Sony cuts PS3 price around world, offers upgrade

[August 19, 2009]  TOKYO (AP) -- Sony Corp. slashed the price of the PlayStation 3 around the world in a move that analysts said is likely to boost sales of the game console while not adding much to its money-losing earnings.

The Japanese electronics maker introduced a revamped, slimmer version of the PlayStation 3 on Wednesday, raising its hard drive to 120 gigabytes from 80, and lowering the price by about $100 worldwide.

Sony cut the price of the current model to the same price as the new model -- $299 in the U.S. from $399, and in Europe to 299 euros from 399 euros, but kept it unchanged in Japan at 39,980 yen ($420).

Shawn Layden, president of Sony Computer Entertainment Japan, the company's gaming unit, told reporters the new model will go on sale in Japan Sept. 3 for a lower price of 29,980 yen ($315).

Sales of video games and consoles have been hit by the global slowdown, and speculation had been rife about a PlayStation 3 price cut.

The price reduction is coming ahead of the critical year-end shopping season, when game makers rake in most of their sales for the year.

Sony desperately needs a boost. The maker of Bravia flat-panel TVs and Cyber-shot digital cameras lost 98.9 billion yen ($1 billion) last fiscal year, its first annual red ink in 14 years. It is forecasting an even worse 120 billion yen ($1.3 billion) loss for the fiscal year through March 2010.

Sony has sold more than 23.7 million PlayStation 3 machines around the world since the machine went on sale in 2006, but their sales have fallen behind rivals.

Nintendo Co. has sold 52.6 million Wii consoles worldwide, although the Wii has cost $250 in the U.S. and 25,000 yen ($260) in Japan since its 2006 launch. Executives have repeatedly denied any price cut is in the works.

Microsoft Corp., the U.S. software company, has sold more than 31.4 million of the Xbox 360 machines globally. The main Xbox 360 model costs $300 in the U.S. and 29,800 yen ($310) in Japan, about the same as the new PS3, but Microsoft offers cheaper models.

Hirokazu Hamamura, gaming expert and president of Enterbrain in Tokyo, which publishes game magazines, expects fans to welcome what he sees as a solid price cut coming well ahead of the holidays.

"Sony is returning to basics to communicate the fun of the PS3, and so you can feel a sense of crisis and a determination to turn things around," he said. "Sony is up against Microsoft gaining market share in the U.S. and Europe, and the Wii, which has been such a big hit."

Sony has promised to make the PlayStation 3 one of its core products in achieving a turnaround from the battering it took from the global financial crisis.

Kazuharu Miura, analyst with Daiwa Institute of Research in Tokyo, said the price cut will be a plus for sales but came earlier than he had expected, eroding more than 10 billion yen ($105 million) in operating profitability from Sony's bottom line.

Sony has said it is planning to sell 13 million PS3 machines in the fiscal year through March 2010, better than the 10 million for the financial year ended March 31. The price cut is likely to have been figured into that projection, according to Miura.

"From what we have seen with the original PlayStation and the PlayStation 2, a price cut is very effective in boosting sales," he said. "There will definitely be an impact."

Consumers are waiting for good games to play on the machines, analysts say, and some news is expected in Japan at next month's Tokyo Game Show.

Console sales for the rest of the year will have to be strong for the video game industry to end 2009 on a high note.

John Riccitiello, the CEO of U.S. video game publisher Electronic Arts Inc., called Sony's decision a "bold move done precisely at the right time."

He praised Sony for not waiting to make the announcement until right before Christmas or Thanksgiving, when, especially in a tough economic environment, consumers will likely be bombarded with an onslaught of messages from companies selling everything from DVDs to TVs to cell phones.

Doing the price cut in the middle of August instead, "really stands out," he said in an interview. He added the price cuts will be a boost not only to Sony but also to the overall gaming industry.

[Associated Press; By YURI KAGEYAMA]

AP Technology Writer Barbara Ortutay contributed to this report from New York.

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