Print

Mail

wiki links

Sony gambling that PSX console will stem decline

"It's really do or die for Sony ... The PSX helps them come in with a bang."

John Yang, an analyst at Standard and Poor's in Tokyo

Sony Corp, seeking to stem three consecutive quarters of profit declines and a three-year share slide, is betting that holiday-season sales of its PSX video-game console and video disk recorder will begin a turnaround.

PSX is the first in a line of products that Sony, the world's second-biggest consumer-electronics maker, forecasts will help boost operating profit margins to 10 percent from 4 percent by 2006. Other products include the PSP hand-held player and a portable device to play recorded television programs.

Sony hasn't had a best-selling product since the PlayStation 2 console's release almost four years ago. Tokyo-based Sony's shares have dropped 78 percent since their peak in March 2000.

PSX, which combines the PlayStation 2 with a DVD recorder and TV tuner, starts selling tomorrow in Japan for as much as ?99,800 (US$927). The console has the ability to play games, access the Internet and record video onto DVDs from a hard-disk drive capable of storing 325 hours of programming.

"Sony had to come up with something like the PSX," that adds new features by tying games with video, said Hideaki Kurimoto, who helps manage the equivalent of US$2.7 billion at Meiji Dresdner Asset Management Co. "They didn't think digital products like DVD recorders would get so popular so quickly."

PSX is one of the products Sony says will bridge the divide between the company's electronics and entertainment businesses.

Ken Kutaragi, president of the company's video-game business, and not chief executive Nobuyuki Idei, introduced the console to investors at a strategy meeting in May.

Sony is wagering it can boost profits by merging the Internet with its consumer-electronics business and entertainment units, even after lackluster results from similar efforts by Vivendi Universal SA and Time Warner Inc.

The PSX's introduction comes as Sony faces stiffer challenges in consumer electronics. Apple Computer Inc's iPod music player competes with Sony's audio products while Microsoft Corp has begun selling a version of its software to let users swap music, record video and organize digital photographs -- the same kinds of functions for which the PSX is designed.

Competition from Microsoft's Xbox console is also eroding earnings at Sony's game unit. Sales of video-game hardware and software contributed 6.6 percent to Sony's operating profit in the July-to-September period, down from 49 percent last year.

"It's really do or die for Sony," said John Yang, an analyst at Standard and Poor's in Tokyo.

"They were late coming to the DVD recorder market," said Yang. "The PSX helps them come in with a bang."

Promoting PSX on its debut may help restore Sony's image as an innovator, one that makes it possible for Sony to charge at least 10 percent more than rivals such as Matsushita Electric Industrial Co, some analysts said.

The introduction "is a great opportunity to redefine or reconfirm the brand is still cutting edge," said Andreas Dannenberg whose company, Brand Vision KK in Tokyo, handles advertising in Japan for Giorgio Armani SpA and Porsche AG.

"Anyone who is somewhat modern and somewhat design conscious, if they could afford the premium, would probably choose a Sony," said Dannenberg. Sony plans to start selling PSX in Europe and the US by the end of next year.

DVD recorders, along with flat-screen televisions, are Japan's fastest-growing consumer-electronics segment. Prices for DVD recorders equipped with hard drives are also falling at a slower rate than other consumer electronics.

The segment has attracted manufacturers seeking to sell customers replacements for aging VCRs and standard DVD players.

"PSX is low-priced" in the DVD recorder market, said Kurimoto.

"There may be some cannibalization of Sony's existing DVD recorder sales, but PSX may have more impact on Sony's rivals," because of its added features, Kurimoto said.

PSX won't debut with functions such as high-speed dubbing from the hard drive or the ability to play CDs or DVDs users recorded themselves.

"There's no really new features there," said Nobuaki Murayama, who helps manage < Some shoppers say they may wait for Sony to cut prices after the holiday season.

"I'd buy PSX if it was more affordable," said Yun So-mun, a Korean student studying in Tokyo. He already has a PlayStation 2.
This story has been viewed 3183 times.