Sony Unveils New PlayStation 3 "Slim" To Boost Sales

Posted by: Kenji Hall on August 18, 2009

ps3_sears.jpg

Damned if you do, damned if you don’t. That sums up how Sony executives must have felt as they debated whether to lower the price of the PlayStation 3 video game console. Lowering the price might add to the console’s allure, but it would also make it harder for the company to turn around its money-losing gaming business.

In the end, Sony decided on a price cut. On Aug. 18, at Gamescom, Europe’s biggest show for interactive entertainment, in Cologne, Germany, the Japanese electronics and entertainment giant took the wraps off the PS3 Slim, a new, lighter, more compact version of the console that will boast all of the same features. It will appear in U.S. stores on Sept. 1 and will cost $299 for a machine with a 120-gigabyte hard disk drive. The price is $100 less than the previously available 80-gigabyte machine and $200 less than the $499 160-GB version. (The older models will be discounted, as well.)

Hours before the announcement, Kmart and Sears jumped the gun and began taking pre-orders in the U.S. for the PS3 Slim. There were other clues that Sony would unveil an overhauled console: Online retailer Amazon discounted the 160-GB PS3 by $50, to $449.99, on its Web site, and British supermarket operator ASDA said it had slashed the price of the PS3 and would continue the sale until its inventory ran out.

For weeks, the market had been rife with rumors of an imminent PS3 price cut. Most analysts thought that Sony had to drop the price in order to boost sales and broaden the machine’s appeal beyond the hard-core gaming crowd. Until today, the PS3 was the priciest of the gaming machines: It sold for $399 in the U.S., compared to $250 for Nintendo’s Wii and $299 for Microsoft’s Xbox 360. And that, say analysts, hurt its chances of gaining a following early on. One possible reason Sony waited so long: It was losing money on the PS3.

Since the day Sony and Nintendo released their consoles in November 2006, PS3 cumulative sales (23.8 million) have paled in comparison to the Wii’s (52.6 million). Worse, Sony is behind in its goal of selling 13 million consoles in the fiscal year through March 2010, up from 10.1 million last year. In the first quarter, Sony sold 1.1 million units, down from 1.6 million in the same period the year before. This year’s October-December quarter will be huge: Sony traditionally does roughly half of its annual console sales during this period.

But the decision wasn’t a no-brainer: Sony can hardly afford to give discounts on a machine that’s been a money-loser from the day it hit store shelves. (Sony profits from selling games it develops in-house and from licensing fees it gets from other game publishers that sell games for the PS3.) When the PS3 was launched, an iSuppli analysis estimated Sony’s “bill of materials”—the total cost of all the components used to build it—at more than $840 for the model that sold at the time for $599, and $805 for a low-end version that sold for $499. More than two years later, iSuppli took the machine apart again and declared that, while losses had shrunk to about $50 per machine, Sony still wasn’t making a profit.

This year the PS3 was finally supposed to earn money. Losses from video games and TVs have been a headache for Chairman and CEO Howard Stringer, who took over four years ago to revive the ailing tech company.

The company’s efforts to design smaller chips and use fewer parts were expected to help lower costs. Problem is, even if the PS3 is no longer a drag on earnings, Sony’s games business still has a ways to go before it stops hemorrhaging cash. And revenues from Sony’s online sales of game, TV and movie downloads through the PlayStation Network are only expected to top $500 million—peanuts for a $73-billion company, according to Barclays Capital Japan’s analyst Eric Lee.

Another problem: In the coming months, Microsoft and Nintendo might lower their console prices, too, making the PS3 the most expensive option for recession-hit shoppers. And as prices of ordinary high-definition Blu-ray DVD players fall, the PS3—with its built-in Blu-ray player—loses its appeal to the early tech adopters who might have bought the console as an all-around entertainment system.

Most analysts I spoke with said Sony Computer Entertainment, the gaming unit, might briefly turn profitable in the October-December quarter but would probably end the fiscal year in the red. Sony is clearly hoping that a lineup of new games slated for later this year will attract buyers. “I think they’re going to lose money anyway at this rate so they probably figured, ‘Why not do something more proactive about jump-starting the gaming business?’” says KBC Securities’ analyst Hiroshi Kamide.

But would a price cut help Sony sell 30% more PS3 consoles than it did last fiscal year? Skeptics abound.

Note: The original item has been updated with details from Sony’s announcement in Germany.

Reader Comments

Bryan

August 18, 2009 11:59 AM

All Sony needs to do is maintain a positive selling momentum till next year. At that point it will pass sales of the XBOX and with more consoles sold, sell more games. They have a larger plan here and the slim is just part of it.

