Sony on the Brink
In 2007 and sometimes in 2008, Sony would refer to sales of the
PlayStation hardware family – grouping the PlayStation 3 together
with the PlayStation 2 and PlayStation Portable (PSP) – to draw
attention away from faltering sales of the nascent PlayStation 3.
Not
even that artifice would have reduced the discomfort of Sony's paltry
hardware sales in April, sales which reached a mere 415,000 systems
across the three platforms.
While PlayStation 2 sales were bolstered significantly by a price
drop to $100, the PSP and PS3 both looked extremely weak. Also
PlayStation 2 software did not see a corresponding increase, and in
fact software sales for the aging platform were down 47% from the
same time last year, according to Wedbush Morgan's Mr. Pachter.
At 127,000 systems for the month (31,750 systems per week), the
PlayStation 3 had its worst showing since October 2007, right before
the introduction of the 40GB system at a lower $400 price.
Moreover,
since Sony has made no moves on price in May, it is quite likely that
when results for this month are reported in mid-June, the figures
will be even lower.
To understand just how attractive the $400 model is relative to
the $500 model, the average sale price for the PlayStation 3 hardware (supplied to us by the NPD Group) suggests that the cheaper model is outselling the more expensive one
by a ratio of about 9-to-1.
Consequently, Sony faces a PS3 hardware price cut. Publishers and
retailers alike have been asking for it, and Sony's Dille made what
could be construed as a
veiled reference to a near-term price drop in a recent interview.
(Such expectations, regrettably, could depress May sales even
further.)
The key questions about the PlayStation 3 price drop are “When?” and “How much?”.
According to Sony's
latest financial results, it believes it can sell 13 million
PlayStation 3 systems globally from April 2009 through March 2010.
That's up from the 10 million systems it sold in the previous fiscal
year, and the 30% increase in PS3 sales will happen in a tougher
economic environment (with higher unemployment, at least in the
United States if not globally, and reduced consumer spending).
Yet we already know that United States PS3 sales will be
significantly down for at least two months of this new fiscal year
(April and May). Even if sales in May are equal to those of April,
the PlayStation 3 would be down almost 50% for the first two months
of Sony's current fiscal year.
For this reason – to make up for lost sales then increase them
year-on-year in adverse economic conditions – we believe Sony will
announce a $100 price cut at E3 2009. The longer Sony delays, and the
smaller the cut, the harder it will be to make the fiscal year
hardware sales target.
We note that others believe the cut could come later, and that it
could be only $50. If recent reports are true and Sony still loses
$40 on each $400 PS3 unit, a smaller price cut would certainly be
gentler on Sony's bottom line.
On the PSP, it is hard to tell what Sony has planned. The recent
download-only release of Patapon 2 along with increasing
rumors of a hardware revision that nixes the UMD drive suggest that
Sony will drop its current retail-focused model and consider using
its PlayStation Store as a primary software outlet.
Even the PSP hardware bundles that had previously been so
attractive to consumers have lost their appeal, with three core
systems at a price of $170 sold for every two $200 bundles (estimated
from average sale price figures provided by the NPD Group). A shift
to core-only models and online software distribution might make
sense.
Consider that the top 10 software titles on the PSP in April 2009
showed only two games released in March 2009 (and first-party games
at that), three from 2008, three from 2007, one from 2006, and one
from 2005.
Given the anemic sales of new PSP software releases, what
would Sony and third-parties lose on a relaunched system and an
online store? No one appears to be making much money on the PSP as it
is, and removing retailers from the chain of software sales might
make the system more attractive to publishers.
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And I am not surprised with that, in fact I still want to buy one :/
imo, it's bound to sell well until the very end of it's production cycle.. with that huge software library available for it, no wonder.. (: