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Confirmed PS3 Price Cut and New Model

ps3 In the wake of a week where Microsoft has been direct about manufacturing issues, Sony has been inconsistent about pricing.  A rumor was reported as unconfirmed last week and denied. It’s now being widely reported again and being confirmed. 

Sony, which has struggled to gain market-share for its high powered (and the industry’s highest priced) gaming console, will cut prices on its flagship PS3 platform.  Effective Thursday, the price for the console will drop by $100 to $499. (It will be the same price as a previously discontinued 20gb model which was phased out in April as a result of poor sales)

Most analysts weren’t expecting a price cut until nearer to the holiday buying season.  But in a world where timing can be everything, the price cut may be a first step in Sony’s gaming revival.   Sony’s CEO of Sony Computer Entertainment America, Jack Tretton acknowledges the early challenges Sony has faced “"We have paid the price in the short term, hopefully for long-term success. … This latest price move is an attempt to try to bridge that gap between what the average consumer can afford and what we, quite frankly, can afford to charge.”

The summer may not be the biggest of seasons for gaming but the timing looks good for Sony.   Rival Nintendo’s Wii is the must-have console (reasonably priced at $250) but the Wii remains so popular that it’s rarely in stock.  Microsoft’s Xbox is tarnished with manufacturing issues and similarly expensive.   At $499, The PS3 will still be too pricey for many, but bundled with a five free Blu Ray DVD promotion, the pricing change may be enough to convert some buyers. 

In the short term, Sony needs the help.    So far Americans have bought 5.6 million units of Xbox 360, 2.8 million of Wii and 1.4 million of PlayStation 3.  In monthly retail reports, the Nintendo Wii is the regular leader.  In May the PS3 sold 82,000 units in the US in May, compared to Xbox 360’s 155,000 units and the Wii’s 338,000 units.  Sony’s past generation console, the PS2, sold more than double the volume of the PS3 (188k units). 

In addition to the price cut Sony, to bolster sales, Sony will also introduce a new model.   Beginning in August Sony will bring an 80gb version of the PS3 to the U.S..  The consoles with an extra 20gb of drive space will cost an additional $100.  A “limited edition” gaming bundle will be included with that purchase.  It’s a curious move.  Sony’s previous effort to segment the market into different pricing categories failed.  A 20gb model of the PS3 was outsold by a factor of nearly 10:1 and phased out in April.  Trying again to offer multiple price points (expensive and very expensive) seems  dubious but maybe Sony learned something from the past effort that isn’t immediately obvious.

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