Chicago (IL) - Sony has launched into defensive mode following the announcement of Nintendo's 100 millionth DS sale after a mere 4 years 3 months on the market. It took Sony a full 5 years 9 months to achieve the same sales record. Analysts say Sony is heading toward a price cut with its PlayStation 3, and it's anticipated that Sony could potentially reduce the price anywhere from $50 to $100 in the next couple months.
Video-game publishers had already been leaning hard on Sony to reduce their prices. The PS3 is a wonderful product, packing processing power, graphics and the ability to play Blu-ray movies; however unit sales have declined significantly in the past three months.
Priced at $399.99, the Sony PS3 is $200 more expensive than the cheapest Microsoft Xbox 360, and $150 more expensive than the Wii -- which currently dominates the sales market. Three years into PS3 sales, and Sony is coming in a hard third despite its high-machine performance.
PS3 sales are expected to total 14 million in 2010, compared to an estimated 28 million Wii and 9.7 million Xbox 360 console sales, according to the Daiwa Institute of Research (a researcher and consultant from Tokyo).
Video game publishers are feeling financial pain from the high priced PS3, and have been delivering games designed only for the Wii as it is low priced, and currently sells better. Pete Moore, head of sports games at Electronic Arts stated, "You can't ignore the company [Nintendo] who has half the market."
Still, senior VP of marketing for Sony Computer Entertainment America, Peter Dille, said that Sony has no immediate plan to reduce prices. He said, "Everybody in the development community would love for the PS3 to be free, so they could just sell razor blades," Dille said in an interview with Bloomberg. He added that Sony is concerned with profitability as well as the installed base.
In October 2007, when Sony reduced their price down to $399.99 from $499.99, sales doubled in the next month. "Anytime a console manufacturer reduces the price, software publishers benefit," Yves Guillemot, CEO of Ubisoft Entertainment SA, Europe's largest video-game maker, told Bloomberg.
Sony hasn't had it easy lately. Their corporate arena is suffering. The company is cutting 16,000 jobs and closing factories.
On paper the reduction of PS3 prices might seem to hurt profits on existing sales, but when facing Wii's onslaught and then examining how the overall gaming market bucks economic downturn trends coupled to the previously observed reality that cheaper PS3 prices means more sales, this business segment might ultimately turn out of be one Sony's saving graces.