RC Cola
08-11-2006, 10:06 PM
http://money.cnn.com/2006/08/11/commentary/column_gaming/index.htm
NEW YORK (CNNMoney.com) -- While the price of the PlayStation 3 may prove to be too high for some this holiday season, it's looking more and more likely that Sony will try to tempt consumers with a less expensive handheld gaming system.
As it prepares to launch its next generation machine, Sony is apparently stockpiling finished gaming hardware, which analysts believe to be the PSP (PlayStation Portable). That, they believe, is a signal that the company plans to reduce the price of the PSP as the holidays get closer.
"There is a price cut coming in the second half of the year," said P.J.McNealy of American Technology Research. "[The PSP] has lost momentum. Nintendo has had a great run since it launched the DS Lite and Sony needs to regain some ground."
McNealy said he expects Sony (Charts) to drop the PSP's price by $50 to $149. It's possible the company will also bundle the cheaper system with a game or two as well, though not certain.
The timing's about right for a PSP price cut. (You could argue that Sony has yet to lower PSP prices, although it'd be a pretty weak argument.) When the system first went on sale in early 2005, it was only available via a $250 bundle, which included headphones, a carrying case and other accessories. This March, the company dissolved the bundle, selling just the system for $199.
PSP sales have been solid so far, with 20 million units shipped worldwide (with over 8 million of those to the U.S.). That's essentially a tie with the Nintendo DS, which has sold over 21 million units - but the numbers don't tell the whole story.
While the DS has been on the upswing, thanks to commercially and critically successful games such as "Brain Age" (which has sold more than 4 million copies worldwide), "Nintendogs" and "New Super Mario Brothers," the PSP has not had a game truly capture the gaming world's attention since the release of "Grand Theft Auto: Liberty City Stories" (published by Take Two Interactive (Charts)) last October.
This holiday, in addition to the expected price cuts, the PSP will see the release of "Grand Theft Auto: Vice City Stories," which should help boost sales. And waiting in the wings is an online Sony store that will allow PSP owners to buy, download and play classic games from the original PlayStation system.
A $149 price point would put the PSP in the same range as the DS, which currently sells for $129. Nintendo is less likely to reduce its price as it continues to have problems meeting demand for the machine worldwide.
That could give Sony an advantage - as the PSP can also double as a portable video player. While many studios and retailers have abandoned the system's UMD discs for movies, Sony has struck deals allowing people to transfer content from their Tivos and Web videos.
As for Sony's other big system - the PlayStation 2 - things are likely to remain unchanged for now. While a price cut to $99 is certainly coming eventually, it likely won't happen until next year, say analysts. The installed base of video game machine owners is considerably larger than it was five years ago, making it less critical to get systems in people's hands.
"PS2 sales are still pretty solid, so why would Sony bother cutting their prices if the flow through retail is still pretty good?," asked Colin Sebastian of Lazard Capital Markets. "Also, Sony still talks about a 10-year life cycle for the PS2. They've typically been doling out these price cuts every couple of years [and they lowered prices earlier this spring]."
http://www.next-gen.biz/index.php?option=com_content&task=view&id=3625&Itemid=2
A report on CNN says that a PSP price cut for the holidays is "imminent," as the DS pulls away in unit sales. Next-Gen spoke with a top analyst who gave us various reasons why a price drop would make sense for Sony.
According to Chris Morris' most recent Game Over column on CNN.com, Sony may try to offer customers a reduced-price PSP as an alternative to the $500-$600 PS3 by the holidays.
During Sony's last earning's call, the company alluded to an inventory of PSPs, or as CNN referred to it, a "stockpiling" of the handheld. This is just one of the reasons analysts are thinking that a PSP price cut isn't that far off.
Lazard Capital Markets analyst Colin Sebastian told Next-Gen that PSP inventories aren't the only indicator of an impending price drop. The house of PlayStation appears to have some significant motives behind such a move.
"The reasons Sony would consider a price cut include driving higher demand, reacting to competitive pressures, and/or taking advantage of lower component costs. For potentially all of these reasons there is a decent chance of getting a PSP price cut."
That "reaction to competitive pressures" is perhaps the clearest motive behind any potential price drop. With Nintendo selling new fit and trim $129 DS Lites as fast as it can make them, Sony is in a position to remind potential customers about its own little handheld marvel.
"Clearly the DS is taking some momentum away from the PSP, and that has to be playing a part in the pricing strategy," said Sebastian. "Also, in more general terms, the PSP is one of the potential growth drivers for the industry, that is, for Sony, the game publishers and to some extent the retailers."
