Sony to Lower the Cost of PS2
Sony Corp. will slash the price of its popular PlayStation 2 video game console by a third today, potentially sparking a price war with rivals Microsoft Corp. and Nintendo Co. as the three companies jostle for a share of the $27-billion global games market.
At the same time, Nintendo said it will break into the online games market by selling a modem for its GameCube console this fall.
Monday’s announcements came a week before the start of the Electronic Entertainment Expo, or E3, the industry’s biggest convention, which begins next week in Los Angeles.
Sony’s price cut puts the PS2 at $199 in the United States, the same as the GameCube. Sony also is slicing by half the cost of its less powerful PS One console to $49.
Microsoft’s Xbox continues to sell for $299, but many analysts expect the Redmond, Wash., giant to match Sony’s price within a few days.
“It’s clear Microsoft has to cut to $199,” said Michael Pachter, director of research at Wedbush Morgan Securities in Los Angeles, who estimated that a combined price cut from Microsoft and Sony would boost console sales by an additional 15% to 20% this year.
Microsoft declined to comment, and Nintendo said it had no plans to cut the price of its GameCube.
Those who stand to gain most from a price war are software companies that make games for the discounted consoles. In the long run, however, console companies also benefit from additional royalties on every game sold.
“Consumers will have an extra $100 to spend on games, so the two biggest beneficiaries are specialty game retailers and software companies” such as Electronic Arts Inc., THQ Inc., Activision Inc. and Take-Two Interactive Software Inc., Pachter said.
Sony’s news lifted the stocks of those four game publishers above the market average Monday. Activision shares rose 5.3% on Nasdaq, Take-Two gained nearly 5%, THQ jumped 4.5%, and EA rose $3.4%. Nasdaq jumped 3.2% in comparison.
Meanwhile, Nintendo said it will sell two modems for $34.99 each, one for dial-up connections and one for high-speed connections to play games such as Sega Corp.’s “Phantasy Star Online.” Nintendo’s news surprised analysts, who pointed to the company’s numerous negative comments about the market for online games played via consoles.
“It’s a complete reversal of what they said a month ago when they indicated they had no interest in online gaming,” Pachter said. “That said, I don’t think it’s a big deal. It’s not a significant market.”
Both Sony and Microsoft also have online plans. Sony has said it will sell an adapter in August for $39.99 that will let gamers connect via dial-up or high-speed connections to play games such as “EverQuest” and “Final Fantasy.”
Microsoft is expected to unveil at E3 its online program, Xbox Live. Xbox comes with a built-in Ethernet adaptor.
