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Sony mulls PlayStation 3 price cuts as earnings sag

Price cuts for the PlayStation 3 video game console are among the factors Sony is studying as it seeks to break even in its money-losing gaming business next fiscal year, a company executive said yesterday.

Startup costs for the PlayStation 3 were the main reason for the 5 percent drop in Sony Corp's quarterly earnings announced on Tuesday. The electronics and entertainment company also said the 20 percent price cut on the game machine in Japan, announced even before it went on sale in November, hurt profits.

Sony senior vice president Takao Yuhara said red ink in the gaming division for the fiscal year through March could turn out to be worse than the ¥200 billion (US$1.6 billion) operating loss forecast for now.

Worried investors sold off Sony shares, which fell 2.8 percent in morning trading in Tokyo.

Costs for flying in PlayStation 3 machines to the US, advertising and other startup expenses were higher than the company had anticipated. But Sony hopes to break even in gaming during the following fiscal year, ending March next year, Yuhara said.

"In the PS3 business, production was very tight, but we knew the market wouldn't wait," he told reporters at the company's Tokyo headquarters.

He said the price cut in Japan was an effort to respond to hard-core game fans' expectations, and the move helped get the machine off to a smooth rollout.

Game machines generally come down in price over time, but this was the first time in Japan that Sony slashed a console price even before they arrived in stores.

Analysts and game fans are watching to see when PS3 prices may drop again, which would depend on its proliferation in the market and production cost cuts. Sometimes a price cut is timed with the introduction of blockbuster game software, expected to boost machine sales.

"We may look at the price as part of our strategy to expand the market when the timing is right," he said.

"Such factors, including price cuts to some extent, are factored in," under our plan to break even in fiscal 2007, Yuhara said.

While stressing that no decision has been made on PS3 price cuts, Yuhara acknowledged it would be a good scenario for Sony if the machine sells in enough numbers so a price cut would make sense strategically.

Sony said on Tuesday it had shipped 1.84 million PS3 machines worldwide from when it went on sale in November through Dec. 31.
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