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Can Sony finally get its game on? - June 5, 2007

Sony continues to do what it can to try to disentangle its Blu-ray strategy from its PS3 strategy.

Less than two months after announcing it will retire the $499, 20GB version of PS3—up to now the cheapest Blu-ray player to hit the market—Sony said it would bypass the $599 price point it originally targeted for its gen-2 Blu-ray set-top, and go straight to $499—the old PS3 price point.

One way to think about the new model, in fact, is as a 20GB PS3 player without the cost of the Cell chip and hard drive—and again the cheapest Blu-ray player on the market.

Sony’s decision to lash together its Blu-ray and PlayStation initiatives has proved costly.

The high cost of Blu-ray drives has made the PS3 more expensive than its competitors, and left Sony unable to respond to the surprising success of Nintendo’s low-cost and comparatively low-tech Wii platform.

According to the latest numbers from Enterbrain, the Nintendo console is now outselling the PS3 by 5 to 1 in their home market of Japan.

At the same time, the need to price the PS3 like a game console instead of a high-end home theater device undercut sales of standalone Blu-ray players.

Instead of driving up volume, and driving down component costs, the combination perversely limited sales of both PS3 and Blu-ray and kept component costs high.

But Sony may finally be cutting the knot.

The first step was killing the 20GB PS3.

By eliminating the low-end SKU, Sony could concentrate its PS3 efforts on the higher-end, 60 GB model, where the loss-per-unit imposed by the Blu-ray drive is more sustainable.

It’s also coming out with an 80GB version in Korea, which may signal further high-end models in other markets.

Not incidentally, the move also cleared the field for a low(er) priced standalone player.

Shortly after announcing it would drop the low-end PS3 SKU, Sony announced plans for a $599-list standalone Blu-ray player in the U.S.

It’s now slashed that price to $499—a move many expected but not until the fourth quarter. Samsung has also introduced a sub-$500 standalone.

Sony’s decision to skip over the $599 rung and go straight to $499 could well have been prompted by recent reports of a spike in HD DVD player sales since Toshiba dropped the price under $300.

Officially, Sony denies any connection, insisting the move to $499 simply reflects improved manufacturing efficiencies.

“We don’t react to other people’s products,” a Sony spokeswoman sniffed to Video Business.

But I don’t know why they would want to deny it. Sony’s haughty refusal to “react to other people’s products,” in fact, is precisely the root of its problems.

Both Blu-ray and PS3 face serious and committed competition. And up to now, Sony has not been in a position to compete effectively in either market.

Reacting to other people’s products is what competitors in a free market are supposed to do.

Instead of showing contempt for the idea, Sony ought to be embracing it ever more fervently.

Now if it really wanted to get its game on, Sony would come out with a new, low-end PS3 without the Blu-ray drive, and go straight after Microsoft and Nintendo.

Yes, I know, PS3 games are all released on Blu-ray discs. But few of them need all that capacity at this point.

Most PS3 games would fit comfortably on a dual-layer DVD, and for the few that don’t, the extra material could be downloaded to a big, fat hard drive—say 80 GB or so—and integrated during game play.

That would be called competing. And it’s not a dirty word.

 

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