Sony's PS3 to Cost $100 More Than Microsoft Xbox 360 (Correct)
(Corrects spelling of name in 10th paragraph.)
By Daisuke Takato
May 9 (Bloomberg) -- Sony Corp., the world's biggest maker of video-game consoles, will sell the PlayStation 3 from Nov. 11 in Japan, betting features such as a high-definition DVD player make the machine worth $100 more than Microsoft Corp.'s Xbox 360.
The PS3 will come with a 20-gigabyte hard-disk drive and sell for 59,800 yen ($535) in Japan, and $499 and 499 euros in the U.S. and Europe starting Nov. 17, Sony Computer Entertainment America Chief Executive Officer Kazuo Hirai said yesterday at an industry conference in Los Angeles.
Sony is looking to attract gamers with functions not available on the Xbox 360, such as a Blu-ray DVD player and a controller that lets users maneuver games by waving it in the air. The Tokyo-based company showed the console with games including Electronic Arts Inc.'s ``NBA Live,'' and touted features such as online chatting and game-playing, as it looks to catch up with Microsoft, which started selling the Xbox 360 in November.
``Early adopters will buy the console, even if it's expensive,'' said Fumio Osanai, an analyst at UBS Securities Japan Ltd. ``
The Xbox 360 graphics are no different from the previous PlayStation and on top of that, the PS3 will have Blu- ray, so they can justify the price.''
Sony on March 15 delayed the global release of the PS3 from a target to get the player out in ``spring,'' because of a holdup in copy protection standards for the Blu-ray, a high-definition DVD format that can store at least five times more data than standard DVDs.
Shares of Sony have gained 2.6 percent since March 15, when the company said it would delay the PS3 by about six months, lagging the Nikkei 225 Stock Average's 5.3 percent advance in the same period. Sony's stock fell 0.9 percent to 5,610 yen today.
Key to Strategy
The PS3 is key to Sony's business strategy as it uses the Cell chip, the company's fastest processor ever, and may help spur sales from its movie library, which includes classics such as the ``James Bond'' series and recent hits like ``Spider-Man.''
``The PS3 is a pillar business for Sony because it holds the future for its software and device businesses,'' said Naoki Fujiwara, who oversees about $172 million in Japanese equities at Shinkin Asset Management Co. in Tokyo. ``At 60,000 yen it's not something you can easily get your kids for Christmas,'' so the PS3's popularity may not spread that much, Fujiwara said.
The Xbox 360 with a 20-gigabyte hard drive sells for $399, and a version without a drive costs $299. The PS2 cost 39,800 yen in Japan when it came out in March 2000 and $399 in the U.S. A 60-gigabyte version of the PS3 will sell for $599 or 599 euros, and retailers in Japan can set their own price on that model.
`A Lot of Money'
``Ouch, 60,000 yen is a lot of money for a console,'' said Chikako Nagashima, 33, from Kanagawa prefecture, just outside of Tokyo. ``
My boyfriend and I were thinking of buying two PS3s so we can play online, but I think we'll just settle for one initially,'' said Nagashima, who has bought almost every player since Nintendo Co.'s Entertainment System in 1984.
Even with a $599 price tag, Sony will lose about $100 to $200 on every unit is sells initially, analysts said.
The console costs about $800 to make, Hiroshi Takada, an analyst at JPMorgan Securities Asia Pte., wrote in a report today. Sony last month said the video-game unit may have a 100 billion yen operating loss in the year started April 1.
``The start-up costs are such that you may not make money on every single unit from day one, but you will'' ultimately make money, Phil Harrison, president of worldwide studios at Sony Computer Entertainment, said in an interview at the conference.
Console makers initially sell the hardware at a loss to keep the price low enough to attract users, and recoup that later by selling game software and collecting royalties from third-party game makers. Sony's Hirai yesterday reiterated the company's target to ship 6 million PS3 units by March 31.
Xbox 360
Microsoft, which loses about $150 per console, according to researcher ISuppli Corp., in March more than doubled Xbox 360 shipments to retailers to help satisfy demand. The Redmond, Washington-based software maker plans to sell 5 million to 5.5 million Xbox machines by June 30.
Sony, at the Electronic Entertainment Expo in Los Angeles, demonstrated the console using new games including ``Formula One 06'' and ``Sing Star,'' a karaoke-like program that lets users sing along with tunes. Consoles connected to the Internet will be able to download new songs.
Ken Kutaragi, the head of Sony's video-game business, showed how the new wireless controller can detect when a user tilts, pulls or makes other subtle moves. The device is similar to a controller used by Nintendo's Wii game console due for debut sometime this year.
Not Innovative
``We didn't see a lot of innovation'' in Sony's presentation today, said Shane Kim, general manager of Microsoft Game Studios. He said there is a ``significant'' difference in the price of the PlayStation 3 and the Xbox 360 and that Sony's controller appeals to a ``niche market.''
Consumers will be able to buy PlayStation cards, letting them acquire additional content such as extra characters. Players can chat online and form communities similar to those at News Corp.'s MySpace.com.
Sony, the world's second-largest consumer electronics maker, has sold more than 103 million PS2s since their March 2000 debut. The company had 64 percent of the market for that generation of consoles, Merrill Lynch & Co.'s Kash Rangan wrote in a May 2 note. Microsoft garnered 16 percent and Nintendo Co. had 13 percent.
``There's a lot of advantages that Microsoft has,'' said Mike Goodman, an analyst at Yankee Group Research in Boston. ``They're in second-generation software, they have an installed base, they're out before Sony.''
Goodman predicts Sony will hold 45 percent of the market share for this generation of game consoles, versus 40 percent for Microsoft.
``This is a fascinating strategic chess match that is going on between Sony and Microsoft,'' Goodman said. ``It's punch and counterpunch.''
To contact the reporter on this story:
Daisuke Takato in Tokyo at
dtakato@bloomberg.net
Last Updated: May 9, 2006 05:36 EDT
