Sony Still Doing the PS3 SKU Shuffle

Sony continued its seemingly weekly shuffle of models and pricing Thursday, this time shifting focus to stateside and announcing the imminent arrival of the 40 GB PlayStation 3 as well as lower pricing for the 80 GB model. The news comes after similar changes were made first in Europe and then in Japan in the first two weeks of October.

Gamers anxious to get their hands on the 40 GB model will not have to wait long — the latest PS3 model will hit stores on Nov. 2 and will sell for US$399.

“We’re pleased to offer the consumer a lower price point without sacrificing core technology components that make PS3 the most advanced high-definition entertainment system available,” said Jack Tretton, president and CEO of Sony Computer Entertainment America. “Every PS3 comes with a Blu-ray drive, HDMI (high definition multimedia interface) output, an integrated WiFi connection, Cell Broadband Engine and built-in hard-drive.

“This holiday season we’ll be able to offer attractive retail pricing with a broad portfolio of outstanding games, including ‘Ratchet & Clank Future: Tools of Destruction,’ ‘The Eye of Judgment,’ ‘Uncharted: Drake’s Fortune,’ ‘Heavenly Sword,’ ‘Call of Duty 4: Modern Warfare,’ ‘Assassin’s Creed,’ ‘Haze’ and ‘Rock Band,'” he added.

The Latest SKU

Many gamers will note that not included in Tretton’s laundry list of PS3 components was backwards compatibility with PlayStation 2 games. Customer feedback indicated that the ability to play PS2 games was no longer needed, Sony said, as the company’s library of PS3 titles will have expanded to 65 titles by the end of the year. Backwards compatibility was also left out of the 40 GB PS3s sold elsewhere in the world.

Consumers who still desire backwards compatibility, Sony said, can “take advantage of the limited PlayStation 2 backwards compatibility of the 80 GB PS3.” Buying the 80 GB unit will take less of a chunk of out gamers’ wallets beginning Thursday. Sony issued a $100 price cut for the larger model “effective immediately.” That brings the price down to $499 from $599.

Price Rollercoaster

Potential and current PS3 owners may be suffering from a bit of vertigo following a summer and fall of frequent price and SKU (stock keeping unit) fluctuations, as the console maker launched one model only to discontinue another and doggedly refused to lower the price.

The company discontinued the 20 GB model a scant five months after the console took the stage in November 2006. Then in July, Sony lowered the price of the 60 GB PS3 to $499 from an original price of $599 and introduced a new 80 GB model. Two weeks later, it announced it would no longer produce the 60 GB SKU.

This should be the end of the “model shuffle,” for now, said Michael Pachter, an analyst at WedBush Morgan.

Others agreed with his estimation.

“This is probably it for this year,” Rob Enderle, principal analyst at Enderle Group, said. “Sony is between a rock and a hard place with this system. There is simply too much cost in the system to be competitive.”

Kimberly Otzman, a Sony spokesperson, told TechNewsWorld that other than the three SKUs currently available — 40, 60 and 80 GB models — Sony has announced no plans for any other models.

Merrier Christmas?

The new 40 GB PS3 will now compete more directly with the Nintendo Wii, Enderle told TechNewsWorld. “[The Wii] is selling in short supply at a $100 premium in many places.” However, both the PS3 and Microsoft’s Xbox 360 — the base model of which was recently reduced from $399 to $349 — could still fall victim to the unprecedented popularity of the Wii.

“If it were just a price problem, this likely would be enough, as clearly the Sony [PS3] represents the better value, but the Wii is being favored by consumers — thus the premium — and both Sony and the more reasonably priced Xbox are being hit as a result,” he continued.

“Both Microsoft and Sony need to more effectively address the family/exercise values the Wii represents,” Enderle added. “Price changes by either alone won’t change the Wii advantage.”

Tough Numbers

Sony reportedly expects to sell 11 million PS3 units by the end of the fiscal year in March 2008, but that number may be a little too optimistic. In the 11 months since its launch, only 5.07 million PS3s have been sold, according to figures from sales tracking firm VG Chartz.

“To get to that number, Sony needs a divine miracle,” Enderle said. “They are well off the mark for them to hit that number. I’m not even sure they could stuff the channel and get there, as the channel won’t take that many of the players.”

Also working against Sony’s expectations is a dearth of must-have titles for the PS3, Enderle pointed out.

“Xbox has ‘Halo 3’ and a huge game library, Wii has the favored platform folks are buying, leaving Sony No. 3 in what is a traditional two-horse race,” he explained. “They are trying to reposition the PlayStation 2, and it’s a good attempt, but I’ve never seen the market move back to the earlier product.”

Holiday Outlook

How the holiday season will shake out for Sony and the other console makers?

Sony will probably sell between 400,000 and 500,000 PS3s during the holiday season, Pachter told TechNewsWorld

Although the Wii is currently hot, Enderle said, it is constrained by manufacturing and Nintendo’s finances, while Microsoft and Sony are constrained by demand.

“If Nintendo can build enough they can exit at No. 1,” he stated. “If they can’t, Microsoft holds [onto its market leading position]. Sony is out of the race for the lead this year.”

Sony is not completely out of the game despite its debut year woes. The announcement Thursday that it will sell its production facilities for the Cell, the microprocessor behind the PS3’s technology, to Toshiba suggests that Sony is picking its fights and cutting costs, Enderle said.

“I think it showcases that the new division CEO has a really good head on his shoulders and that next year we should expect to some creative solutions to this competitive problem that Sony has,” he concluded. “It also suggest the PS4 will be a vastly less risky product that will be much more aggressively priced at launch.”

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