Sony Shaves $30 Off PSP Price

In a move framed as an anniversary celebration, not a reaction to competition, Sony Computer Entertainment America (NYSE: SNE) is cutting the price of the PlayStation Portable (PSP) game console by US$30.

Sony said the units will now sell for $169.99, "delivering a significant $30 savings to consumers." That's about the same price being charged by some retailers, including Wal-Mart (NYSE: WMT), for last year's Black Friday sales , but the first official price cut since the PSP was introduced in 2005.

Sony may have needed to trim its game hardware prices to compete with lower-priced alternatives from other makers, particularly Nintendo.

Nothing to Do With Nintendo?

"I'm just not seeing an issue here between Nintendo and Sony," NPD gaming analyst David Riley told TechNewsWorld. "The PSP has sold over 7 million units in America and the Nintendo DS sold almost 9.9 million. If you look at the original market for the PSP and the original market for the DS, the DS has a much larger scope because it's simply a gaming device while the PSP was marketed as a multi-function device."

Sony describes the PSP as the world's "first truly integrated handheld entertainment system designed to handle multiple applications -- music, video, photo, Internet, live and recorded TV, and wireless connectivity, with games as its key feature." So, it's bound to cost more than the DS, Riley said.

"It was marketed totally differently and at a much more expensive price point, so I think those are darn good sales results," he noted. "So in terms of them doing this in response to Nintendo, I just don't see that."

Why then did Sony make the price reduction? "This is typical for hardware systems in this industry," Riley claimed. "Over their lifecycle, their prices drop."

Not a Door-Buster

The $30 reduction is barely noteworthy, according to Parks Associates gaming analyst Michael Cai.

"I just don't think it's such a big deal," Cai told TechNewsWorld. "They cut the price by about 15 percent, but if you look at the market there are all sorts of bundles already existing that essentially reduce the price to much less. ... I saw PSP bundles with five games at Costco a couple weeks ago for essentially the same price. It was like $200 or $250 with five games."

The $30 cut is unlikely to convince a prospective DS buyer or somebody interested in an iPod to instead pick up a PSP, he suggested. "While, obviously, with the price cut the hope is to spur the demand a little, I just don't think a 15 percent cut is going spur sales numbers all that much," he added.

Neither Riley nor Cai were willing to give credence to suggestions Sony is trying to clear inventory so it can introduce a new PSP model. "Everybody can make predictions and there are a lot of rumors," said Cai. "But it seems Sony's marketing budgets and energies are going behind PlaysStation 3 now. Do they really want to dilute that effort? I just don't see it happening this year, although obviously there's a void in the market for a flash- or hard drive-based PSP with local storage capabilities."

Expanding the Community

Sony said the PSP price cut was a move prompted by the two-year anniversary of PSP's launch and one made to allow more people to join the fold of Sony gamers. "We have always been passionate about making great entertainment accessible to everyone," said Sony Computer Entertainment America CEO Jack Tretton.

The new price reflects the company's "commitment to supporting and expanding the PSP community," Tretton said and suggested good sales of the portable console prompted the move.

"We are pleased that we are able to engineer savings for the consumer at this stage of PSP's lifecycle ... In particular, we have recently seen a steady rise in the number of teens adopting PSP as their primary handheld entertainment system, and we expect the new price will accelerate that trend," he added.

"Key software launches and new entertainment features" for PSP contributed to the PSP's sales-to-date reaching the 25 million unit level, according to Sony. More than a million PSPs were sold in North America during December.