It is sweltering in Tokyo and California, but Sony executives are already thinking holly and mistletoe. With only four months to go before the holiday shopping season in the US, Sony has revved the marketing machine for its PlayStation 3 console to full throttle.
Analysts say this Christmas will make or break perceptions surrounding the PS3. “Sony needs to light a fire under the [PS3] and get it selling by the end of the year,” says Jay Defibaugh, analyst at Credit Suisse.
“It is difficult to shift perceptions after the second Christmas [a console is launched].”
The nearly decade-long dominance of Sony’s original PlayStation console and its successor, the PlayStation 2, squarely cemented the consumer electronics maker as leader of the $30bn global games market. The PS2, in particular, has been the most commercially successful console in gaming history, with more than 120m units shipped by May 2007 and a market share of about 60 per cent worldwide.
But Sony walked into the annual E3 gaming conference this year in last place – a ranking unfamiliar to the consumer electronics group. The PS3 is lagging behind both Nintendo’s Wii and Microsoft’s Xbox 360 in sales, prompting Sony this week to slash its price by $100 to $499.
Analysts say the price cut is too shallow and that Microsoft and even possibly Nintendo are likely to retaliate in coming months.
The disappointing performance of the PS3 is all the more dire as it was supposed to play a vital role in boosting Sony’s profits. Instead, it is acting as a dead weight.
Sir Howard Stringer, Sony’s chief executive, admitted at its AGM that senior executives in charge of the PS3 had seen their bonuses slashed this year.
Kaz Hirai, the new head of Sony’s games unit, has long maintained that the over-engineered PS3 will win the test of longevity, having a “life cycle” of about 10 years. But for this to happen, observers say, it is crucial for Sony to kick-start sales by the end of the year.
“Sales of consoles are driven in large part by fad and young people’s opinions. If they don’t want to buy [the PS3] now or in a few months, they will lose interest,” says Carlos Dimas, analyst at HSBC.
Unlike the previous generation of consoles, in which the PS2 reigned supreme, it is no longer a given that software developers will make exclusive games for the PS3. Making games for multiple consoles has become the norm, although a little cash can sometimes sway the equation.
Most recently, Sony suffered a blow when Take Two Interactive Software, maker of the popular Grand Theft Auto game, said it would create two exclusive episodes for Microsoft’s Xbox 360 in exchange for $50m.
When it debuts in October, Grand Theft Auto IV will be released for both the Xbox and the PS3 on the same date, for the first time.
Some analysts say Sony could launch yet another round of strategic price cuts just in time for the holidays.