough money to buy them all. And the trade doesn’t quite know where to put all the top titles. So what you’re going to see is that we might put some of our jewels out in February, March, May and right through the year. We call them pillar titles. I think, probably, that third parties will try to put their pillar titles out before Christmas, because that’s where they get the best sales. But we have a slightly different approach.

Q: What are the big first-party PS3 games that really stand out for you beyond Killzone 2?

DR: They haven’t been announced, but I’ll give you the thought process. We now have, every quarter, something called Gameshow where we all get together globally and look a what Worldwide Studios are producing. Now, we don’t see every game at every session, but every session, we see five or six new IPs which we can rate. I can, hand on heart, say that there are six or seven such games, coming in the next 18 months, which are absolutely spectacular. There are some that are very emotional – one of the objectives we gave Phil Harrison is to make people cry. We know that in the middle and the back end of next year, these are going to come out and people will say: “I have never seen anything like that before”. We just have to be a little bit patient – there will be more God of Wars and so on. What has been remarkable is that there was a crash programme to put games ion the PlayStation Network – LittleBigPlanet was originally designed for that. We’ll see that some of them will be online, but some will be done as full-blown games. We started that programme over three years ago.