johnnymk
07-09-2007, 04:24 AM
http://www.nytimes.com/2007/07/09/business/09sony.html?_r=1&th&emc=th&oref=slogin
LOS ANGELES, July 8 — Facing slower-than-expected sales of its PlayStation 3 video game system, Sony said it would announce Monday that it planned to lower the price of its console in the United States by $100, to $500, effective Thursday. The lower price of the 60-gigabyte device comes as a rival system, the Microsoft Xbox 360, is inundated with reports of widespread product failures. Microsoft announced last week that it would spend up to $1.15 billion to repair the machines.
The other rival system, Nintendo’s Wii, is hard to find in stores because the company miscalculated demand. Lines still form at stores that announce they have the product, and units are listed by sellers on Amazon.com at up to twice the suggested retail price of $250.
Sony said it would also introduce an 80-gigabyte PlayStation for $600. It had discontinued a 20-gigabyte model earlier.
Although PlayStation 3 is more technologically advanced than its rivals, sales have drastically trailed those systems. NPD Group, a market research company, said that as of May, Americans had bought 5.6 million units of Xbox 360, 2.8 million of Wii and 1.4 million of PlayStation 3.
Since it began selling the PS3 last November, Sony has been criticized for setting the price higher than the competition and including expensive features that most consumers were not ready to use, like a Blu-ray high-definition DVD drive.
Even after cutting the price, Sony will still have the most expensive game console available. An Xbox 360 with a 120-gigabyte hard drive sells for $480, but less powerful versions sell for less.
“There certainly has been resistance to the price,” said Jack Tretton, president of Sony Computer Entertainment America. He said that the lower price of $500 gave the company “a higher level of confidence” that it would sell 11 million PS3 units worldwide, as it had predicted, by the end of its fiscal year next March, Mr. Tretton said. The company is making a similar price cut in Canada.
The company will also sell 10 million older PlayStation 2 consoles and 9 million PlayStation Portable machines this fiscal year, Mr. Tretton predicted.
Analysts said that Microsoft’s huge task of repairing Xbox 360s and the brand’s reputation would allow Sony a chance to gain customers. Given the amount of money that Microsoft is setting aside for repairs, as many as a third to one-half of all Xbox 360s may need to be fixed. Microsoft has declined to specify the extent of the problem.
The product failures could also create discord with its retailers, said Richard Doherty, a partner in the Envisioneering Group research firm. “Best Buy now has to deal with returns instead of selling new products,” Mr. Doherty said. “Sony’s price cut really does change the playing field this summer.”
Mr. Tretton of Sony said that PlayStation 3’s technological sophistication would benefit the company, as more consumers upgrade their video experience.
“If the play was for a couple of years, the answer would be, yes, we overengineered this product,” Mr. Tretton said. “But in the long term, over a 10-year period, this technology will absolutely pay off.”
PlayStation 3’s reduced price equals the list price for Sony’s new entry-level Blu-ray DVD player, which began shipping last month. Consumers who want a Blu-ray machine could buy the PS3 once they realize that the prices are the same.
LOS ANGELES, July 8 — Facing slower-than-expected sales of its PlayStation 3 video game system, Sony said it would announce Monday that it planned to lower the price of its console in the United States by $100, to $500, effective Thursday. The lower price of the 60-gigabyte device comes as a rival system, the Microsoft Xbox 360, is inundated with reports of widespread product failures. Microsoft announced last week that it would spend up to $1.15 billion to repair the machines.
The other rival system, Nintendo’s Wii, is hard to find in stores because the company miscalculated demand. Lines still form at stores that announce they have the product, and units are listed by sellers on Amazon.com at up to twice the suggested retail price of $250.
Sony said it would also introduce an 80-gigabyte PlayStation for $600. It had discontinued a 20-gigabyte model earlier.
Although PlayStation 3 is more technologically advanced than its rivals, sales have drastically trailed those systems. NPD Group, a market research company, said that as of May, Americans had bought 5.6 million units of Xbox 360, 2.8 million of Wii and 1.4 million of PlayStation 3.
Since it began selling the PS3 last November, Sony has been criticized for setting the price higher than the competition and including expensive features that most consumers were not ready to use, like a Blu-ray high-definition DVD drive.
Even after cutting the price, Sony will still have the most expensive game console available. An Xbox 360 with a 120-gigabyte hard drive sells for $480, but less powerful versions sell for less.
“There certainly has been resistance to the price,” said Jack Tretton, president of Sony Computer Entertainment America. He said that the lower price of $500 gave the company “a higher level of confidence” that it would sell 11 million PS3 units worldwide, as it had predicted, by the end of its fiscal year next March, Mr. Tretton said. The company is making a similar price cut in Canada.
The company will also sell 10 million older PlayStation 2 consoles and 9 million PlayStation Portable machines this fiscal year, Mr. Tretton predicted.
Analysts said that Microsoft’s huge task of repairing Xbox 360s and the brand’s reputation would allow Sony a chance to gain customers. Given the amount of money that Microsoft is setting aside for repairs, as many as a third to one-half of all Xbox 360s may need to be fixed. Microsoft has declined to specify the extent of the problem.
The product failures could also create discord with its retailers, said Richard Doherty, a partner in the Envisioneering Group research firm. “Best Buy now has to deal with returns instead of selling new products,” Mr. Doherty said. “Sony’s price cut really does change the playing field this summer.”
Mr. Tretton of Sony said that PlayStation 3’s technological sophistication would benefit the company, as more consumers upgrade their video experience.
“If the play was for a couple of years, the answer would be, yes, we overengineered this product,” Mr. Tretton said. “But in the long term, over a 10-year period, this technology will absolutely pay off.”
PlayStation 3’s reduced price equals the list price for Sony’s new entry-level Blu-ray DVD player, which began shipping last month. Consumers who want a Blu-ray machine could buy the PS3 once they realize that the prices are the same.