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Sony to PS3 Detractors: Go Sell Razor Blades

| 16 Mar 2009 20:15
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Analysts and game publishers are turning up the pressure for a price cut to the floundering PlayStation 3 console but as far as Sony is concerned they can all get bent.

Sony has been taking a lot of grief lately over its stubborn refusal to reduce the price of the PlayStation 3 despite the fact that the system is bringing up the rear in the console wars and has no immediate prospects for turning around the situation. Meanwhile, publishers are finally responding to the success of the Wii, with many shifting development resources to focus on the console, while the Xbox 360 continues to make slow but steady progress.

"You can't ignore the guy who has half the market," said EA Sports boss Peter Moore. "Sony obviously still has a ways to go with their pricing." EA Sports unveiled a new lineup of Wii exclusive "All-Play" games in June 2008 and soon after, Electronic Arts CEO John Riccitiello admitted the company "made the wrong call" by not supporting the Wii earlier. Since then, EA has unveiled a variety of new Wii titles and said that "half [its] emphasis in terms of title counts" will be going to Nintendo platforms.

Janco Partners analyst Mike Hickey said that could become a trend among publishers if Sony doesn't do whatever it takes to sell more PlayStation 3 consoles. "If they can't meaningfully increase their install base, then you will likely see a capital reallocation," he said. Those sentiments were echoed by fellow analyst Evan Wilson of Pacific Crest Securities, who said, "The publishers need the PS3 install base to grow in order for most of these games to be profitable."

It's a refrain Sony may be getting tired of hearing, if the response of SCEA Marketing Vice President Peter Dille is any indication. Sony is well aware of the size of the PS3 user base and the questions about the system's profitability, he said, but has no immediate plans for a price cut despite the clamor. "Everybody in the development community would love for the PS3 to be free, so they could just sell razor blades," he said.

It's not all bad news for the company: PlayStation 3 exclusives like Killzone 2 do well for the company and Epic Games Vice President Mark Rein, whose company is best known for publishing the Xbox 360-exclusive Gears of War franchise, said publishers who shift away from the PlayStation 3 risk losing out. "You make very good money on PlayStation 3 if you develop a good game," he said. "You can very easily take that game to Xbox 360 or PC."

And regardless of Dille's protest, Hickey predicts a price cut of $50-100 in either March or April, a cut that would be good news for publishers but much tougher to swallow for Sony, which is still manufacturing the PlayStation 3 at a loss. "It's an easy equation for [publishers]," Wilson added, "but it's very different from the one that Sony has to take on."

Which leaves just one question: What the hell does selling razor blades have to do with it?

Source: Bloomberg

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