Jul 8 - PlayStation 3 price cut by $100

Jul 8 - PlayStation 3 price cut by $100

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PlayStation 3 price cut by $100
By Mike Snider, USA TODAY


Looking to jump-start sales of its PlayStation 3 game system, Sony (SNE) has cut the price by $100, to $499, and plans to introduce a $599 package with a larger (80-gigabyte vs. 60-GB) hard drive and one game next month.

Most analysts were surprised at the price cut's timing and size. "We would have figured $50 by Christmas and $100 by next spring," says Richard Doherty of research firm The Envisioneering Group.

Sony CEO: 'We're doing just fine, thank you'

Sony's aggressive move should increase interest in its state-of-the-art PS3, which plays high-definition games and movies, he says. Crowds lined up for the PS3 in November, but sales slowed after the holidays as the underdog $250 Nintendo Wii grabbed the spotlight. By the end of May, Nintendo sold 2.8 million Wiis, while Sony sold 1.36 million PS3s in the USA, according to sales tracker The NPD Group.

Nonetheless, with nearly 4 million PS3s shipped worldwide, Sony has reduced manufacturing costs enough to "take those efficiencies and pass them on to the consumer," says Jack Tretton, CEO of Sony Computer Entertainment America.

He acknowledges that the steep price, limited early shipments and technical glitches made the launch less successful than Sony hoped. "We have paid the price in the short term, hopefully for long-term success," he says. "This latest price move is an attempt to try to bridge that gap between what the average consumer can afford and what we, quite frankly, can afford to charge."

At Wedbush Morgan Securities, analyst Michael Pachter doesn't think the price will catapult the PS3 into the lead, though he expects sales to increase by 50% or more. Wii's lead won't fade "until Sony gets the price to $299 or lower," he says. "I don't think people believe consoles are worth that."

Sony's price cut adds to the industry's attention going into this week's gathering at the E3 Media and Business Summit in Santa Monica, Calif. Last week, Microsoft announced it would extend its Xbox 360 warranty because of unacceptable failure rates, a move that will cost more than $1 billion.

Microsoft (MSFT) has sold about 5.4 million Xbox 360s in the USA since bringing it to market 1½ years ago. The company claims to have solved the problems, Doherty says, but still, "The Xbox 360 just got a lot hazier." Microsoft's troubles, he says, "have got to help Sony and Nintendo in the coming months."

Had Sony known of Microsoft's announcement, Doherty says, "they might have reconsidered" the price cut.