Sony confirms phasing out of cheaper PlayStation 3

Official statement irons out several contradictory statements that Sony executives made last week.
Written by Reuters , Contributor
Sony plans will phase out the $499 model of its PlayStation 3 game machine, leaving only a higher capacity $599 model in the U.S.

The official statement on Monday ironed out contradictory statements that Sony executives made late last week about the console's future.

The revelation also undid some of the praise Sony won from the gaming industry last week for its 17 percent price cut on the machine, a move seen as trying to level the playing field with Microsoft Xbox 360 console.

But one analyst said Sony had left the door open to further price cuts, saying another would almost certainly happen when the cheaper PlayStation 3 sells out.

Sony dropped the price on the PS3, which comes with a 60GB hard drive and high-definition Blu-ray DVD player, from $599 to $499 last week in a bid to boost sales.

It also said it would launch in August a new model featuring an 80GB hard drive and a copy of its off-road racing game MotorStorm.

A company representative said Sony would sell the $499 version until "supplies of that unit are depleted," estimated to be months after the August debut of the new, pricier model.

"We have ample inventory to meet the immediate needs of consumers in this territory for several months to come," Dave Karraker said in an e-mailed response to questions. "We won't be making any further announcements regarding our PS3 model hardware strategy in North America until the 60GB model is exhausted and market conditions are evaluated."

Wedbush Morgan analyst Michael Pachter said in a research note that Sony had an estimated 2 million to 3 million 60GB models in inventory. Pachter predicted that once those units were sold out, Sony will lower the price on the 80GB version.

"Although we think that Sony's public relations gaffe was unfortunate, we do not believe that the company has ill intent, and we expect the $499 price point to be maintained until early next year, when the 80GB model will likely by cut again to $399," Pachter said.

The PS3 lags the Xbox 360 and Nintendo Wii console in sales. The Xbox 360, which launched in November 2005, has sold 5.6 million units in the United States through May of this year.

The $250 Wii, with its unique motion-sensing controller, has become a surprise hit, selling 2.8 million units in just seven months after its November 2006 launch, compared to the PS3's 1.4 million units in that time.

Microsoft's Xbox 360 comes in three models priced from $300 to $480. The most expensive model, the Elite, comes with a 120GB hard drive but lacks the PS3's high-definition DVD player, built-in wireless technology and bundled game.

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