Sony Cuts PlayStation 3 Price, Aims to Double Sales
July 9 (Bloomberg) -- Sony Corp., the world's biggest game- console maker, cut the price of the PlayStation 3 in the U.S. by $100, or 17 percent, responding to the widening lead of Nintendo Co.'s Wii and Microsoft Corp.'s Xbox 360.

A PlayStation with a 60-gigabyte hard drive will sell for $499 starting today, part of a push to double U.S. sales, Jack Tretton, head of Tokyo-based Sony's U.S. games unit, said in an interview. An 80-gigabyte model goes on sale in August for $599.

Lower prices will allow Sony to target potential buyers of Microsoft's $479 Xbox 360 Elite model to increase sales and narrow losses at the PlayStation unit, analysts said. Nintendo's Wii, the top-selling console at $249, probably won't be affected. Sony also will have 100 new games available by the end of the company's fiscal year in March, Tretton said today.
``The price cut is unlikely to help the company dramatically expand its market share,'' Seiichiro Iwamoto, who helps oversee the equivalent of $809 million at Mizuho Asset Management Co. in Tokyo. ``There is still a large price gap.''

U.S. consumers have purchased 1.38 million PlayStation 3s since it was introduced in November. That compares with 2.84 million Wii players, which reached stores the same month. Microsoft sold 5.5 million units of the Xbox 360, introduced a year earlier, according to New York-based NPD Group Inc., which tracks sales.

``A lot of sales that would have gone to the Xbox Elite will go to PlayStation'' after the price cut, Richard Doherty, an analyst at the research firm Envisioneering Group in Seaford, New York.

E3 Games Show
Microsoft is struggling to lift Xbox sales amid an ``unacceptable'' number of repairs made under warranty, the company said on July 6. Glitches in the Xbox 360 console will cost as much as $1.15 billion to fix, Microsoft said.

Sony said in May that higher sales and lower production costs will help reduce losses at the game division by almost 80 percent this fiscal year to 50 billion yen ($405 million) after a record loss. President Ryoji Chubachi said as recently as July 6 that Sony had no plans to cut PlayStation 3 prices.

The company made its announcement one day before the opening of the Electronic Entertainment Expo, or E3, conference in Santa Monica, California, where console makers and game publishers announce new products for the coming year.

The conference opens tomorrow night with a press briefing by Redmond, Washington-based Microsoft. Kyoto, Japan-based Nintendo and Sony have scheduled events for the following day.

Sony will also lower the price of the PlayStation 3 in Canada to C$549, a C$110 discount, for the 60-gigabyte model.

Xbox Price
``There are no plans for any other price cuts in other regions at this time,'' David Karraker, a spokesman for Sony Computer Entertainment America Inc., said by telephone today.

Sony American depositary receipts fell 10 cents to $53.04 at 4:02 p.m. in New York Stock Exchange composite trading. The ADRs, each worth one ordinary share, have increased 24 percent this year.

Microsoft may respond by announcing a cut of $50 to $100 in the Elite's price at the conference, said Michael Pachter, an analyst at Wedbush Morgan Securities in Los Angeles.

Last week, Microsoft said it will introduce the Elite in October in Japan for 47,800 yen, or about $390, to help gain market share.
``We constantly assess market dynamics,'' Darren Huston, president of Microsoft Japan, said today at a news conference in Tokyo. ``We have very competitive pricing'' in Japan, he said.

Sales Forecast
Sony's sales increase probably will be closer to 50 percent than the doubling Tretton forecasts, Pachter said. At $499, the price of a 20-gigabyte model that's being discontinued, the PlayStation 3 still is costly, especially when the Wii is available for half the price and the PlayStation 2 sells for $129, he said.

Sony will cut prices further as production costs continue to drop, Pachter said.
``Five hundred dollars isn't going to get anyone excited,'' he said. ``It's good as a signal if nothing else.''

Sony can cut prices because the company has fixed production problems with a diode used in the PlayStation 3's Blu-ray disk player, said Tretton, who is based in Foster City, California. He declined to discuss costs for the console.

Clearing up the trouble made PlayStation 3 profitable several months ago, giving the company room to cut prices, analyst Doherty said. Microsoft still loses money on each Xbox 360 it sells, he said.

``Any price cut they try to make puts them more into the red,'' Doherty said.

In addition to a larger hard drive, the new PlayStation 3 model will also come with the racing game ``MotorStorm,'' Tretton said.



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