Dale

August 18, 2009 12:16 PM

People buy ipods and iphones then pay monthly contracts or pay for music, videos etc but there has always been a stigma over the PS3 price point why? Even in comparing the xbox 360 which has no blu ray, pay for online play each year, no wireless and a small hard when based on facts the PS3 has always been the better console. Now, it's just going to be that much better. Game on!

Mike Balrog

August 18, 2009 1:40 PM

Playstation 3 is imminent. Prepare for launch. PS3 Slims is a GO!

bob

August 19, 2009 1:46 AM

"All Sony needs to do is maintain a positive selling momentum till next year. At that point it will pass sales of the XBOX and with more consoles sold, sell more games"

...except that the PS3 is still selling fewer units than the X360, so it's actually falling further behind. Not that the relative sales of the platforms has anything to do with the number of games sold on any particular platform.

"PS3 has always been the better console." This is debatable, and it also misses the point. Nobody buys a console for a hunk of plastic and metal -- they buy it for what it can do, which means games. Developers may prefer one over the other in terms of ease of development, especially cross-platform development these days. The Xbox is strong in those areas.

The PS3 still seems like a glorified Blu-ray player to me, and Blu-ray hasn't really caught on. Maybe once the world economy starts to recover people will jump into these higher-priced home movie options.

Shannon

August 19, 2009 1:51 AM

Wonder if this one is backwards compatible with PS2???

Peter

August 19, 2009 3:05 AM

It should be backwards compatible with PS2. I think this is very important for all PS2 owners, and there is a lot of them.

Chris

August 19, 2009 5:19 AM

Nope the Ps3 slim is not backward compatible.Sorry. Safe to say if this doesnt work for sony there company is screwed

Chris

August 19, 2009 5:19 AM

Nope the Ps3 slim is not backward compatible.Sorry. Safe to say if this doesnt work for sony their company is screwed

Lower the cost of Games, higher the profits

August 19, 2009 5:37 AM

Asia Pacific region and the middle east fit a chip that plays pirated games. Millions of games are sold this way. Sony just has to lower the exorbitant prices on the games to pocket the phenomenal gains.

jon

August 19, 2009 8:31 AM

when will these people learn? why are they losing money? because they don't listen to the customers. let's put it this way, 3 months ago i went to buy a console. having loads of ps one and ps2 games i headed for the ps3 thinking i can play my old games on it AND i was prepared to pay anything. having been told it doesn't play the old console games i though what was the point then when i can get a xbox 360 much cheaper. so i bought a xbox 360. if they had the backwards compatibility i would have definitly bought one. if they did that they wouldn't be at a loss. a lot of people done what i did and if sony listened and done it on the new slimer version then i would buy one and sell my xbox. they never learn do they? lol

ajay

August 19, 2009 10:10 AM

fyi sony, flat panel tv is a 10 year purchase, once bought the customer is going to keep it for 8-10 years, so price your tv right and then build it to make money, have the most feature packed tv at the lowest price in each category. same thing for game consoles. secondly and this is very important, make it easy to integrate with other stuff a customer might have - e.g- why have a bluetooth remote for the ps3? this prevents the customer from easily integrating it into his universal remote control, kills the elegance and makes me hate you. sony needs to focus on equating sony brand with to notch technology and easy to own, not just be the priciest brand out there

Aaron

August 19, 2009 10:24 AM

jon first off id like to say i have been a 360 owner for ever. that said i still haveto defend sony. they first released the console with backwards capability but it cost them so much to produce an engine that read two formats that they had to charge high prices and they didnt sell due to this so when you said that is what there problem is youd be wrong seeing as how they attempted just that. what sonys problem is is that they forgot that they were selling a gaming console not an entertainment system if they would have started out with something cheaper to produce like the slim even if a bit less powerful, as long as it played movies and games theyd have made a killing

Zachary

August 19, 2009 11:02 AM

Don't forget that Sony is losing the handheld war, also. I own a Psp and the last time I bought a game for it was a year ago. Money loses have been big in Sony gaming.

Zachary

August 19, 2009 11:02 AM

Don't forget that Sony is losing the handheld war, also. I own a Psp and the last time I bought a game for it was a year ago. Money loses have been big in Sony gaming.

Arnold Darrow

August 19, 2009 2:22 PM

IMO the reason the PS3 isn't doing better is that putting a blu-ray player inside made it uncompetitive with other gaming systems that use lower cost playing systems.

Of course, its obvious why Sony took this gamble. They wanted a powerful launch for their new Blu-Ray system and figured putting it in the PS3 would give the new high-def movie system a big boost.

But this turned out to be a 2-edged sword. While putting in Blu-Ray helped it win the war against HD-DVD, and convinced Warner Home Video to go with them and drop the Toshiba system, it made it just too expensive for the gaming world for it to dominate.

