Sunday, May 8, 2011

The Death of the Playstation?

In case you missed it, the online system of the Playstation --Playstation Network, or PSN-- was hacked in the last week of April. It was a big fiasco, as thousands of credit card numbers and various other forms of user information was stolen, and Sony had to shut down the PSN entirely, leaving many people without a way to watch movies or play video games. However, what's worse, recent reports indicate that much of the information has been released by the hackers online, and Sony announced that they would not be able to re-initiate their online system until a later, undefined date. How does this relate to economics? It's a prime example of a situation that would cause people to substitute products. Commonly, the theory states that a person will replace a product they are purchasing for something less expensive, and sometimes inferior, especially if their income changes suddenly, but what happens in a situation like this? Surely, some people will temporarily, if not permanently, move to another medium of entertainment, inferior or not. Surely, Microsoft will see an increase in users of the Xbox and their online system, or Nintendo, with their Wii and online system. Basically, the sudden lack of demand for the Playstation is leaving a vacuum that will naturally be filled with the supplies of the video game alternatives available. A similar situation seen in the past would be the situation that Peter Pan Peanut Butter found themselves in a while back. Reports of Salmonella kept popping up due to consumption of that Peter Pan brand. Naturally, people replaced the Peter Pan Peanut Butter they usually purchased with another brand of peanut butter, at least until the Salmonella scare had passed, but I'm sure some people ended up finding themselves fancying their new peanut butter from then on, whether because of continued fears of illness, or because they preferred the taste. So, too, will some people permanently drift away from their Playstations.

-Zander Mapes

6 comments:

  1. Zander, while I do agree with you that this PSN hacking fiasco is terrible for Sony and great for it’s competitors, I do not necessarily agree that this is “The Death of the Playstation”. Although demand and as a result sales of the Playstation 3 will be down for a long time because of this fiasco, companies have come back from controversies that have been just as bad if not worse than this one, so there is no reason to believe the PlayStation will be any different. In fact awhile back a Playstation competitor, Microsoft’s Xbox 360, suffered a setback which was arguably worse, when a hardware malfunction that broke consoles effected almost half of the 360’s out on the market. Since then as a result of a superior product and a genius marketing campaign the Xbox 360 has come back stronger than ever and is now the highest selling gaming console. The Playstation’s sales benefited greatly from this controversy as a substitute and it’s sales grew, just as Xbox’s will now after the PSN fiasco. Also this controversy and the subsequent negative publicity associated with the Play station will only provide more incentive for Sony to make the Playstation 3 an even better product, which will better help the Playstation survive this catastrophe. Though I doubt that the Playstation 3’s comeback from this fiasco will be as strong of that of the Xbox, I do not believe that this fiasco will result in the end of the Playstation 3 gaming console.
    - Andrew Velvin

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  2. This "fiasco" is a good example of outside factors that have nothing to do with price that affect the production and sales of a product. Playstation never could have seen this coming. Now they are suffering great losses due to the actions of hackers, not of themselves. I agree with Andrew through,I do not see this as the end of Playstation. They have a wide range of products and a dedicated consumer base. If they are smart they will find ways to come out of this on top by making security on their products better than that of their competitors. They are going to have to upgrade their prodicts to create incentive for people to buy their products again. Playstation has been a successful company for many years, they most likely have a strong team of economic advisors and creative minds. I do not see this as the end of Playstation.

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  3. Waaannnnder, I do agree with the notion that this catastrophe will lead to diminishing sales for the PlayStation 3, as well as increased sales for its substitutes. In your blog you referenced the substitution effect. Although you did so correctly, I just wanted to point out another phenomenon that is occurring within the PlayStation fiasco: a shift in demand. This fiasco does not necessarily affect the price of an Xbox 360 or a Wii, but because they are substitutes for the PlayStation, there is a shift in their demand curves. A change in demand only occurs when the ceteris paribus assumption is nullified, meaning that something other than price affects the choices consumers make. If consumers began to buy more Wii’s and Xbox’s in response to a price change, there would just be movement along the demand curve, not a change in demand. But because consumers are buying more due to the PS3 fiasco and not the price of the Wii or Xbox, their demand curves shift, resulting in a change in demand. This shift in demand will increase sales for both the Xbox 360 and the Wii.

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  4. The playstation three is also more expensive than it's competition and clearly does not have a higher level of service. Thousand of people identities will now be stolen and credit card companies will spend countless hours. Rigging the ship. Not to mention the enormous drop in stock value Sony will suffer from this embarrament, the enormously high demand for an online gaming service will cause pan players to transferover to xbox live and other competitors. Now who wants to bet it was Microsoft who hacked the psn network?

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  5. I completely agree with you Zander, I think that this will be the ultimate “Death of the Playstation.” I think this is very different from the situation Velvin is talking about in that people are having their personal information spread all over the web, while with the Xbox 360 people just had to send back their game consoles which could be fixed, but this problem is just not fixable at the moment. Although Playstation does have dedicated consumers, I do not believe that those consumers are so dedicated anymore now that all of their personal information has been released online. I think that although this was the work of hackers, Playstation has obviously proved itself not to be as good as they thought they were, so really they are partly at fault for this situation. There product sales will start to diminish and in the time being they cannot do much about it because creating an entirely new security system will take quite a while. I completely agree with Logan that the Xbox live will get a kick out of this and I think that if Microsoft really wanted to they could even raise the price of their product a little because obviously no one is going to buy the Playstation, and consumers will have little other options when looking at gaming consoles that do exactly what these two do.

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  6. I disagree, The “fiasco” will only affect sales temporarily, demand will go down for a long time, but eventually people will forget about the incident and sales will go back up. I do agree that people will look for alternative products in the market and that sale will not be as strong as before, but I believe that the “death of play station” is too radical. Many companies have had crisis like this before and with ingenuity they find a solution. As well, there will always be people who prefer the PS3 over the Xbox. There is more demand of PS3 in Japan than there is of Xbox, as long as Sony is able to keep their total revenue over their total cost they will be in business.
    -Santiago Z

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