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Sony Finally Drops PS3 Price

In a move that is the poster child for about-time tactics, Sony is introducing a $299 PlayStation 3 model, finally coming out with something that can compete in price with Microsoft's Xbox 360. The new price takes effect today for the model with the 80GB hard drive, though in about a month that price will get a PS3 with a 120GB hard drive.

Sony has suffered from having a system that was significantly more expensive than the Xbox, let alone Nintendo's Wii. As a result, it has trailed in sales behind both. Now the question becomes how well Sony can afford the price drop. The PS3 has been a money loser that, unlike the old industry joke, didn't make it up in volume. Plus, Sony has had a rocky financial time as of late. Even if the PS3 was finally coming down in cost and getting to breakeven, or even some profit, the price drop is likely to keep Sony's gaming division in a pool of red ink.

But Sony probably didn't have a choice. As I found back in May, PS3 unit sales had actually begun to trend downward, making it, by any reasonable financial definition, a dying product line. How is it standing up? Here are the updated figures of unit sales:

PS3 Unit Sales
Calendar Quarter Units (Millions)
Q4 2006 1.68
Q1 2007 1.93
Q2 2007 0.71
Q3 2007 1.31
Q4 2007 4.90
Q1 2008 2.33
Q2 2008 1.56
Q3 2008 2.43
Q4 2008 4.46
Q1 2009 2.15
Q2 2009 1.1
And as I did last time, here's a graph done with a second order polynomial trend line.

That's a pretty ugly turn, given that Sony has said that it expects the PS3 to have a ten year life. Maybe if they hook up life support -- and maybe that's exactly what the price cut will do.

Then again. there are the rumors that Microsoft will drop Xbox prices in time for the fall. The company has been making money off the units, so is probably doing this to stoke up sales through the holiday season, which also makes you wonder whether we'll be seeing a new generation of gaming unit by next fall. So the console gaming market should be pretty interesting to watch over the next few months.

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