By
Michael Kanellos, CNET News.com
12/05/2006
URL:
http://asia.cnet.com/reviews/home_av/others/0,39037627,39358680,00.htm
The battle between Sony and Microsoft in the game console market won't hinge on price, analysts say. Instead, it will likely come back to Blu-ray.
Sony, which unveiled the specs and pricing of its PlayStation 3 at the Electronic Entertainment Expo in Los Angeles, will charge US$499 and US$599 for the consoles when they arrive in November in the US.
Microsoft charges US$299 and US$399 for its Xbox 360, which debuted last year. It has shipped about 1.6 million and hopes to have delivered around 5.5 million by the end of June.
While it might look like Microsoft has a US$200 advantage in price, the comparison is a lot more complex than it looks.
For example, Microsoft's US$299 machine doesn't include a hard drive. The US$399 Xbox 360, the more popular model, comes with a 20GB hard drive, making it similar in configuration to the US$499 PlayStation 3.
More important, the Sony console comes with a high-definition Blu-ray DVD drive for playing movies. Standalone Blu-ray players are likely to cost close to US$1,000 when they arrive later this year.
"The PlayStation 3 will look very inexpensive (compared) to the Blu-ray player," said Van Baker, an analyst at research firm Gartner. "You're paying US$100 for the privilege of having a Blu-ray player. It is a very aggressively priced movie player."
But that raises another question: Will consumers consider the movie question when buying the consoles?
"It's cheap for a Blu-ray drive and expensive for a game machine," said Stephen Baker, an analyst at NPD Group.
Trojan horse in living room
When the PlayStation 2 and Xbox launched in the 1990s, analysts and reporters speculated that the consoles might be Trojan horses that enter the home as games machines but end up subsuming DVD players and home computers. The PlayStation 2 did help build awareness for the DVD format, but the takeover predictions didn't pan out. Sales of PCs and standalone DVD players continued to zoom.
Both Baker and Baker said the price difference between a PlayStation 3 and a Blu-ray device could work to Sony's advantage, as people who want a Blu-ray player might decide to pick up the game console instead. Still, Sony will have to outline the value benefits clearly and will have to work hard to avoid confusing consumers, NDP's Baker said.
Many also believe that buyers will sit on the sidelines until the battle between Blu-ray and HD DVD formats to become established as the successor to DVD is worked out. Consumers, in fact, have voiced their concerns on chat boards and in reactions to stories.
"If you want to force these titans into reaching an agreement on a single format, just don't buy the product. I won't be buying a player until there is a single format," wrote CNET News.com reader Brian Grant in reaction to an article in January.
Thus, the potential advantage for Sony in offering a cheap next-generation movie player could be attenuated.
Microsoft, which supports the rival standard, plans to release an HD-DVD addon drive for the Xbox. While the price isn't known, the addon will close the delta further between the two consoles.
Still, by making high-definition DVD capability an option, Microsoft doesn't have to market the Xbox 360 as a two-function device.
Appealing to the hardcore
But Sony could benefit from another somewhat unusual circumstance of the game market. Hardcore gamers--the initial target market--really don't care about price, said Chris Crotty, an analyst at iSuppli.
"I don't think the price of the PlayStation 3 is too high," Crotty said. "Look at what people were willing to pay for the Xbox 360 when it first came out. People were paying over US$1,000 on eBay."
Both Microsoft and Sony have to subsidize their consoles. Each US$399 Xbox 360 likely cost the company US$525 in components alone last year, Crotty estimated. The subsidy on the PlayStation 3 is expected to run about US$300 or US$400. Declines in component prices, however, should eliminate the need for subsidies, and both companies will likely be able to sell their machines for profit in a few years, analysts predict.
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