Sony cuts PlayStation 3 price by $100

It's hoping to boost flagging sales

Sony Corp.'s U.S. entertainment arm today cut the price of the PlayStation 3 game console by $100 to boost flagging sales.

The PlayStation 3 (PS3) price cut, effective today, reduces the 60GB console to $499 from the $599 price tag that has been in place since the video game system's November 2006 launch. The price drop, which was the subject of heavy rumor-mongering late last week, was anticipated primarily because of slow sales, -- blamed in part by the console's higher price tag compared with rival products'. Nintendo Co., for example, sells its Wii for $249, while Microsoft Corp.'s Xbox 360 retails for $299 and up.

"As we move into the next phase of PS3, it's important that we continue to evaluate our product line," Jack Tretton, CEO of Sony Computer Entertainment America Inc., said in a statement.

At the same time, Sony also announced that starting next month, it will sell a new 80GB PS3 console in the U.S. for $599, and bundle a free copy of the MotorStorm game with the box. Currently, the 80GB model is sold only in South Korea.

PS3 sales have lagged behind those of the same-generation consoles from rivals Microsoft and Nintendo, according to statistics from research firm NPD Group. Through May, NPD estimated total sales of the PS3 in the U.S. at 1.4 million consoles, compared with 5.6 million Microsoft Xbox 360s and 2.8 million Nintendo Wiis. (Microsoft, however, had a one-year jump on the competition; it launched the Xbox 360 in the fall of 2005.)

Some analysts don't see the price cut leading to any change in the standings. "Sony's a distant third, and they had to do something," said Van Baker, a Gartner analyst. "It'll help some, but I think it's very unlikely that [the PS3] will emerge as a substitute for the Xbox 360."

Microsoft's video game business took a blow of its own last week, when the company said it would take a charge of more than $1 billion to pay for an "unacceptable number of repairs" to Xbox 360 systems already sold and still in stock.

"I was a little bit surprised, to tell you the truth," said Baker about that Microsoft move. "It's important to keep the installed base happy, but it also tells the world that there's a hardware problem. Microsoft didn't come out and say that they will have [the problems] fixed going forward. That's not reassuring to the person who hasn't bought yet."

In a conference call with financial analysts last week, Robbie Bach, the head of the company's entertainment division, came close, but he didn't quite guarantee that the Xbox 360's issues had all been addressed. "We think we have our hands around it at the engineering level," said Bach.

Copyright © 2007 IDG Communications, Inc.

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