Sony to delay release of PlayStation 3 until November - East Valley Tribune: Business

Sony to delay release of PlayStation 3 until November

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Posted: Thursday, March 16, 2006 4:29 am | Updated: 4:24 pm, Fri Oct 7, 2011.

SAN JOSE, Calif. - When Sony Corp. hiccups, everyone else in the video game industry feels it.

For game publishers, sales will continue to languish until Sony’s now-delayed PlayStation 3 console comes out. For rivals like Microsoft Corp., the prolonged wait should translate to a silver lining.

Sony said Wednesday the launch of the long-awaited PlayStation 3 will be in November instead of this spring, confirming months of growing speculation of a delay.

Ken Kutaragi, the head of Sony’s video games division, said Sony is still trying to finalize the copyrightprotection technology and other standards for the Bluray DVD disc, the highdefinition video format for PlayStation 3 and other next-generation DVD players.

The PlayStation 3 is critical for Sony’s profits and brand image, so the delay from its promised ‘‘spring’’ debut is a major setback for the Japanese electronics and entertainment company as it struggles to mount a recovery after several years of poor earnings.

And any potential delay after November — missing the holiday season — would be even more damaging, though financial analysts are mixed on concerns about whether Sony and its component suppliers will be able to deliver as now promised.

WORSENING SLUMP

Already, sales of video games industrywide have slowed as customers have been withholding purchases and waiting to switch to new models of game consoles.

Now the industrywide decline will continue, and possibly worsen each month, with sales of current-generation console games falling as much as 35 percent from year-ago periods, predicted analyst Michael Pachter of Wedbush Morgan Securities.

In addition to the PlayStation 3, consumers had been waiting for Microsoft’s new Xbox 360, which debuted last November with supplies falling short of demand. Also, Nintendo Co., maker of Game Boy machines, is set to release its next-generation Revolution console later this year.

Microsoft spokeswoman Molly O’Donnell said Sony’s delay won’t change Microsoft’s strategy. ‘‘We’ve blasted out of the gate with the greatest launch in the history of video games and we’re keeping our eyes squarely fixed on today and on the Xbox 360 road ahead,’’ she stated in an e-mail.

The PlayStation 3 delay will likely help Microsoft and Nintendo chip away at Sony’s 60 percent global market share, but analysts think Sony will still reign. Sony has shipped nearly 204 million machines worldwide when combining shipments for the original PlayStation and its upgrade PlayStation 2.

‘‘It’ll sell 20 million PS3s in the next couple of years no matter what,’’ Pachter said.

Still, the now-confirmed half-year lag will mean the predominant console maker won’t benefit from the new product until November. Its game revenues will likely be hurt, said Toshiaki Nishimura, analyst for Yasuda Asset Management Co.

‘‘I’d like to apologize for the delay,’’ Kutaragi said Wednesday at a hastily called news conference in Tokyo after reports of it surfaced in publications. ‘‘I have been cautious because many people in various areas are banking on the potential of the nextgeneration DVD.’’

BLU-RAY WOES

Blu-ray preparations were initially to have been completed by last September, but now won’t be finalized until next month, he said.

The PlayStation 3 console can be used as a Blu-ray DVD player, but will also read previously released PlayStation and PlayStation 2 games, Kutaragi said. It will also have a 60-gigabyte storage drive, broadband and wireless Internet connections and support for high-definition televisions.

The company is expecting monthly production of 1 million machines, and targeting production of 6 million units for the fiscal year ending March 2007, Kutaragi said.

The significance of the Bluray DVD technology in the console could not be ignored, analysts say. At stake are billions of dollars in royalties from movie or game providers that will use the format. Bluray is competing against another high-definition disc format called HD DVD, backed primarily by Toshiba Corp. Both formats are making their product debuts this year.

As electronics makers, including Sony, plan Blu-ray DVD machines, the PlayStation 3 is considered a way for Sony to sneak the Blu-ray format into households that may not necessarily be ready to buy a separate Blu-ray player. So with the new PlayStation 3, consumers would get not only the latest game console, but also the latest DVD technology, for a price that Sony has said will not exceed $500.

Possible fallout

SONY WORRIES: Sony surrenders an early advantage in that race because high demand for the console was expected to put Blu-ray, Sony’s high-definition DVD format, in more homes quickly. HD-DVD players, with starting prices around $500, will be in stores later this month. Blu-ray players, starting around $1,000, from other manufacturers are expected to follow in May.

INDUSTRY WORRIES: Already, sales of video games industrywide have slowed as customers have been withholding purchases and waiting to switch to new models of game consoles. In 2005, video game sales fell 5 percent to $7 billion in the United States, according to market research firm NPD Group.

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