Sony Corporation (NYSE: SNE) today announced that starting tomorrow, April 1, Playstation 2 will be available for $99.99. Playstation 2 is not only the best-selling console ever, with over 140 million units sold by mid 2008, but it is also the fastest-selling console as well, reaching 100 million units sold within 5 years and 9 months.
I remember when the word Playstation first started to become a household name. Nintendo and Sega had been the dominant players in the video game industry for decades, and there was a ton of doubt surrounding whether Sony, which had been dominant in overall electronics retail, had the ability to compete with the “big boys” in the video game wars, without having enough industry experience and know how. Aside from the stiff competition, it is well-known that the hardware side of video gaming is typically a losing endeavor for the companies that produce the consoles, as it costs more for the company to produce them than the price they receive at sale. However, large profit margins made on software sales, combined with much more significant volume of game sales, more than makes up for the losses experienced on hardware. But at that time, there was also talk of problems with coding on the software end of Sony’s new venture, which only added to mounting skepticism over the new console’s fate.
Even after the overwhelming success of Playstation, and its variant PSone – which combined, was the first console to ever reach sales of 100 million units, – Sony faced the same skepticism when rumors of their plans for the second generation, Playstation 2 console, hit the press. Launched at the turn of the century in the year 2000, Playstation 2, as mentioned, is now the fastest selling console ever, reaching 100 million units sold in almost half the time it took for the original Playstation to hit that mark.
With todays announcement regarding not just the price cut, but also the deep bench of more than 100+ titles slated to be added to its game arsenal just this year, it’s no surprise that almost 10 years later, Playstation 2 is showing no signs of slowing down in popularity. Aside from that, Director of Hardware Marketing, John Koller, is quoted in this article as having stated, “We don’t intend on discarding the system any time soon.” Meanwhile, direct competitors, Microsoft Xbox and Nintendo GameCube – both released a year after Playstation 2 – were discontinued in 2006 and 2007, respectively. Based on all that, I’d say Sony has certainly proven the naysayers wrong regarding their ability to enter and dominate the video game industry, or perhaps even any sub-industry within consumer electronics, without having gleamed prior industry experience or know how.
Sony’s newest generation console, Playstation 3, however, has sorely lagged behind its predecessors in terms of sales volume and popularity, mostly due to it having the highest price point of all the newest game systems at $399.99.
With the price of the PS2 being cut today, along with Sony’s recent weaker-than-expected earnings announcement, all in the midst of the current economic recession, some serious pressure has been mounting for a big drop in the price of the PS3. Most argue that a $50-$100 price cut would make the PS3 much more competitive with current console-sales leaders, Nintendo Wii and Xbox 360. Despite absolute denial of the corporation’s willingness to do so, recent news of technological advances within the industry, like the rumor-heavy OnLive service set to launch soon, as well as rising popularity of the other competing consoles, I’d say a PS3 price cut this year is inevitable. With unemployment looking to continue rising, which means more and more parents staying home with their children, Nintendo Wii, which is the cheapest and is widely accepted as the most family and socially oriented of all the current systems, may have an opportunity to take a significant amount of market share away from Sony during the upcoming summer months, when kids are out school and playing video games more than ever. If Sony remains stubborn on price throughout the summer, I have no doubt that an ’09 Christmas price cut could be the company’s last option in an effort to keep PS3 competitive with Wii and Xbox 360. If that were to happen, I think the war over which console is best, Wii, 360, or PS3, would come to an abrupt end with a nice three-peat for Sony. Power to the Players!