It would have been better to put a lower cost drive in the PS3, which would also be backwards compatible with PS1 and PS2 games.

So they won the high definition movie system war but lost the gaming system war. Too expensive a trade-off!

GameAnalyser

August 19, 2009 5:50 PM

Perhaps Gaming Industry is one of the victims of money loosing , but revenue piled up thru consistent sales and a sudden boost is what is required to stay on and survive in the market of recession-hit period.

GameAnalyser

August 19, 2009 5:50 PM

Perhaps Gaming Industry is one of the victims of money loosing , but revenue piled up thru consistent sales and a sudden boost is what is required to stay on and survive in the market of recession-hit period.

Soultrappa

August 19, 2009 7:08 PM

Sorry folkes but sony cannot win against anybody that has experienced xbox live-You may have to pay for it but its definately worth it! There are however many million users on live which hammer PSN's figures. Then when microsoft lost the hd war they just incorpitated the option to download or stream HD-(blue ray for you sony folkes) straight from live marketplace. Why do you need a drive anymore when you have cable?

The next thing is that microsoft are continually updating there system-from games to live to the features of the dasboard - the only thing i cant believe they dont have is internet browsing - not that its needed as most people with an internet connection also have a computer.

Sony started out to late - microsoft were already dominating by the time sony released the PS3 and at a crazy price that no-one wanted to pay. Yes it is the more powerful console - graphics chipset not included - and it does have a snazzy blue ray player, but it doesn't have the chavvy people power, live system or ease of game development as the xbox - oh anyone played Marvel vs Capcom 2 from the live arcade? - And u can download original xbox and xbox360 games from the market place.

Rush

August 20, 2009 4:56 PM

I want a ps3 bad and the slim seems 2 b wat I want. But wat games r they refering 2? I dont want a console that is not going to be around in 3yrs because of bad business!

Rush

August 20, 2009 4:56 PM

I want a ps3 bad and the slim seems 2 b wat I want. But wat games r they refering 2? I dont want a console that is not going to be around in 3yrs because of bad business!

Rush

August 20, 2009 4:56 PM

I want a ps3 bad and the slim seems 2 b wat I want. But wat games r they refering 2? I dont want a console that is not going to be around in 3yrs because of bad business!

joseph

August 20, 2009 9:49 PM

i agree with aaron...they release an ultimate system but the price is too much for the consumer...for example they release it with bluray capable they thought it would attract the consumer the material cost too much and the disc cost too much too and only few people have bluray dvd they should upgrade the console slowly like the xbox360 did start with plain gaming console..most gamers have budget for a basic gaming console then slowly they buy accessories

The Author is an Idiot

August 21, 2009 2:53 AM

The author is an idiot. Sony has been profiting from every PS3 sold since the start of this year. They cut down manufacturing costs 70% from the launch PS3s. The slim PS3s will also cost far less because of a smaller heat sink, less plastic, a smaller Cell CPU, a cost effective Blue Ray Drive, a smaller power supply, and a smaller overall cooling system. How will this cost them more than the bigger and less efficent fat PS3? Here's my source: "http://www.engadget.com/2009/07/31/ps3-manufacturing-costs-down-70-percent-strange-it-doesnt-fee/ ".

The PS3 is also a far better value than the Xbox 360. It has built in wifi, Blue Ray, and harddrive (not all 360s have HDDs) to name a few. If you want wifi on your 360, be prepared to pay an extra $100 for an addon. Want Blue Ray, too bad. Want a HDD if you don't have one, prepared to shelf out big bucks. The PS3 also has a removable HDD which uses standard laptop HDDs so the user can add more at any time.

The Ps3 also has free online play through Playstaion Network while Microsoft charges and extra $50 per year. If you start adding up the numbers the PS3 is a better value and it's finally at a mass market price. It's already the number one item in Amazon.com's video game section. Preorders are bein sold out in stores.

The PS3 also has exclusive games such as Killzone 2, Metal Gear Solid 4 (which was credited with hundreds of thousands of console sales on it's month of release), Uncharted 1/2, Reistance 1/2, MAG, God of War 3, and the list keeps on rolling. These are all major system sellers and are only on the PS3.

When you actually do research you will find that the PS3 will suceed and that it is a much better value. I am a gamer, I have bought the Gameboy Color, GameBoy Advance SP, Nintendo 64, Playstation 1, 2, and 3, PSP, and so on. I know games and I know what gamers want. I have spent thousands of dollars on games. I can tell you that there will be a wave of PS3 buyers come this holiday season, there are many who have waited for a $299 price point and it is here.

