Sony to lose crown to Microsoft or Nintendo? Analyst Predictions

Sony may have disappointed many gamers with their E3 showing, but generally E3 doesn’t have a huge effect on the actual sales of a system come launch. This time however, Sony’s expensive $600 price point (for the high-end model PS3) may very well be it’s Achilles’ heel, despite the extremely strong Sony brand name and unparallelled sales of the Playstation 2 and Playstation One.

The most attractive part of the PS2 still always came down to the games, and this time Sony may not have enough original titles to draw in consumers, or rather, draw them away from competitors Nintendo and Microsoft.

Says San Diego-based DFC Intelligence, who explained that Sony may be going from first to worst. The biggest problem being how Sony has severely underestimated their competition.

“Sony has done very little to justify why the system is worth a premium price for consumers that don’t care about raw hardware performance and are not hard-core audio/visual consumers,” DFC said. “Unfortunately we believe that represents over 90% of the consumers in the marketplace.”

DFC recognizes that software plays a large part in buyers’ decisions, and points out that the PS2 was so successful because of its diverse portfolio of games and large third-party support. The broad range of software made the PS2 “a complete entertainment system for the family priced under $300,” said DFC.

“With the PlayStation 3 the company is going after the high-end power user. It is almost as if Coca-Cola not only decided to go with a new formula, but also decided to exit the low-brow soft-drink business to go into high-end wines,” DFC explains. “Of course, there is a market for high-end products but it is 1) a very different consumer type and 2) not nearly as big as the blue collar mass market. Wal-Mart sells more toys than FAO Schwartz and McDonald’s sells more beef than Ruth’s Chris Steak House.”

According to DFC, Sony may have drastically underestimated the competition and will have a lot of trouble cutting the price, particularly in time for the critical 2007 holiday season.

“A $600 price point is okay for launch but it will not fly in holiday 2007. If Sony wants to drive unit volume 2007 needs to be not only the year of price cuts, but the year of drastic price cuts. There is going to be a shakeup in the video game industry and even if Sony executes perfectly there could be a new market leader in two years.”

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