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Sony Cuts PlayStation 3 Price by $100, Projects Sales to Double
By Michael White
July 9 (Bloomberg) -- Sony Corp. will cut the price of the PlayStation 3 video-game console in the U.S. and Canada by $100 in a bid to double sales of the player, which has trailed rivals since its introduction last year.
A PlayStation 3 with a 60-gigabyte hard drive will sell for $499 starting today, a 17 percent discount, Jack Tretton, head of Tokyo-based Sony's U.S. games business, said in an interview. A new 80-gigabyte model will go on sale in August for $599.
Sony predicts the price cut will double U.S. sales of the player, Tretton said. The move will take customers from Microsoft Corp., forcing the Xbox 360 maker to drop the price of its $479 Elite model, analysts said. Nintendo Co.'s Wii, the top-selling console at $249, probably won't be affected.
``The price cut should take more away from Microsoft,'' said Richard Doherty, an analyst at the research firm Envisioneering Group in Seaford, New York. ``A lot of sales that would have gone to the Xbox Elite will go to PlayStation.''
Sony made its announcement one day before the opening of the Electronic Entertainment Expo, or E3, conference in Santa Monica, California, where console makers and game publishers announce new products for the coming year. The conference opens tomorrow night with a press briefing by Redmond, Washington-based Microsoft. Kyoto-based Nintendo and Sony have scheduled events for the following day.
Sony's news may spur Microsoft to respond by announcing a cut of $50 to $100 in the Elite's price at the conference, said Michael Pachter, an analyst at Wedbush Morgan Securities in Los Angeles.
Sales Forecast
``It pretty much forces Microsoft to cut,'' Pachter said.
Sony's sales increase probably will be closer to 50 percent than the doubling Tretton forecasts, Pachter said. At $499, the price of a 20-gigabyte model that's being discontinued, PlayStation 3 still is costly, especially when Wii is available for $249 and Sony's own PlayStation 2 sells for $129, he said.
Sony will cut prices further as production costs continue to drop, Pachter said.
``Five hundred dollars isn't going to get anyone excited,'' he said. ``It's good as a signal if nothing else.''
American depositary receipts of Sony, each equal to one ordinary share, rose 77 cents to $53.14 on July 6 in New York Stock Exchange composite trading. They have gained 24 percent this year.
Sony President Ryoji Chubachi said as recently as July 6 the company had no plans to cut PS3 prices.
U.S. Sales
U.S. consumers have purchased 1.38 million PlayStation 3s since it was introduced in November. That compares with 2.84 million Wii players, which reached stores the same month. Microsoft, which introduced Xbox 360 a year earlier, has had sales of 5.5 million, according to Port Washington, New York- based NPD Group Inc., which tracks sales.
Sony can cut prices because the company has cleared up production problems with a diode used in the PlayStation 3's Blu- ray disk player, said Tretton, who is based in Foster City, California. He declined to discuss costs for the console.
Clearing up the trouble made PlayStation 3 profitable several months ago, giving the company room to cut prices, analyst Doherty said. Microsoft still loses money on each Xbox 360 it sells, he said.
``Any price cut they try to make puts them more into the red,'' Doherty said.
In addition to a larger hard drive, the new PlayStation 3 model will also come with the racing game ``MotorStorm,'' Tretton said.
