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Sony’s PlayStation 3 Gaining Ground on Xbox With Games, Blu-Ray. July 14, 2008

Posted by Admin in Industry.

By Michael White Bloomberg News:

July 14 (Bloomberg) — Sony Corp.‘s PlayStation 3, the 2007 loser in the fight for second place in video-game console sales, is gaining ground on Microsoft Corp.‘s Xbox 360.

The PlayStation 3 outsold the Xbox 360 in the U.S. in the first five months of 2008 after trailing Microsoft’s console in 2007. New exclusive games, such as “Metal Gear Solid 4,” and the rise of Sony’s Blu-ray as the dominant high-definition DVD player may enable PlayStation 3 to hold onto its lead.

“For the first time since the console launched, I really think there’s more reason to buy a PS3 than the 360,” said Todd Greenwald, an analyst at Signal Hill Capital Group in Baltimore.

The rivalry may heighten this week when console makers and game publishers gather for the E3 Business and Media Summit, an annual video-game trade show in Los Angeles. Sony plans to spotlight the PlayStation 3’s DVD capability and “Little Big Planet,” a social-networking game that can be played online through the two-year-old console.

Yesterday, Microsoft said it will triple the storage capacity of the Xbox 360 and sell the consoles with 60-gigabytes of storage starting in early August in the U.S. and Canada.

Microsoft will keep the price of the new machines unchanged at $349 and drop its 20-gigabyte consoles to $299 while supplies last. That compares with a $399.99 price tag for a 40-gigabyte PS3 and $249 for Nintendo Co.’s top-selling Wii.

`Battle for Second’

The Xbox 360 was introduced in 2005, a year before PlayStation 3 and Wii reached stores in November 2006. Wii became an immediate hit and has outsold the other two consoles in 14 of the past 15 months through May.

Each console sale typically means hundreds of dollars more in revenue from boxed games, online downloads and royalties from third-party game developers.

“This battle for second place is quite relevant,” said Wedbush Morgan Securities analyst Michael Pachter in Los Angeles. “They lose revenue stream for years ahead based on what people buy.”

The Wii had sales of 2.8 million units during the five months through May, according to NPD Group Inc., a Port Washington, New York-based researcher. Sony sold 1.2 million PS3 consoles and Microsoft sold 1.12 million Xbox 360s.

`Not a Competitor’

Wii isn’t a rival to the PlayStation 3 because it doesn’t offer the broader features of the Sony console, including the ability to watch movies and access the Internet, Sony Chief Executive Officer Howard Stringer said in an interview.

“I’ve played a Nintendo Wii,” Stringer said last week at the Allen & Co. media conference in Sun Valley, Idaho. “I don’t see it as a competitor. It’s more of an expensive niche game device. We’re selling a lot of PlayStation 3s now and it’s still the best way to buy a Blu-ray player.”

Nintendo spokesman Yasuhiro Minagawa wasn’t available to comment yesterday.

Sales for the PS3 may have gained in June as well with the release of “Metal Gear Solid 4: Guns of the Patriots,” the combat title developed exclusively for the console by Tokyo- based Konami Corp., said Peter Dille, head of marketing for Sony’s U.S. video-game business, in an interview.

`Far From Over’

Sony made its biggest gain in U.S. sales this year in May, when retailers sold 208,700 PlayStation 3s compared with 186,600 Xbox 360s, according to NPD Group.

“This race is far from over and we are confident that we have a winning strategy,” Microsoft spokesman David Dennis said in an e-mailed statement.

To step up competition, Redmond, Washington-based Microsoft also may unveil a new controller that allows more interactive play, Signal Hill analyst Greenwald said. That would follow the trend set by Nintendo, which introduced a balance board for games that simulate downhill skiing and soccer.

The PS3’s debut was hurt by production glitches that created a shortage of consoles during the 2006 holiday season. Interest diminished when consumers were unable to find machines in stores, Sony’s Dille said.

“That’s not a formula for success,” Dille said. “Once you create the demand and aren’t able to deliver, you create a situation where it stalls.”

Sales also were harmed by the console’s initial price of $599 and the quality of games available. Developers needed about a year to learn how to create for the PS3, which uses nine processors to create high-definition graphics. Sony introduced its $399 model in November. There are no plans to lower the price again in response to a Microsoft action on the Xbox, Dille said before Microsoft’s announcement yesterday.

“The price has been addressed,” Dille said. “We are at $399 and I think that’s right in the wheelhouse for a lot of people, especially those who have high-def in their homes.”

To contact the reporters on this story: Michael White in Los Angeles at mwhite8@bloomberg.net.



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