Was PS3's European Debut a Dud?

The less-than-stellar sales for Sony's (NYSE: SNE) next-generation video game console PlayStation 3 (PS3) continued Thursday as the platform was made available in Europe.

According to reports from around Europe, the scene bore little resemblance to the frenzy that greeted the release of the PlayStation 2 console in 2000.

After the scheduled midnight launch, from Amsterdam, the Netherlands, to Paris, and even Australia, reports indicate only a fraction of the anticipated number of gamers showed up to purchase the PS3.

Hard Start

London was the site of the largest number of shoppers clamoring for a PS3, according to the BBC. Sony handed out free HD TVs and taxi rides to buyers there. Crowds in Germany and France, however, were distinctly underwhelming.

Several stores in France stayed open to welcome the expected midnight rush only to have that rush quickly become a trickle. One Web site claimed that nearly 95 percent of the consoles remained on store shelves following the late-night release spectacle beneath the Eiffel Tower and the FNAC store on the Champs Elysée, where only 300 of the available 1,000 units were reportedly sold.

At the Eiffel Tower, near which Sony had moored a boat to serve as a temporary sales outlet, reports indicate that more journalists than customers showed up. The same was true in Sydney, Australia, at a release event held by Sony and Australian retailer Myer. The Sydney Morning Herald termed the launch "feeble" after counting a sparse showing of some 80 consumers. Meanwhile, in Germany, the release brought out several hundred gamers to the Sony Center launch event in Berlin.

In Amsterdam, queues consisted of mere handfuls of gamers. More than 100 people turned out to pick up the new gaming platform in Prague, Czech Republic, and, according to the BBC, that was one of the better attended events.

In Italy, some retailers apparently refused to go along with Sony's grand launch plans and began selling the consoles with little fanfare two days earlier than the scheduled Thursday release.

Sony's Stiff Upper Lip

As they did when confronted with lackluster sales in the U.S., Sony executives across Europe maintain that first-day sales met the company's expectations. News Web site France Matin quoted Sony Computer France representative Georges Fornay calling the French launch a success . He noted that some 60 percent of the 100,000 PS3s available in France had already been reserved.

"We have taken nearly 60,000 reservations compared to the 40,000 Xbox 360s and 75,000 Wiis sold at the launch of the two consoles," Fornay said. He added that the PS3 "is already a success" and that to avoid any problems with availability, Sony had shipped one million PS3s for the European market, of which more than 150,000 were available in France.

Ray Maguire, chief of Sony's UK division, held to the party line, reportedly classifying the PS3 launch to date a success with sales greater than those of the PS2 at the period of time from its launch seven years ago.

Twisting the Knife

Microsoft (Nasdaq: MSFT) executives in Europe had fun at the expense of Sony at release events in both London and Paris, according to reports.

Outside the Virgin Megastore on London's Oxford Street, the Sony competitor handed out free beer to journalists. For gamers standing in the queue prior to midnight, the company handed out folding chairs with a Web address printed on them.

The URL, www.shkyw.org, was for a site at which Microsoft welcomes Sony to the European market.

"Xbox welcomes the PS3 to the next generation. Sony ... You're late! Let the games begin," reads the message on the site.

At the Parisian launch, Microsoft cruised the Seine in a boat sporting a signs on either side that read, "Xbox 360 loves you."

Reality Check

The problem with Sony's European launch is the high price, according to Brian O'Rourke, an analyst at In-Stat. While U.S. and Japanese consumers have paid up to US$599 for the more technologically advanced version, the price for Europeans is considerably greater. The PS3 will run consumers in the UK about Pounds 425 ($840); in France and the rest of Europe it costs 599 euros ($779).

"If the Sony Europe launch was less than successful, it's most likely a sign of two things," O'Rourke explained. "No. 1, the Sony PS3 price is too high. No. 2, there is more significant console competition in this generation than in the previous generation."

O'Rourke said Sony's PlayStation 2 was the market leader for its own generation of consoles by at least a year, which "gave them tremendous marketing advantages."

"If the PS3 launch in Europe is less than Sony expects, it may put more pressure on them to cut the PS3 price sooner," he said. "However, I think a PS3 price cut before the end of the year was already fairly likely.

Is Pricing the Issue?

However, talk of the PS3 being too expensive was a "red herring," according to Billy Pidgeon, an IDC analyst.

"Honestly, I don't think price is the issue," Pidgeon said. The pricing on game consoles has gone up rather incrementally since the '80s, and whereas inflation has occurred, games are roughly the same price. And consoles adjusted for inflation are not that expensive. Things get a little complicated in Europe because of the value-added tax [on top of the console price]."

The other component perhaps hampering sales is a lack of exclusive games for the PS3. Publishers have shifted their strategy and developed more games for the PS2, Wii and Xbox 360 in the short term and held off on developing games for the PS3 until the mid-term because the installed base will build rather slowly for the PS3, according to Pidgeon. Sony has built a console with a longer life span than both the Xbox 360 and the Wii, he added. So, when the other two consoles are reaching the end of their life cycles, the PS3 will just be hitting its stride.

"The PS3 won't require a successor as quickly as the Xbox 360 and Wii will. When there are successors for those two coming out, the PS3 will still be going strong," Pidgeon noted.

"I don't really expect to see major shifts in Sony pickup until the final quarter of '07 and into '08, when we'll start to see Sony gaining some momentum," he concluded.