Sony’s PS3 launch turns into waiting game

Sony may be planning to surprise PlayStation fans by keeping quiet about the exact launch date and the price of its next generation video games console. But the silence, so close to its promised spring launch, has only increased speculation that PlayStation 3 will not be in shops in Japan before the summer.

A delay to the launch of PS3 will not just embarrass the embattled consumer electronics group but, depending on how long the delay turns out to be, it could jeopardise Sony’s dominant position in the video games market – giving rival Microsoft a major boost.

And with PS3 likely to be a major driver of growth, a delay could also throw off course Sony’s medium-term strategy to return its underperforming consumer electronics division back to pole position.

Sony said on Monday that it still plans a spring launch, although it conceded that the timing could be affected if specifications for the Blu-ray disc – the next generation DVD to be incorporated into PS3 – are not completed in time.

Those in the software industry remain sceptical.

Many software developers – including Konami, Bandai Namco and Capcom – have committed to launching titles for PS3, but they have refrained from committing to a spring launch.

Meanwhile, Square Enix, a major player in the market, has no plans to launch titles for PS3 this spring.

“So many [software developers] are saying that the development tools [needed to develop software] are not available and that the software won’t be ready [by the spring],” says Hirokazu Hamamura, president of Enterbrain, which publishes Famitsu, a widely-read video games magazine.

Carlos Dimas, electronics analyst at CLSA in Tokyo says: “The question is not whether they will delay it but for how long it will be delayed.”

Some analysts say that even if Sony does bring out the PS3 before the Christmas season, it is unlikely to have a significant impact on its leadership position in the video games market.

This is partly because Microsoft’s XBox 360 has failed to live up to expectations, due to a product shortage in the US and an indifferent audience in Japan. But it is also because Sony’s games division continues to reap profits from PS2, which remains a popular platform five years after it launched.

“PS2 sold well before Christmas in North America and PSP [Sony’s handheld console] is also selling well so there is no reason to launch PS3 right away,” says Mr Hamamura.

Some analysts are even suggesting that, given that the PS3 is bound to add to Sony’s losses, it would actually be better for Sony’s bottom line to delay the launch.

CLSA’s Mr Dimas estimates that it will cost Sony at least $523 to make each PS3 console.

But if yields on the cell processor – the super-computer-on-a-chip Sony is developing with Toshiba and IBM – prove to be low or the Blu-ray multimedia drive turns out to be more expensive than expected to produce, the cost of the PS3 “could easily go to $600 or $700”, Mr Dimas says.

Since the PS3 is unlikely to sell at such a high price, Sony is expected to make substantial losses in the initial stage of its cycle.

Mr Dimas expects Sony to lose $133 per box in the initial stage and its games division to post an operating loss of Y25.4bn ($215m) in the year to March 2007 as a result – even factoring in the profits from PS2 and PSP.

Sony would be better off delaying the launch until it can bring costs down and phasing it out so that it does not take a huge hit in one year, Mr Dimas says.

The problem is that any hold-up due to a delay in specifications could set back the launch until the year-end, Mr Hamamura points out.

“There are things that SCE [Sony Computer Entertainment, which makes PlayStation] can’t control and that is Blu-ray disc,” he says.

This is because the specifications for the Blu-ray disc must be agreed by the Blu-ray Disc Association, which counts 180 companies as members.

Those extra months would give Microsoft time to improve its performance with XBox 360, which has been in shops since late last year.

Meanwhile, Nintendo’s much-anticipated, next-generation games console, the Revolution, is expected later this year.

Mr Dimas says: “If the delay goes beyond December, it could be bad.”

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