Remember how 2008 started? Sony and some pundits proclaimed that 2008 would be the "year of the PS3." With GTA IV, Metal Gear Solid 4, LittleBigPlanet, the launch of PlayStation Home, addition of Trophies and a new video marketplace, one could argue that the PS3 should have fared better. And while total PS3 sales in the U.S. were up 40 percent in 2008, the fact of the matter is that 2008 was anything but "the year of the PS3." Indeed, it was the year of the Wii, and to a much lesser extent, the year of the Xbox 360.

Sony has been losing market share and it desperately needs to convert the majority of those 50 million PS2 owners into PS3 adopters. It won't be easy, and clearly the biggest obstacle at the moment is the PS3's price, but analysts believe Sony definitely still has a chance to catch or even exceed Microsoft in the console race.

GameDaily BIZ picked the brains of five leading game industry analysts to get their respective takes on how Sony can "rescue" the PS3 before the hole grows any deeper.

Michael Pachter, Wedbush Morgan Securities

Sony has two ways to increase sales: either they price competitively (that means at the same price as their competition), or they convince consumers that the higher price is justified by "must have" features.

"Should they price at parity with Xbox 360 ($299), I think that PS3 sales would exceed 360 sales, and eventually, they could catch up."



They don't seem inclined to price competitively, and the cost of production for the PS3 coupled with Sony's financial situation may preclude a price cut over the near term. I said I expected a price cut in April, but it's not clear (given the strong Yen) whether the company can afford to do so that early. It's entirely possible that they cut in June (E3), September (TGS), holiday, or not at all.

If I'm right that they cannot afford to price competitively, that leaves them the alternative of educating consumers about the value proposition of the PS3. That strategy has its pitfalls, insofar as the feature set of the PS3 includes many expensive components that each appeal to only a minority of consumers. For example, Wi-Fi is great to have if you care to log on to PSN, but in reality, only a fraction of PS3 owners really care. (I know that they claim 17 million PSN members--maybe it's 14 million--but the truth is that most had to log on to download a system update, and joined while waiting). If there are only 17 million Xbox Live members out of 28 million, it is likely that only 60% of consumers have the desire to be online, and some of these would be happy to use a wired Internet connection. Sony asks consumers to pay for Wi-Fi whether they desire it or not. Similarly, they ask consumers to pay for a hard drive, which has value only if the purchaser intends to download content. Flash memory would suffice for most game saves, as Nintendo has proven with the Wii.


Finally, the Blu-ray player feature is another "nice to have," but should only really appeal to HDTV households (maybe 30% of the market). I am certain that in 10 years, HDTV penetration will approach 100%, but at present, a large number of potential PS3 purchasers don't have HD, and don't perceive the need to pay for Blu-ray.

That makes the education option extremely difficult. I think that they should do both (cut price and aggressively market the PS3 feature set), but am not optimistic that we'll see real traction from the latter this year. Rather, the immediate boost will come when they decide to cut price. I expect it this year, as soon as their cost structure permits a cut. My Monday note said April, and that is nothing more than a guess. It could come later, but it seems to me that it must come some time in 2009.

With that said, I think that PS3 will sell well once competitively priced. The company has an insurmountable advantage in Japan, and an overall brand loyalty in Europe. Should they price at parity with Xbox 360 ($299), I think that PS3 sales would exceed 360 sales, and eventually, they could catch up. At present, it doesn't look like that is happening any time soon, so Sony should be prepared to remain in third place until well after they cut price.

Next page: DFC's David Cole and EEDAR's Jesse Divnich