Sony Still Optimistic Despite Sluggish Sales Of Their PS3 Next Gen Console

by Paul Hamilton on August 8, 2007 at 12:49 pm

A little over a week ago Sony reported sales numbers for its slow-out-of-the-gate PlayStation 3, pegging units sold in the three months to June at 710,000. This is compared to the unexpected success of the Wii–still tough to find on store shelves–which sold 3.43 million units in the same period.

Sony tried to look at the glass as half full, noting that they sell each PS3 at a loss so the low sales numbers actually worked out to mean less money lost than they had expected. Price cuts in both Japan and more recently in the US have yet to make a discernible difference in the disappointing adoption rate of the PS3, although those cuts are recent their full impact has yet to be determined. What will remain constant is that Sony’s losses will continue for some time as they struggle to keep pace with the Wii and XBox 360 while selling at an estimated $200 loss per unit.

But Sony’s plan to deal with that is to lower the manufacturing costs of each system, first by removing the Emotion Engine from the system but also by reducing costs for manufacturing the pricey Cell processors, RSX graphics chips and Blu-ray components. Sony would like to achieve this by the end of the year and get back to the break-even point so they can focus once again on getting more PS3s into homes. It should be noted that rivals Microsoft also sell their consoles at a loss, although that margin is suspected to be lower and Nintendo’s bargain priced unit is actually a profit stream for the company.

And in spite of all the doom and gloom, there is actually some silver lining on the cloud that’s hung over Sony since their lackluster launch a little over a year ago. Many have pinpointed the inclusion of a full-featured DVD player in the enormously popular PS2 as one of the catalysts for that system’s success last gen, which came at a time when DVD players were still expensive and mostly still firmly stuck in early adopter land. Some of the slow pickup rate on the PS3 may have to do with the uncertainty of the comparable technology this time around due to the format wars of high definition DVDs. But lately Sony’s Blu-ray technology has made some promising inroads, scoring exclusivity as the HD format in Blockbuster rental stores and getting the nod from the US’ second-largest retailer, Target as their featured high definition DVD hardware platform. Target insists they’ll continue to carry the competing HD-DVD discs but will sell only Bu-ray players for the time being. East Coast warehouse chain BJ’s Wholesale Club announced a similar decision.

With Blu-ray starting to pull ahead and the PS3’s recent price dip putting it squarely into the position that worked so well for the PlayStation 2 as a competitively priced Blu-ray player that also happens to play next gen games, PS3 may finally be ready to compete this gen. Add to that a fairly strong showing at E3 which showcased several AAA-level titles coming in time for the holidays such as Heavenly Sword and Ratchet & Clank Future: Tools of Destruction and perhaps the reports of Sony’s early demise have been greatly exaggerated.

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