Sony frets over PS2 (and XBox)

What to do about PS3?

Sony is feeling the heat of competition breathing down its neck. Kunitake Ando, Sony’s president and COO, has told the

FT

that the presence of Xbox on the market could shorten console lifecycles. In other words Ando fears that the more powerful Xbox, which actually retails for the same price as PlayStation 2 in the States, will force Sony to manufacture the PlayStation 3 ahead of schedule.

Ando also uses the opportunity to take a pop at Nintendo, drawing attention to the disappointing sales of its new console in Japan.

Currently, Sony’s console is the only one on the market in the USA, but as of next week it will have two competitors to deal with. The PS2 has an awesome catalogue of titles, though (and not content with that, Konami has mysteriously decided to launch Metal Gear Solid 2 one day after the US Xbox launch).

The news that Sony feels PS3 production may need to be ramped up sooner is slightly confusing, because the company isn't used to backing away from current formats as soon as something else hits the market.

That was Sega's MO, and the last thing we want is Sony repeating this mistake. If it's so worried about market share slipping through its fingers, why not hack another $100 off the price of PS2? Don't forget, while we pay £199, American consumers still having to pay $299 – a shade over £200 at current exchange rates. Under normal circumstances we would expect to pay as many pounds as the American pay dollars. Sony isn't exactly giving itself every break, which is why this PS3 message seems somewhat confused.

The truth is, Sony may not be losing much money on PS2 units at the moment, but with another $100 off the price it would be, and in order to get PS3 production online early (which Ando-san believes his company may need to do) it needs to recoup a lot of iinvestment in chip manufacturing. Perhaps now it's regretting its decision not to farm out console production to another firm, as Microsoft have done with Xbox...

If Sony is in this position, it's a no-winner. The company cannot afford to drop the price of PlayStation 2 because it needs to recoup costs. But neither can it afford to let Microsoft steal their market share by undercutting them in the near future. So which is worse? Losing the ability to construct PlayStation 3 in time to deal with an Xbox successor (HomeStation is still happening, as far as we know), or losing market share?

It's an unenviable position to be in. But we think that Microsoft has the greatest fight on its hands. MS has no previous success in the games console sector upon which to base promotions, few if any killer applications (Jet Set Radio Future isn't even out yet, so forget that), and it is opting for the higher price of $299.

With things the way they are now, Sony's next move may decide whether Xbox is a success or a failure.

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