Sony keeps PS3 price cut deliberation close to vest

By @ibtimes on

Sony Corp is in no hurry to cut prices on its PlayStation games console, top executives said, even though many industry experts and other executives consider it a foregone conclusion.

Some analysts thought Sony might announce a price cut at the E3 video game convention that wraps up Thursday. Others predict the cut would come in September, ahead of the winter holidays.

Such a move would boost Sony's console sales, lift demand for gaming software and increase foot traffic to retailers, experts say.

And with a big portion of holiday season sales at stake, rivals Microsoft Corp and Nintendo Co Ltd might follow suit, or perhaps offer promotions that bundle in free games or accessories.

Jack Tretton, chief executive of Sony Computer Entertainment of America, said in an interview that as of now, the company planned no price cut.

Asked how long that would remain true, he said: It is tough to predict the future. There is nothing on the horizon. It depends on how far you see the horizon.

Wedbush Morgan analyst Michael Pachter expects a drop in the U.S. base price of the popular console to $349 or $299, from the current $399.

It could use the help. Pachter estimated that through April, U.S. cumulative hardware sales of the PS3 stood at 8 million units, trailing by far the 20 million for the Nintendo Wii and 15 million for Microsoft's Xbox 360, which debuted a year ahead of the PS3.

Microsoft cut prices on the Xbox 360 last year. And Reggie Fils-Aime, President of Nintendo of America, told Reuters this week the market leaders had no plans for a price cut on the Wii.

TO CUT OR NOT TO CUT?

During its two-hour presentation on Tuesday, Sony unveiled new games, introduced a slimmed down version of its PSP portable device and demonstrated cutting edge controller technology. Lower prices of the PS3, which started selling in Japan and the United States in November 2006, was not on the agenda.

Sony's Tretton reiterated that PS3 sales continue to grow at current prices of $400 to $500, depending on features. He adds that shoppers get more bang for their buck because of services connected to the machine, beyond purely playing games.

We have added so many things to our (PlayStation 3) platform, without having the consumer invest another penny, he said in an interview on Wednesday.

Still, he did not deny that lowering prices was an option the company may someday employ, saying that Sony was not done with efforts to find ways to trim the cost of making the box.

We will continue to focus our efforts on (adding features) while working on production efficiencies to ultimately bring more and more attractive retail pricing to consumers, he said.

If consumers ask, 'what do I get when I buy a PlayStation 3', I don't think that $399 is going to stop them from making that purchase, he added.

While shoppers would clearly vote for lower prices, Sony's corporate bosses have to keep in mind the consequences: less revenue and slimmer profit margins -- if any.

Last month, Sony forecast its first back-to-back annual losses since listing in 1958, underscoring troubles for a company that has fallen behind Apple Inc's iPod in portable music, Nintendo in video games, and is losing money on flat TVs.

In 2007, Sony cut the price of the PS3, which has a built-in Blu-ray disc player that drives up production costs, making its retail price at launch twice as expensive as the Wii.

He said PS3 was in year three of what was originally foreseen as a 10-year life span .

There should therefore be no rush to slash prices - a lesson Sony has learned from past models. Its original PlayStation was introduced in 1995 in the U.S. and discontinued in 2006, and its PlayStation 2 model -- the best-selling console ever -- is still in demand after nine years. Sony cut the PS2's price this year to $99.

I think we have demonstrated that we know how to manage a product life cycle, Tretton said.

(Reporting by Franklin Paul)

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