Sony's PlayStation 3: Will A Price Cut Notably Burnish Its Respectability?

Speaking of game consoles… after many weeks’ worth of rumours (including a leak from a major retail partner):

Sony announced a ’slim’ version of the PlayStation 3 game console early last week. Armed with a user-replaceable and –upgradeable 120GB 2.5" SATA HDD, the PS3 Slim will cost $299 when it becomes available in a week or few. And commensurate with the transition, the existing PS3 is discounted to $299 (80 GByte) and $399 (160 GByte) until existing inventory (which will not be refreshed) is depleted.

What do you gain with the PS3 Slim versus the PS3 predecessor, aside from its comparatively diminutive form factor and fingerprint-resisting matte black finish? An upgraded HDMI port enables native transfer of advanced audio formats (specifically Dolby TrueHD and DTS-HD Master Audio) to a connected A/V receiver or other decoder…which’ll only be important to the audiophile fringe. And what do you lose? The ability to boot Linux or another operating system on the hardware…which, sorry Devin Coldewey, will only affect an even smaller ‘fringe’.

As iFixit’s recent teardown shows:

Sony’s made some notable under-the-hood hardware evolutions commensurate with the PS3-to-Slim transition (as was the case with the earlier PS2-to-Slimline migration). Chief among them is the litho-shrunk 45 nm Cell CPU, which is likely a notable factor not just with respect to bill-of-materials cost reductions but also on the cooler-and-lower-power front. It’s not yet clear whether or not the other dominant IC on the system PCB, the Nvidia-designed GPU, has (yet) undergone a similar transistor-shrinking procedure. However, whatever cost Sony has managed to squeeze out of the console equation hasn’t (again, yet) translated to out-of-chute profitability, especially given the recent price slashing. The PS3 is still in the red until subsequent content and peripheral sales are considered.

So what about that content? As I’ve alluded to many times before, Sony’s unique corporate position as both a consumer electronics developer and a movie studio enables it to (for example) use an unprofitable Blu-ray player as a ‘Trojan Horse’ to subsequently sneak highly profitable Sony Blu-ray movies into folks’ homes. And I’ve long advocated the PS3 as a presumably future-proof (therefore ideal) Blu-ray player for folks that can afford it versus a standalone unit. But to that point, with conventional Blu-ray players that support Profile 2.0 features now selling for around $200 (and with low-end Profile 1.x players flirting with the $100 barrier), Sony needed to cut the PS3’s price to keep it competitive here.

What about today’s other primary kind of content, i.e. games? Here the picture’s not nearly as bright for Sony. Take a look again at the graphs I showed you yesterday. The PS3 remains stuck in third place among the latest generation of console hardware, woefully behind even its PS2 predecessor. A dearth of compelling PS3-exclusive titles is fundamentally to blame for this issue; no amount of console price-cutting will get around this shortcoming. And now that the PS3 has absolutely no ability to play prior-generation PlayStation content, Sony can’t even upgrade PS2 owners with existing title libraries. My first-generation PS3 hardware with full backwards compatibility is looking like a better and better sell-someday-on-Ebay investment all the time…

The Xbox 360’s one-year availability advantage over the PS3, coupled with the PS3’s formidable introductory $499/599 price tag, has essentially flip-flopped the Microsoft-versus-Sony standings as compared to the Xbox-vs-PS2 prior-generation results. And subsequent to finally getting the PS3 out the door, Sony’s done little to help its cause. One emerging content case study (of many); Sony wasted abundant time and money on the woeful PlayStation Home, while Microsoft locked up an exclusive streaming deal with Netflix (thereby blunting to at least some degree the PS3’s Blu-ray playback advantage).

Microsoft’s not taking its lead for granted. Again, as long suspected and rumored, earlier today the company admitted that it was dropping the price of the Xbox 360 Elite from $399 to $299 to match Sony’s earlier price move, along with slashing remaining retail inventory of the Xbox 360 Pro to $249 in conjunction with a formal EOL of that particular console variant. One warning; this newer, cheaper Elite package no longer contains any high-def video cables (either analog component video or digital HDMI).

Although Microsoft and Sony’s price moves are welcome, you’ll forgive me for not being too enthusiastic about the HDD capacity-growth implications at a given price point. Take the Xbox 360, for example; the Pro formerly cost $299 and contained a 60 GByte 2.5" SATA HDD, while the previously $399 Elite touted a 120 GByte 2.5" SATA HDD. But, as I pointed out just one month ago, 2.5" HDDs are already up to the 1 TByte level. Granted, that’s a three-platter configuration, but divide the platter count by three…heck, and drop the drive down to a single-head, therefore single-platter-side configuration…and you’re still left with 167 GBytes as the ‘floor’ capacity of a leading-edge PMR (perpendicular magnetic recording) 2.5" HDD nowadays.

Translation: a 120 GByte HDD costs Microsoft’s suppliers, therefore Microsoft (given the volumes of building-block product it buys), no more money than a smaller-capacity (i.e. 60 GByte) HDD would. And given that all of the other Xbox 360 variants are now similarly featured to the Elite (specifically: also including HDMI outputs), the Pro-to-Elite conversion at the $299 price point was a no-brainer. Further fueling my analysis is the fact that the HDD-less Arcade system remains $199.