The headline in The Wall Street Journal reads: Hope Fades for PS3 as a Comeback Player. The problem is that "early results from this holiday season aren't promising. US sales of the PS3 fell 19% last month from a year earlier, while sales doubled for the Wii console and rose 8% for the Xbox 360, according to research firm NPD."
Wii took most of the market, shipping 2.04m Wii consoles in the US in November. The Xbox 360 trailed in a distant second with 836,000, but the PS3 didn't even sell half as many as that, at 378,000. The WSJ says:
The sales decline is a heavy blow to Sony, which was banking on the videogame division to provide a bright spot as its core electronics business is hit by the global economic downturn. Sony in May forecast that its games division would turn a profit this fiscal year after two years of losses since launching the PS3 in 2006. Meanwhile, poor sales of television sets and digital cameras are forcing the company to lay off thousands of staff and close factories.
Basically, Microsoft gave the Xbox a boost by cutting the price, and Sony couldn't afford to follow because it's already losing too much money selling PS3 consoles at a loss.
The PS3 costs a lot, of course, because it includes an expensive Blu-ray player. This gave the PS3 an advantage when standalone Blu-ray players were expensive. "But prices of Blu-ray players have fallen so sharply recently -- new players are available for less than $200 -- that it's possible to buy a Blu-ray player and an Xbox 360 for less than a PS3," says the Journal.
Sony is trying to reduce the cost of the PS3 by, for example, leaving out PS2 compatibility, and increasing the integration of parts. A new report from iSuppli estimates the cost of a PS3 at $448.73, against its US retail price of $399, so Sony is still losing a lot on each one, if you bear in mind the distribution, sales and marketing costs. And it will never catch up with Nintendo (the Wii is lower technology and was profitable at launch) or Microsoft, which came out first and will always be a year further down the cost reduction curve.
A graph with the WSJ article shows the impact the games division's losses are having on Sony, and with the company laying off staff and closing factories, it's not hard to see the games division eventually taking a hit.
Sony desperately needs the November figures to be an anomaly, followed by an upsurge in December and, especially, through 2009. However, the current financial turmoil suggests that will not be easy.
But what can Sony do? Drop Blu-ray and rush out a PS4? I don't think so.
