PlayStation 3 -- a Bust or a Boon for Sony?


Jan. 4, 2007 — -- Though images of electronics stores adorned with snaking lines of pimply faced teenagers, desperate parents and eager technophiles searching for an elusive Sony PlayStation 3 blanketed the Internet before the holidays, the high-tech, high-priced video game console may no longer be so hard to find.

Blogs, recently filled with stories of gamers on the hunt for PS3s, are now littered with accounts of stockpiles of the machines uncovered at major retailers. Even scalpers have returned machines they picked up before the holidays to sell on Web sites like eBay but failed to unload.

One slightly frustrated wife of a wannabe PS3 scalper who didn't want to be identified said her basement was cluttered with several units they hoped to return after the demand for the machines took a post-holiday nose dive on eBay.

"I certainly haven't been to every store in the country, but anecdotally it's an issue," said Brian Crecente, editor in chief of gaming blog Crecente photographed a large stack of PS3s for sale at a major U.S. electronics retailer just after the holidays.

A visit to eBay finds the PlayStation 3 selling for a retail price of $500 for a 20-gig model and $600 for 60-gigs, a stark contrast to the $2,000 plus they went for before Christmas. As of this writing, Best Buy's Web site shows that the high-end model is available on order.

But as skeptics question the authenticity of the PS3 supply shortage due to overwhelming demand, others call it conspiracy theory hogwash.

"Rumors and speculation surround every console launch," explained Michael Gartenberg, vice president and research director at Jupiter Research. "Someday Oliver Stone is going to do a movie about the launch of a video game console and all the cabals and clandestine groups keeping them out of stores."

Gartenberg said that while the PS3 may be available in a store here or there, if you want one you're still likely to resort to paying more than the retail price in an online auction house.

"At this particular point in time there aren't enough PS3s to go around," he said. "The question is what happens when supply catches up to demand. Will consumers still want it?"

But is that true? Is there more demand for the PlayStation 3 than there is supply?

"Demand was outstripping supply at launch, but with so few units readily available, it would be shocking if that wasn't the case," said John Davison, vice president and editorial director of the 1UP Network, a series of Web sites and multimedia productions on gaming. "I don't think it'll be possible to assess whether it's truly a hit until this time next year."

Davison and others agreed that the real test for the PS3 would come next holiday season, after the system is readily available and developers have had a chance to produce some grade A games.

While not willing to talk about specific sales figures, Sony believes the PS3 is doing well.

"Everything that we put on store shelves sold out," said Sony spokesman David Karraker.

Karraker admitted that doesn't necessarily mean that every system Sony sold to retailers like Best Buy made it to the shelves and said that the units that Crecente posted on were put out after the holidays and beyond the company's field of vision.

It's virtually impossible to know what PlayStation 3 units were sold to real gamers, their friends and families, and which ones went to middlemen looking to make a couple of quick bucks off the fervor surrounding it.

According to Gartenberg, who cares?

"It's a little bit hard to tell if we're seeing opportunists or purists here," he said. "But at the end of the day, the units are being sold to someone, whether there's a middleman or not."

While the perpetually paranoid maintain that Sony intentionally created supply shortages to generate buzz, it may be the retailers that have the greatest impact on sales.

Aside from stories of stores holding on to shipments from Sony to encourage customers to line up for the PS3 during heavily advertised events, retailers forcing unwanted products on customers to get what they really want is a much reviled if increasingly common practice.

Retailers create "bundles" that include the video game system, certain games or other hardware that the consumers may or may not want or need. The problem is that the hotter the item, the pricier the bundles, and often retailers won't allow the core product driving the sale -- in this case, the PS3 -- to be sold outside a bundle.

"Bundles suck," said Davison. "If you're buying a console, you want to buy games with it -- and I guarantee that everyone buying a new machine knows exactly what they want before they go to the store. They don't need those stores packaging together all the crap they couldn't sell otherwise into an overpriced mess of unwanted games and lousy accessories."

In some scenarios, the bundles include items, such as magazine subscriptions or TV sets, almost unrelated to the core product.

Crecente said the buzz out of Sony is that it's not crazy about bundles, but it's relatively powerless to do anything to stop them.

"I think in Sony's defense, they're opposed to it," he said. "They've never said it, but I think they understand the negative impact it has on their product."

It may be too early to predict a winner in the next generation console war, but that doesn't keep some experts from speculating.

"The "next gen" war has only just begun, but from the early skirmishes, things are looking pretty good for Microsoft," said Davison. "Nintendo had a good holiday season, but it has a lot to prove."

Crecente, who believes Sony's PlayStation 3 is a powerful system that's capable of offering a great experience, agreed with Davison's assessment.

"I would say Microsoft [will be the winner]," he said. "Sony is not winning -- that's easy to say -- there have been so many missteps. Nintendo has a tremendous amount of buzz, but Microsoft has really taken advantage of the year's head start."

But Gartenberg, who believes the PS3 is off to a great start, said the market may be big enough that there doesn't need to be a winner -- everyone could win.

"Consumers are looking at all this stuff and saying that everything looks pretty good," Gartenberg said. "What we may end up seeing this time around is something different. Instead of one vendor dominating the market, we may find three vendors able to split it up in a more balanced way."

A utopian video game market? What's next, world peace? We doubt it.