Sony Cuts Price of PlayStation 3 to Revive Sales

Sony Computer Entertainment made a surprising announcement on Tuesday at the Gamescom conference in Germany that the company will be lowering the worldwide price of its PlayStation 3 by an additional $50.

The price on the 160 GB version will fall to $249 from $299. In Europe and Japan, the basic console's price has been slashed to 249 euros and 24,980 yen, from 299 euros and 29,980 yen, respectively. For the 320 GB version, the price will drop to $299 from $349.

At $249, the 160 GB version of the PS3 will now cost $351 less than its original retail price of $600. That original price tag -- when PS3 came out in 2006 -- is one of the reasons why the gaming system has perennially been stuck in the third place in terms of sales, behind Xbox 360 and Nintendo's Wii, according to NPD Group sales.

The five-year-old video game console has already gone through a handful of iterations and price reductions, as well as one major structural redesign. The last time Sony cut the price of the PS3 was in 2009 when it launched a slimmer model.
The first PS3 price reduction took place in July 2007, reducing the price of the 60 GB model from $599 to $499. Subsequent models introduced higher storage limits and lower prices.

"This is a proactive strike from Sony. It has been rapidly gaining share and it has made strides since the original $600 price tag. Its pricing aggressively as it senses inroads in the console market. It can expand the install base with this move," said Scott Steinberg, a video game analyst at http://www.toptechexpert.com.

Sony is cutting the price of its PS3 gaming console in a bid to drum up more demand for the console as competitors such as Nintendo also cut their prices.

Nintendo said a month ago that it would cut the price of its flagship Nintendo 3 DS player. Microsoft's Xbox 360 has generated interest with the addition of the Kinect controller, which allows users to play games without the need for a game controller.

Microsoft has sold 55 million Xbox 360 units worldwide; Sony has sold 52 million units of the PS3 while Nintendo remains ahead with 86 million units sold of its gaming console.

"It is no secret that the PlayStation 3 has been struggling for some time against the Microsoft Xbox 360 in North America, though it did slightly better in Europe," said Jesse Divnich, an analyst at Electronic Entertainment Design and Research.

Divnich believes Microsoft won't immediately follow with a price cut of its own.

“Sony is cutting the price in August to target the back-to-school shoppers," aid Jack Tretton, CEO, Sony Computer Entertainment America. "The reduced price will give the Sony PlayStation 3 a boost and will help the company meet its goal of selling 15 million consoles this year.”

Despite the price cut, Sony will still be able to sell the console for a profit because of manufacturing efficiencies.