Analysis: Making Up Sony's PlayStation 3 Sales Gap

In examining the margins between Sony's end-of-2006 sales goals for PlayStation 3 and the actual numbers reported this morning by NPD Group - the accounting for which, Sony told BetaNews today, makes sense if you count those PS3s still on trucks - Parks Associates analyst Michael Cai told BetaNews there could be more serious factors at play...or at work.

There were several factors behind Sony's debacle, said Michael Cai, an analyst with Parks Associates.

First was the price point, especially considering the holiday season when people are buying gifts, Cai said. The people who did buy PlayStation 3s were the core early adopters, but once you get beyond them, price becomes a big factor - especially when it's parents buying consoles for their kids. In fact, he noted, the PS3 didn't even make its numbers in Japan, where the price was cut by 20%.

The second factor was the limited supply at the beginning, and that even when more machines became available, Sony didn't communicate that very well, Cai said.

The third factor was the Nintendo Wii, which got a lot of attention. Even the wrist strap problem served to help promote the machine. "Everyone has to wonder why you need a wrist strap," remarked Cai. "'What are they doing with that thing?'"

A fourth factor was the still booming popularity of the Sony PlayStation 2, which was often sold for $100 bundled with five games, Cai said. "Sony was competing against themselves."

Sony needs to do several things to recover, he advised. First, it needs to communicate with the market that the machine is available. Second, it shouldn't cut the price immediately, because that will increase the perception of failure. Instead, Sony should add value to the product by bundling games and movies with it, he said. Third, Sony needs to market the device to people in their 20s and 30s, who have a job and have their own purchasing power, leveraging social media such as MySpace and YouTube, he said.

Will there be a PlayStation 4? Cai thinks so, but not right away. Gaming machines such as the Xbox 360 and PlayStation 3 are so powerful, he said, that it's hard to see another machine coming out in five years. The next cycle will probably be more like eight years, he said. In addition, Sony needs to look at what Microsoft is doing with IPTV and turning the Xbox 360 into a set-top box and a living room entertainment center, and look for similar opportunities, perhaps making use of its own content, he said. To do that, Sony needs to create more synergy between its different corporate components.

The upshot is that the 2006 holiday season was a big shot of reality to Sony, Cai said. "Sony is no longer the Sony of four years ago," he said. "Apple is a lot cooler than Sony. They thought because of the PlayStation 1 and the PlayStation 2 that the PlayStation 3 would sell itself, but that's not what happened."