Stephen Whiteford

August 21, 2009 2:20 PM

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canDarian

August 21, 2009 7:01 PM

There were three reasons xbox sells more

1.The fact that their console constantly fails,xbox failure rate is over 50% -_-

2.It's a system that allows you to play pirated games.

3.It was priced cheaper.

MS is hardly dominating,Wii is flatlining I wouldn't at all be surprised to see a 4th quarter showing Sony sales surpassing both MS and Nintendo.

Aaron

August 24, 2009 3:51 PM

There is a lot of speculation why the PS3 isn't selling better, but I would have to say that it is primarily the cost. In order to make in-roads into the crowd that doesn't have a income (kids under 16), you need to compete on price almost exclusively. Kids are going to latch on to whatever system they are most likely to get, which is the cheaper one - the Xbox. Forget the ongoing monthly fees to pay online and the fact that it can only play a defunct HD DVD format only after you spend an additiona $100 on a external drive; the Xbox was cheaper. Personally, I love the PS3. It's expensive for a reason - it is one bad gaming and multimedia machine! I stream movies from my media server all the time, watch Blu-Ray movies, and game all in HD. If you are the right buyer, it really is a economical solution to entertainment. You get a $300+ Blu Ray player, $200+? media streaming device, AND you get a game system all in one! Sounds good to me! So good, in fact, that I just bought another one yesterday for my bedroom so I can enjoy Blu-Ray and stream movies there too.

PS3 rocks

August 25, 2009 12:04 AM

To Jon, for your info the PS3 does play PS1 discs, and PS2 discs just not the dvd kind. But rumor has it that Sony is working on PS2 backwards compatible software that can be downloaded on your PS3 via PSN. I still have no problem putting my old Playstation 2 discs in my old PS2 system. And Im sorry to say this to 360 and Wii users, but Id rather have system quality, than game selection and system failure anyday. PS3's game selection I think is way better than 360's. GT5 demo outsold all of the 360 forenza racing games, Uncharted 2 is a way better follow up than gears of war 2, we got MGS4 arguably the greatest game out there, who plays halo anymore, ninja giaden sigma 2 is way better than 360's version, and when it comes to graphics 360 can't come close and the numberous system failures and trust me I owned a 360 once traded it in 6 times, I had my 80gb PS3 ever since it came out and still runs like new. Wii is for children. Fact-And the only reason why Wii and 360 profit more than sony is because it takes on a combined 300 dollars to build the wii and 360. It cost sony over 800 bucks to construct there systems so in a way you get more for your money. And to soultrappa, Netflix movie selection sucks. PSN has already provin that you can get way better movies in bluray. And guess what ha you can play it on regualr SDTV and HDTV. PS3 sales are actually getting closer to 360 numbers only down 6 million, and by the end of the year sony will overtake 360 in world wide sales. So when the Slim comes out and the prices drop, and when the 360 eliete price dropps, Im begging people to choose system quality over system failure. I promise you, that you wont be disapointed. And to all the 360 and Wii owners, buy this system you wont regreat it.

Paul

September 8, 2009 7:49 PM

I have a ps3 with the 60gb HDD, and i got it when it first came out years ago and its backwards compatible i still play my old ps1&2 games on it all the time. I was thinking about trading it in for the new ps3 slim but if what u say is true and backwards compatability is important to me, which it is!!! I'd be better off staying with my old ps3 rather than upgrading to the slim. Is that right? Is there anything new with the slim, (apart from being smaller) to make it worth upgrading too and then lose the ability to play my old ps1&2 games???

Paul

September 8, 2009 7:50 PM

I have a ps3 with the 60gb HDD, and i got it when it first came out years ago and its backwards compatible i still play my old ps1&2 games on it all the time. I was thinking about trading it in for the new ps3 slim but if what u say is true and backwards compatability is important to me, which it is!!! I'd be better off staying with my old ps3 rather than upgrading to the slim. Is that right? Is there anything new with the slim, (apart from being smaller) to make it worth upgrading too and then lose the ability to play my old ps1&2 games???

VT

September 11, 2009 4:22 PM

i bought the slim as much as i would have like backward compatibility xbox 360 that i had kept getting the red ring of death i couldnt play multiplayer. like ps3 can as much as i like xbox 360 menus and all the achievements stuff which is better than ps3 currently has plus msn y do i have to pay to play.

499 for slim 120gb one of or or an xbox pro 60gb for 399 with a yearly subscription 99 a year plus point points to buy games mods and extra game packs

its a bluray player (which by the way costs around 800 if u buy a bluray player only comes included) as well as dvd player its classy in everything only downside is the psp menu the should make more like xbox 360 with avatars and all

red ring of death alwayz after a year of fun no matter the xbox 360 u buy ull mostly get it after a year

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