News

Sony looks to boost handheld game sales

Dan Gallagher
MarketWatch (MCT)

SAN FRANCISCO - Sony Corp. cut the price on its PlayStation Portable, or PSP, on Tuesday in an effort to boost sales of the handheld gaming device, which has so far been far outsold by rival devices from Nintendo.

The consumer electronics giant said Tuesday that it will shave $30 from the retail price of the PSP, cutting the price from $199 to $169.

The move, effective immediately, comes as Sony has come under pressure for its expensive gaming consoles. Both the PSP and the company's flagship console - the PlayStation 3 - are the most expensive devices in their respective categories, which analysts believe has hurt the company's share of the growing video game market.

"Basically, the PSP turned out to be too much money for kids and too much machine for adults," said Kaufman Bros. analyst Todd Mitchell.

In a note to clients Tuesday, Mitchell said he believes that game publishers were "instrumental" in pushing Sony to lower the price of the PSP.

Edward Williams of BMO Capital Markets noted that retail giant Wal-Mart offered the PSP for sale at the $169 price point for five hours on Black Friday - the kickoff to the Christmas shopping season in November. He believes more than 100,000 PSP units were sold during the promotion.

"We expect PSP hardware sales to experience a good lift from this price cut," Williams wrote in a note to clients.

Though Sony has long ruled the home console space with its PlayStation platform, the company has had less success in the handheld market.

Since its debut in March of 2005, the PSP has sold about 7 million units in North America, according to data from the NPD Group. Nintendo's handheld DS device - which hit the market four months earlier - has sold 9.9 million units.

The Nintendo DS, which currently sells for about $130, has been the top-selling gaming console for the past three months, outstripping next-generation home consoles such as the PS3, the Nintendo Wii and the Xbox 360 from Microsoft.

In addition, Nintendo has sold more than 35 million units of its Game Boy Advance devices.

Sony's rivalry with Nintendo has taken on a new dimension of late. The two companies target different audiences; Sony has long sought the hard-core gamer crowd, while Nintendo has typically been more popular with families and younger children.

However, Nintendo has a genuine hit on its hands with its Wii, which launched in the U.S. in November. Sales of the PS3, which also launched in November, have been considered a bit of a disappointment, which analysts blame mostly on the console's $600 price tag.

For the past two months, the Wii has outsold both the PS3 and the Xbox 360, according to NPD data.

Mitchell of Kaufman Bros. speculated that the PSP price cut may actually be an effort by Sony to clear out inventory before launching a new version of the device later this year.

"It has been broadly speculated in the video game industry that a new model of the PSP is in the works," Mitchell wrote. "We expect the new PSP will be in a slimmer form factor and have an enhanced communication and community features, highlighted by enhanced connectivity to the PS3."

He added, however, that Sony is not expected to offer the new device at the lower $169 price point, "which could prove problematic."

Colin Sebastian of Lazard Capital Markets believes the price cut could stimulate game sales, which in turn could boost revenue for game publishers such as Electronic Arts Inc., Activision Inc. and Take-Two Interactive Software. But he noted that PSP game sales do not account for a significant portion of the publishers' sales at this point.

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