(Adds additional material about possibility of PS3 price
cut)
DOW JONES NEWSWIRES
Now that it's in a price-cutting mood, analysts tracking Sony
Corp. (SNE) say the company is more likely than ever before to
lower the price of its flagship PlayStation 3 videogame system
sometime this year.
Sony's computer entertainment division announced Tuesday it will
lower the price of its eight-year-old PlayStation 2 console to
$99.99. Sony hopes the 23% price cut, which takes effect Wednesday,
will sustain the life of the PS2, which it says has sold more than
136 million units worldwide since its launch.
Critics contend Sony now needs to lower its PS3 prices for a
number of reasons, starting with staying competitive with Microsoft
Corp. (MSFT), which saw sales of its Xbox 360 jump after lowering
the price and bundling the system with games in early
September.
PS3 price-cut pressure increased in December, when analysts said
Sony might not reach its goal of selling 10 million PS3 consoles
through March without a price reduction, as sales for the hardware
dropped despite gains by competitors. March videogame console sales
results won't be available for another two weeks, a Sony spokesman
said.
Meanwhile, the company is in the midst of a major restructuring
- shedding 16,000 jobs worldwide - in an effort to reverse its
fortunes. Sony expects to post a net loss for the fiscal year
ending in March, its first net loss in 14 years.
That's not to say a move on PS3 prices couldn't backfire. Sony
is still losing money on every PS3 it sells at $399, so a price cut
could hurt the games division, analysts say. Yet BMO Capital
Markets analyst Edward Williams was among the handful that
suggested Tuesday Sony will cut the price of the PS3 by $100
sometime before the start of the 2009 holiday shopping season.
"In our view, this action would have a much greater impact on
the interactive entertainment ecosystem than will the PS2 price
cut," he noted.
A Sony spokesman didn't comment on the potential for a price
cut.
Any PS3 cut would highlight how Sony's strategy of selling the
PS3 as a relatively inexpensive Blu-ray player has failed. That's
largely because prices of Blu-ray players, which play
high-definition videos, have fallen so sharply recently that it's
now possible to buy a Blu-ray player and an Xbox 360 for less than
a PS3. In the interim, the new PS2 prices Sony announced Tuesday
should resonate with consumers facing a challenging economic
environment, despite the relatively limited number of video games
still available for the console, said BMO Capital Markets analyst
Edward Williams. Sony, and leading PS2-compatible game publishers
Activision-Blizzard Inc. (ATVI) and Electronic Arts Inc. (ERTS)
should also see a benefit, he said.
Used videogame retailer GameStop Corp. (GME) also stands to gain
because value-seeking shoppers that frequent used-goods retailers
are more likely to buy $99 PS2s, according to Sterne Agee analyst
Arvind Bhatia.
Sony's shares were recently down 2 cents to $20.73.
-By Kerry E. Grace, Dow Jones Newswires; 201-938-5089;
kerry.grace@dowjones.com
(Ben Charny contributed to this report.)