Handheld software sales have proven to be a significant source of revenue for publishers as the PSP and DS continue to become more established platforms. Just recently, Capcom and Infogrames both cited handheld software sales as strong contributors to overall revenues for their most recent quarters.
Sebastian stated that a price cut during the fall months would be out of character for Sony, but a price cut may still be possible as the year progresses. "Historically Sony has preferred to cut hardware prices in the spring or summer, but you can't rule out the possibility of a move closer to the holidays," he said.
Earlier this year, Sony introduced a scaled-down PSP pack for $199, versus the normal $249 tag. While the lower-priced option may have attracted more consumers, it can't really be considered a true price cut, as Sony merely removed extra peripherals from the more expensive pack to achieve a lower price. So technically, since its North American introduction in March 2005, the system has yet to see a true price cut.
But how much of a price cut will we see? "I think you could see either $149 or $179 for the core system, with $149 getting the PSP closer to the DS," said Sebastian.
Analyst P.J. McNealy with American Technology Research sounded even more confident in a price cut than Sebastian. He expects the price to drop to $149. "There is a price cut coming in the second half of the year," he told CNN. "[The PSP] has lost momentum. Nintendo has had a great run since it launched the DS Lite and Sony needs to regain some ground."
This seems like a much-needed move for the PSP. It probably won't help them surpass the DS in sales (especially since the DS could easily respond with a drop to $99...which the analysts didn't mention for some reason), but it should still help improve PSP sales by quite a bit (especially with the GH program and PS1 downloads on the way IMO). I wonder if they'd be losing money again at $149 or still making a profit. IIRC, the core pack that was launched in Japan was around $185 (from the exchange rate at the time), and that was almost 2 years ago; it wouldn't surprise me if they were still profiting from the PSP at $149 (although not as much of course).
It also seems like developers have wanted a price drop for the PSP (among other things). EA's VP and COO of their WW studios said this (http://www.next-gen.biz/index.php?option=com_content&task=view&id=3617&Itemid=2
):
"I don't think Sony can afford to sit back. They still have things they can do with the price and performance of the machine, things that they need to address."
So along with the price drop, I guess developers want Sony to release the CPU cap on the PSP. I'd be happy with both. :)
NEW YORK (CNNMoney.com) -- While the price of the PlayStation 3 may prove to be too high for some this holiday season, it's looking more and more likely that Sony will try to tempt consumers with a less expensive handheld gaming system.
As it prepares to launch its next generation machine, Sony is apparently stockpiling finished gaming hardware, which analysts believe to be the PSP (PlayStation Portable). That, they believe, is a signal that the company plans to reduce the price of the PSP as the holidays get closer.
"There is a price cut coming in the second half of the year," said P.J.McNealy of American Technology Research. "[The PSP] has lost momentum. Nintendo has had a great run since it launched the DS Lite and Sony needs to regain some ground."
McNealy said he expects Sony (Charts) to drop the PSP's price by $50 to $149. It's possible the company will also bundle the cheaper system with a game or two as well, though not certain.
The timing's about right for a PSP price cut. (You could argue that Sony has yet to lower PSP prices, although it'd be a pretty weak argument.) When the system first went on sale in early 2005, it was only available via a $250 bundle, which included headphones, a carrying case and other accessories. This March, the company dissolved the bundle, selling just the system for $199.
PSP sales have been solid so far, with 20 million units shipped worldwide (with over 8 million of those to the U.S.). That's essentially a tie with the Nintendo DS, which has sold over 21 million units - but the numbers don't tell the whole story.
While the DS has been on the upswing, thanks to commercially and critically successful games such as "Brain Age" (which has sold more than 4 million copies worldwide), "Nintendogs" and "New Super Mario Brothers," the PSP has not had a game truly capture the gaming world's attention since the release of "Grand Theft Auto: Liberty City Stories" (published by Take Two Interactive (Charts)) last October.
This holiday, in addition to the expected price cuts, the PSP will see the release of "Grand Theft Auto: Vice City Stories," which should help boost sales. And waiting in the wings is an online Sony store that will allow PSP owners to buy, download and play classic games from the original PlayStation system.
A $149 price point would put the PSP in the same range as the DS, which currently sells for $129. Nintendo is less likely to reduce its price as it continues to have problems meeting demand for the machine worldwide.
