http://tech.yahoo.com/blogs/null/114413PS3 settling in as #3 gaming console
Mon Dec 29, 2008 1:47PM EST
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Buzz up!on Yahoo!One pundit famously told me this summer that 2008 would be "the year of the PlayStation 3," presuming that must-have new games and the rise of Blu-ray would turn the PS3 into, if not the top console on the market, then at least a strong #2.
Alas, things haven't turned out so well for Sony's flagship PS3: Sales of the console are down 19 percent vs. last year, and analysts are now warning that Sony may not hit its goal of selling 10 million consoles this fiscal year (which ends in March 2009).
Why the hefty decline? You can try to blame the economy at large, but that's looking in the wrong direction: Gaming has been experiencing a booming market in 2008 -- even during the recession-stricken holiday season. Sales of the Wii console this November were twice what they were in 2007, and the Xbox 360 saw sales increase 8 percent, as well (driven largely by a well-timed price cut). And those trends are likely to continue when December numbers are in.
Most analysts are looking at the hefty PS3 price tag as the reason for its misery. At a bare minimum price of $399, the PS3 is wildly more expensive than anything else on the market (and double the entry-level Xbox), and that's after some price cuts already. Yet the PS3 is said to be so expensive to make that cutting the price would further erode Sony's plummeting profitability (it's already laying off thousands of workers and shutting down factories). And Sony's old selling point -- that at $399 the PS3 is a relatively cheap way to get a Blu-ray player -- doesn't really work in an era of sub-$199 standalone Blu-ray units. The Wall Street Journal (linked above) now notes that you can get a Blu-ray player and an Xbox 360 for less than the price of a PS3.
The fatal blow could come in the form of game developers, which have limited resources and have to choose which platforms they want to develop for. It's already rare for a title to be released on all three consoles, with exclusives becoming more popular: Again, as the WSJ notes, four of the top five selling games in November were exclusive to either the Wii or the 360. And even when a PS3 version is available, that doesn't mean much, with WSJ noting, "Sony's best-selling game during the month was an action shooter game, Call of Duty: World at War. But twice as many people bought the Xbox 360 version."
With a terrible economic outlook for 2009 and the holiday season now behind us, what is Sony's next move? A huge price cut might save the PS3 from outright failure... but at what cost to the company?
http://online.wsj.com/article/SB123050978162738293.htmlHope Fades for PS3 as a Comeback Player
In Battle of the Game Consoles, Nintendo Wii and Microsoft Xbox Widen Leads Over Sony's PlayStationArticle
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.
Sony CEO Howard Stringer, seen in June, committed to making the games division profitable after a heavy investment in the PlayStation3.
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.
