Cheaper Blu-ray Player Fuels PS3 Price Cut Speculation

June 05, 2007 | By: James Brightman

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Consumers can now buy a standalone Blu-ray player for less than the price of a PS3. But what does this mean for Sony's console? Analysts believe that the next step is for Sony to reduce the price on PS3 and that the company should be able to do it now that Blu-ray component costs are falling.

The Blu-ray drive in the PlayStation 3 is one of the main reasons Sony's console costs $600. Yet, as we reported in April, Sony's production capacity for blue laser diodes is increasing and the costs of Blu-ray components are slowly but surely coming down.

In fact, just yesterday Sony announced the first standalone Blu-ray player to cost less than the PS3 itself. The BDP-S300 Blu-ray player now retails for $499, the same price as the now defunct 20GB version of the PS3. Sony acknowledged that they were able to sell the player for less because of "production efficiencies" and cheaper components.

Of course, the next logical step according to analysts is to slash the price on the PS3 � a move that would seem to be needed to stimulate sales of the console and one that some in the industry have been calling for.

"If the cost of Blu-ray is coming down, you can drop the price of anything with Blu-ray in it," said Arvind Bhatia, an analyst with Sterne Agee & Leach Inc., according to the Dow Jones.

"Feedback from retailers continues to indicate that a price cut on PS3 will be important," Bhatia added. Certainly if you listen to all the anecdotal evidence, there are many more PS3s sitting on store shelves while Nintendo's Wii continues to sell out. Retailers would gladly welcome a price cut to help move inventory.

While Bank of America analyst Michael Savner went on record stating that a $100 price cut on the PS3 would not be significant enough to really improve sales, Bhatia believes that any price cut on the console would boost its market performance, not just with hardware but also with software.

We believe that a $100 price reduction on PS3 is inevitable by the end of this year, if not sooner. Remember, Sony is using the PS3 not only as a video game console but also to push its next-gen movie format. With Spider-Man 3 coming to Blu-ray this fall, the format and the PS3 could get a nice lift.