Hope Fades for PS3 as a Comeback Player
In Battle of the Game Consoles, Nintendo Wii and Microsoft Xbox Widen Leads Over Sony's PlayStation
TOKYO -- For most of this year, Sony Corp.'s PlayStation 3 videogame console seemed finally to be taking off after a slow start. The PS3, trailing Nintendo Co.'s Wii and Microsoft Corp.'s Xbox 360 consoles, was closing in on the No. 2 Xbox 360, with new games and quarterly sales growth at twice the speed of last year.
But early results from this holiday season aren't promising. U.S. sales of the PS3 fell 19% last month from a year earlier, while sales doubled for the Wii console and rose 8% for the Xbox 360, according to research firm NPD. Analysts say they expect PS3 sales for this month to be flat or lower than last year, while sales for its rivals are likely to rise. And Sony may not reach its goal of selling 10 million PS3 consoles in the fiscal year through March, analysts say.
The sales decline is a heavy blow to Sony, which was banking on the videogame division to provide a bright spot as its core electronics business is hit by the global economic downturn. Sony in May forecast that its games division would turn a profit this fiscal year after two years of losses since launching the PS3 in 2006. Meanwhile, poor sales of television sets and digital cameras are forcing the company to lay off thousands of staff and close factories.
Sony's strategy of selling a pricey game machine with advanced features and cutting-edge components appears to be backfiring as a deepening recession has U.S. consumers more price sensitive than ever.
If Sony doesn't close the gap with its rivals, it could risk making the PS3 an afterthought to game publishers, who focus most of their resources on the machines with the most users. At the end of September, the Wii had a wide lead with nearly 35 million units sold since its launch in 2006 compared with about 22 million Xbox 360 consoles and 17 million PS3 machines. Nintendo last month sold 2 million Wii machines in the U.S., while Microsoft sold 836,000 Xbox 360s and Sony sold 378,000 PS3s, according to NPD.
Sony said earlier this month that it was happy with the "strong momentum" of the PS3 and focused on the machine's 60% rise in the year-to-date sales. A spokesman at Sony's game division declined to comment further, saying it is working hard to close the quarter strong.
A key factor behind the decline in sales may be the PS3's high price. At $399, the entry-level PS3 model costs at least $150 more than the Wii or the least expensive Xbox 360. Sony emphasizes that the PS3 comes with a Blu-ray high-definition video player and an 80-gigabyte hard drive, features not available with the Wii or Xbox 360.
Microsoft cut Xbox 360 prices in early September and started bundling games with the most basic console for $199. Nintendo has maintained the Wii's initial $249 price, but sales are rising now that it has overcome an early supply shortage.
Part of Sony's strategy hinged on selling the PS3 as a relatively inexpensive Blu-ray player. But prices of Blu-ray players have fallen so sharply recently -- new players are available for less than $200 -- that it's possible to buy a Blu-ray player and an Xbox 360 for less than a PS3. Meanwhile, the economic downturn has cooled sales of flat-screen TV sets and Blu-ray players this holiday season.
Industry watchers say they were surprised Sony didn't cut PS3 prices to boost sales before the holidays. One reason may be Sony Chief Executive Howard Stringer's commitment to making the games division profitable after heavy investment in the PS3 machine. Console makers hope to eventually recoup development investment with game sales and production cost reductions. Sony is still losing money on every PS3 it sells at $399, so a price cut could push the games division back into the red, analysts say.
"With Stringer saying, 'We will be profitable,' you can't cut price," says Michael Pachter, a research analyst at Wedbush Morgan Securities in Los Angeles. He expects Sony to cut prices at the start of its new fiscal year in April, which could help boost sales.
Sony also is suffering from a lack of attractive titles that are exclusive to the PS3. Microsoft has hit the jackpot with two action-adventure game franchises, Halo and Gears of War, which are available only on the Xbox 360. Most of Nintendo's top games are made in house and playable only on the Wii.
Sony used to have a stable of exclusive games. But in recent years, Microsoft has persuaded most game publishers to release highly anticipated games to it and Sony at the same time.
Last month, four of the five best-selling U.S. games were exclusive to either the Wii or Xbox 360, according to NPD. Sony's best-selling game during the month was an action shooter game, Call of Duty: World at War from Activision Blizzard Inc. But twice as many people bought the Xbox 360 version.
The Damage.
Alright boys, it seems like the PS3 can't get up from underneath a steady stream of bad decisions, bad breaks and bad PR. In order to turn this arms race around, I think Sony is going to have to go ahead anddo what they didn't want to do and cut the price of the console. Yes, they'll lose money in the short term. maybe a lot of money. but at this pace, they're going to further deepen their 3rd place hole, which damns the future of the console (it will eventually force more and more games to go multiplat or leave the PS3 entirely). I know Sony is looking for ways to make money and cut costs...but I think they're going to need to reassess their approach. They need no more negative publicity.
Also, what the hell happened to Sony's marketing and PR teams? did they fire them among the thousands of Sony employees laid off earlier this year? You guys remember their awesome "do ya want it?!" commercials from this time last year? They rocked. This year, I can think of...like 4 PS3 commercials I've seen in the last 60 days. That just doesn't get the job done. They have to recapture that PR magic. And that means again doing something they don't want to do: spend (invest) more money. I'd also like to see them bundle headsets into their PS3's to more formalize the online talking experience.
So that's my suggestion. What more do you think Sony can do with what they have to creep out of the cellar? Or does the reality of what has happened in '08--weakening sales in spite of a victory over HD-DVD, MGS4, LBP, Resistance 2, Motorstorm 2 and GTA4 (a game synonomous with PlayStation)--signal more systemic problems than can be fixed this generation given their financial state?
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