That could give Sony an advantage - as the PSP can also double as a portable video player. While many studios and retailers have abandoned the system's UMD discs for movies, Sony has struck deals allowing people to transfer content from their Tivos and Web videos.
As for Sony's other big system - the PlayStation 2 - things are likely to remain unchanged for now. While a price cut to $99 is certainly coming eventually, it likely won't happen until next year, say analysts. The installed base of video game machine owners is considerably larger than it was five years ago, making it less critical to get systems in people's hands.
"PS2 sales are still pretty solid, so why would Sony bother cutting their prices if the flow through retail is still pretty good?," asked Colin Sebastian of Lazard Capital Markets. "Also, Sony still talks about a 10-year life cycle for the PS2. They've typically been doling out these price cuts every couple of years [and they lowered prices earlier this spring]."
http://www.next-gen.biz/index.php?option=com_content&task=view&id=3625&Itemid=2
A report on CNN says that a PSP price cut for the holidays is "imminent," as the DS pulls away in unit sales. Next-Gen spoke with a top analyst who gave us various reasons why a price drop would make sense for Sony.
According to Chris Morris' most recent Game Over column on CNN.com, Sony may try to offer customers a reduced-price PSP as an alternative to the $500-$600 PS3 by the holidays.
During Sony's last earning's call, the company alluded to an inventory of PSPs, or as CNN referred to it, a "stockpiling" of the handheld. This is just one of the reasons analysts are thinking that a PSP price cut isn't that far off.
Lazard Capital Markets analyst Colin Sebastian told Next-Gen that PSP inventories aren't the only indicator of an impending price drop. The house of PlayStation appears to have some significant motives behind such a move.
"The reasons Sony would consider a price cut include driving higher demand, reacting to competitive pressures, and/or taking advantage of lower component costs. For potentially all of these reasons there is a decent chance of getting a PSP price cut."
That "reaction to competitive pressures" is perhaps the clearest motive behind any potential price drop. With Nintendo selling new fit and trim $129 DS Lites as fast as it can make them, Sony is in a position to remind potential customers about its own little handheld marvel.
"Clearly the DS is taking some momentum away from the PSP, and that has to be playing a part in the pricing strategy," said Sebastian. "Also, in more general terms, the PSP is one of the potential growth drivers for the industry, that is, for Sony, the game publishers and to some extent the retailers."
Handheld software sales have proven to be a significant source of revenue for publishers as the PSP and DS continue to become more established platforms. Just recently, Capcom and Infogrames both cited handheld software sales as strong contributors to overall revenues for their most recent quarters.
Sebastian stated that a price cut during the fall months would be out of character for Sony, but a price cut may still be possible as the year progresses. "Historically Sony has preferred to cut hardware prices in the spring or summer, but you can't rule out the possibility of a move closer to the holidays," he said.
Earlier this year, Sony introduced a scaled-down PSP pack for $199, versus the normal $249 tag. While the lower-priced option may have attracted more consumers, it can't really be considered a true price cut, as Sony merely removed extra peripherals from the more expensive pack to achieve a lower price. So technically, since its North American introduction in March 2005, the system has yet to see a true price cut.
But how much of a price cut will we see? "I think you could see either $149 or $179 for the core system, with $149 getting the PSP closer to the DS," said Sebastian.
Analyst P.J. McNealy with American Technology Research sounded even more confident in a price cut than Sebastian. He expects the price to drop to $149. "There is a price cut coming in the second half of the year," he told CNN. "[The PSP] has lost momentum. Nintendo has had a great run since it launched the DS Lite and Sony needs to regain some ground."
This seems like a much-needed move for the PSP. It probably won't help them surpass the DS in sales (especially since the DS could easily respond with a drop to $99...which the analysts didn't mention for some reason), but it should still help improve PSP sales by quite a bit (especially with the GH program and PS1 downloads on the way IMO). I wonder if they'd be losing money again at $149 or still making a profit. IIRC, the core pack that was launched in Japan was around $185 (from the exchange rate at the time), and that was almost 2 years ago; it wouldn't surprise me if they were still profiting from the PSP at $149 (although not as much of course).
It also seems like developers have wanted a price drop for the PSP (among other things). EA's VP and COO of their WW studios said this (http://www.next-gen.biz/index.php?option=com_content&task=view&id=3617&Itemid=2
):
"I don't think Sony can afford to sit back. They still have things they can do with the price and performance of the machine, things that they need to address."
So along with the price drop, I guess developers want Sony to release the CPU cap on the PSP. I'd be happy with both. :)