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Sony PS3's Pricing Problem

This story was written by Tameka Kee.
Another day, another industry insider calling for Sony (NYSE: SNE) to drop the price of the PS3. This time it's Janco Partners' Mike Hickey, who told Bloomberg that Sony will slash the console's price between $50 to $100 by next month. Then again, Hickey said the same thing to investors in a recent research note, so there's no telling whether he has any real insight into Sony's intentions.

But Hickey does seem to have a read on game publishers. Back in February, he cautioned that publishers and developers would start shifting their attention away from the PS3 if Sony didn't drop the console's price to boost sales. The latest stats say 6.3 million people in the U.S. have PS3s installed in their housesless than half of the Wii's 16.2 million, or the Xbox 360's 12.8 millionand if Sony doesn't start catching up to its competitors, then its stream of blockbuster games will dry up. And that seems to be the indirect message publishers like Electronic Arts (NSDQ: ERTS) are sending.

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While EA is "committed to the PS3," Peter Moore, head of EA's sports games division, told Bloomberg that "Sony obviously still has a ways to go with their pricing." His comments echo statements made within the past two weeks by other EA execs, including CFO Eric Brown and Glen Schofield, GM of EA's Redwood Shores studio; both execs expressed concern about Sony's strategy for the PS3 moving forward (via SAI). Without quality games, the PS3 is as good as dead, but Sony is facing a bit of a catch-22, since the relatively slim library of hits is what has kept some gamers from buying the console, regardless of the price.

The other issue is that Sony just can't afford to come down on the price right now. It's still losing about $50 on every PS3 it manufactures, an improvement from the roughly $259 it lost on every console back when it launched in 2006. Sluggish electronics sales already forced Sony to slash 8,000 jobs and cut production across its various electronics divisions; Peter Dille, SVP of marketing for Sony Computer Entertainment America told Bloomberg that there was no immediate plan to reduce prices, since the company was concerned with profitabilitynot just increasing the user install base.


By Tameka Kee

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