Sony Could Lose Ground in Gaming Wars With PS3 Delay

Sony’s highly anticipated PlayStation 3 gaming console may not reach the market on schedule, an analyst firm says, leading to speculation that the company could lose ground in the video game war brewing among Sony, Nintendo and Microsoft.

PS3 is slated to debut this spring in Japan with later launches in the U.S. and other key markets. The console is seen as critical for Sony because it will include many of the same high-end features of Microsoft’s Xbox 360 and Nintedo’s GameCube, including interactive Web-based game play, the ability to play DVDs and other media and wireless connectivity.

Bad Timing, High Prices

A report from a Merrill Lynch analyst raised the possibility of the delay, suggesting the consoles may not reach the U.S. market until late in 2006, possibly causing the struggling Sony to miss the key holiday sales window.

Merrill suggested that the decision to include Sony’s Blu-ray high-definition DVD-format player to the console and the addition of some of the fastest graphic and processing chips in the business may be driving the price of the device so high that it will not be marketable.

The report said the devices may cost as much as US$900 to make, meaning they would have to sell for more than twice the price of the Xbox 360. The report follows speculation about a delay that revved up during the Consumer Electronics Show earlier this year in Las Vegas, when Sony did not commit to a firm launch date. Some analysts have speculated that Sony may have manufacturing slowdowns as well, as it tries to maximize its chip yield in order to keep production costs down.

Sony has denied that it has changed its schedule and still plans to launch PS3 in its home market of Japan in the next several weeks with later rollouts in the U.S. and Europe.

The report, however, serves as a reminder of the difficulty of assembling the increasingly complicated gaming consoles — and doing so for a price that will not frighten away consumers. It also highlights the still-undecided battle over the dominance of competing high-definition DVD standards, with Sony’s Blu-ray battling the HD DVD approach.

Needing a Boost

Sony has been seeking to use its gaming platforms to reverse its sliding fortunes in the home electronics area. It has scored a major victory with the PlayStation Portable. The PSP was a huge seller in 2005 as portable gaming devices outsold traditional consoles.

Even there, however, Sony saw stiff competition from Nintendo’s DS, a WiFi capable portable player that sold 10 million units worldwide during 2005.

Any delay in the PS3 rollout could be critical not only because Sony is banking on the sales to help improve its bottom line, but also because the rollout schedule is something that die-hard gamers — the very type that will be willing to spend what it will take to acquire a PS3 early on — track closely.

Some of those gamers may have opted not to purchase an Xbox 360 during its rollout late in 2005 because they believe the PS3 will be a better device, DFC Research President David Cole told the E-Commerce Times.

Still, Cole said 2006 was poised to be a strong year for gaming in general and for the individual players, as both Sony and Nintendo have consoles on the launch pad and with the Xbox 360 no longer suffering some of the production shortages that hampered supply last year.

“The devices are changing and becoming more versatile and functional,” Cole noted, but the rising prices may mean the days when gamers would purchase all of the top consoles may be in the past.

Standards Battle

Game developers are also impacted by the release schedule. Having a critical mass of PS3 consoles in place is seen as necessary to prompt developers to invest in making games for the platform. By the holiday season of 2006, the focus may shift to which console among the big three has the most game titles available. That in turn can help drive additional console sales, giving early leaders — in this case Microsoft which was first to market — an added advantage.

A delay could also tilt the battle over the next-generation DVD standard toward the HD DVD format, which enjoys the backing of powerful heavyweights such as Microsoft and Intel.

Sony has said its Blu-ray is a superior technology and was designed to work better with high-definition television sets — which it also produces.

Enderle Group Principal Analyst Rob Enderle noted that the recent endorsement of HD DVD by Hewlett-Packard, which cited the limitations on legal copying of discs in Blu-ray, was a major boost for the HD standard .

In the end, however, Enderle said that standard may not be as important as some believe as more consumers will receive their video over the Internet or by on-demand cable feeds rather than on printed DVDs.

“The consumer may sit this standards battle out and wait for what’s next,” he added.

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