Shock tactics being used in war of consoles
Tokyo, September 25:
It was another “Sony Shock’’ but this time of a more welcome kind. Ken Kutaragi,
the company’s head of computer entertainment, opened the Tokyo Game Show at the weekend (SEP23-24) with the dramatic announcement that Sony would slash the price of its entry level PlayStation 3 console in Japan by 20 per cent.
The surprise move is seen as an admission by Sony that it risked pushing gamers into the open arms of its competitors by asking them to pay more than double the price of rival consoles sold by Nintendo and Microsoft.
“Japanese users and media would not stop saying that a price tag of over 60,000 yen was too expensive,’’ Kutaragi said. The PS3 will now sell for 49,980 yen (GBP225) when it goes on sale in Japan on November 11 rather than the original 62,790 yen.
But instigating a price war on home soil is unlikely to secure Sony victory in the battle between its powerful next-generation games console and rival machines from Microsoft and Nintendo. There will be no price cuts in the US and Europe, where a PS3 will cost $499 (GBP262) and 499 euros (GBP335), respectively.
Sony remains under intense pressure after a series of recent defects and production problems have damaged its reputation for technological perfection, adding to the headaches for Sir Howard Stringer, chief executive, as he seeks to turn around the firm’s finances.
Dell and Apple recalled 6m Sony-made lithium-ion computer batteries amid fears they could overheat and even catch fire. Last week, Toshiba said it would recall 340,000 laptop batteries with potential power problems and this weekend Sony acknowledged that it was investigating a fire involving a Lenovo laptop PC that uses one of its batteries.
Mitsushige Akino, a fund manager at Ichiyoshi Investment Management, said: “All of this has raised concerns about whether there is something fundamentally wrong with Sony’s manufacturing process. And it could further damage the Sony brand.’’ Sony has placed high hopes on a successful PS3 launch to consolidate its dominance of the global $30bn video games market. Yet the console’s long-awaited appearance has been fraught with problems. Earlier this month Sony said its European launch would be delayed by four months because of supply problems with its blue diode laser, a key component of the PS3’s Blu-ray DVD player. It had already pushed back the console’s launch from spring 2006 to November, when it will appear in Japan and the US. The company has also had to cut back initial shipments for 2006 from 4m to 2m consoles.
Start-up costs for the PS3 were expected to hit profits this year, even before the decision to cut its price. Sony said in April its game unit expected to post an operating loss of 100bn yen in the year to March 2007 and estimates it may take five years to recoup losses incurred developing the powerful console.
Some analysts reckon Sony will face its biggest challenge when Nintendo launches its Wii console in the US on November 19, and in Japan in December.