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The Upside to Poor PlayStation 3 Sales

| 1 Aug 2007 14:05
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According to Sony Chief Financial Officer Nobuyuki Oneda, the bad news is the good news when it comes to the PlayStation 3.

"Because the number of units sold was not as high as we hoped, the loss was better than our original expectation," he recently told reporters. Sony has been selling the PlayStation 3 console below its production cost to better compete with Microsoft's Xbox 360 and the Nintendo Wii. A recent $100 price cut in North America, which followed a similar cut in Japan, has resulted in a sales surge but won't help Sony's bottom line.

"Sales of the PS3 have risen but we booked losses due to our strategic decision to price it below the (production) cost," Oneda said.

Despite the cut, the PlayStation 3 is still priced significantly higher than the Wii, and continues to lag well behind it in sales. Sony recently reported sales of 710,000 PlayStation 3 consoles for the quarter up to June, resulting in an operating loss of $243 million for its game unit in the same period, an increase over the $225 million loss the company suffered over the same period in the previous year. Nintendo, meanwhile, reported 3.43 million Wii systems sold in the same quarter.

Sony, however, is taking a long-term view, and has not yet conceded this round of the console wars to Nintendo. SCEE President David Reeves recently said that that Christmas 2008, rather than 2007, would be the "critical test" for the PlayStation 3, while Oneda said that continuing growth of support will eventually right Sony's ship. "We will see more game titles as we head into the Christmas season," he said. "Software developers will continue to use the PS3 as an important platform to which they are committed."

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