Sony to slash PlayStation3 price
The PlayStation 3 plays video games and high-definition movies. Now Sony Corp. wants the game console to play better with consumers’ wallets.
The Japanese consumer electronics giant plans to announce today that it will knock $100 off the price of the PlayStation 3 in an effort to jump-start sluggish sales. The price drop, to $499 from $599, comes eight months after Sony started selling the console.
The price cut could help Sony recover from the uncharacteristically slow start of its PS3.
After dominating with its first two PlayStation systems, the PS3 is lagging behind Microsoft Corp.’s Xbox 360 and Nintendo Co.’s Wii as the next-generation console of choice.
Analysts say that’s in large part because Sony’s console has a built-in high-definition DVD player and therefore costs more than rival systems.
“From a pocketbook standpoint, we know we’ve presented a challenge for consumers,” said Jack Tretton, president of Sony Computer Entertainment of America, which manages the U.S. PlayStation unit.
Sony had timed the price cut to coincide with the video game industry’s annual gathering at the E3 Summit, which starts Tuesday in Santa Monica. But Sony got an extra competitive boost last week when rival Microsoft acknowledged a fault with its Xbox 360 game consoles that could cause some systems to freeze. The Redmond, Wash., company announced it would set aside as much as $1.15 billion to make repairs and extend the warranties on its machines.
In discussing Sony’s price cut, Tretton was quick to point out that its consoles had not suffered similar quality problems. The company delayed the launch of its console last year to work out kinks in its production.
“We’ve worked very hard to make sure that the product quality of the PS3 was where we wanted it to be,” Tretton said.
Partly because of the delayed launch, sales of the PS3 have lagged behind those of its rivals.
From November, when Sony introduced the console, to May, 1.4 million PS3 consoles were sold in the U.S., according to NPD Group. Nintendo sold 2.8 million Wii consoles in the same period. Microsoft began selling its next-generation console a year earlier than its rivals, and consumers have bought 5.6 million Xbox 360s since then.
The PS3’s new price tag still is higher than the Wii’s, at $249, and the Xbox 360’s, which costs $299 to $479 depending on the size of the hard drive.
“It’s still expensive,” said Michael Pachter, an analyst with Wedbush Morgan Securities, who predicts that Microsoft will counter this week with a discount of $50 or more. “With a 17% price cut, you may get a 50% increase in sales. It’s unrealistic to assume that demand will double.”
Some analysts say, however, that the PS3 is a good value because it has a high-definition Blu-ray DVD player built in. Sold separately, Sony’s DVD player costs $449.
“You’re essentially getting a free high-definition disc player,” said Richard Doherty, research director for Envisioneering Group. “We think that, coupled with the new price, will make a tremendous difference in terms of sales.”
Price, however, is just part of what has kept consumers from buying the PS3.
“It’s a good start, but it’s not enough,” said Billy Pidgeon, an analyst with IDC. “What Sony needs is more exclusive games that are compelling enough to get people to buy into the PS3.”
Sony’s Tretton said the company was poised to launch a slate of games that could be played only on the PS3, including “Ratchet & Clank Future,” “SOCOM: U.S. Navy SEALS Confrontation” and “Unchartered: Drake’s Fortune.”
Sony also plans today to introduce a higher-end PS3 for $599. The console will feature an 80-gigabyte hard drive, compared with 60 gigabytes for the regular PS3, and include a game called “MotorStorm.”
The company has sold the PS3 at a loss, primarily because of the cost of the blue lasers used in the movie player. The game division lost nearly $2 billion in its 2007 fiscal year, which ended March 31. But analysts said the price drop signaled that the company now had those costs under control.
“We think they’re profitable now with the PS3,” Doherty said. “We also think the Wii is profitable for Nintendo. But with the $1-billion charge to fix its consoles, Microsoft will need a telescope to see profitability.”
Microsoft said last week that it intended to turn a profit in its current fiscal year, which began July 1.
