Playstation 3: Is Sony's $100 price cut a scam?

How Sony reduced the price of the PS3 to increase its profits on the PS3.

Published July 14, 2007 11:10AM (EDT)

Is Sony cutting PS3 prices, or just dumping inventory to make room for a model that's cheaper to produce? Nobody knows!

Earlier this week Sony announced it would cut the North American price of its 60GB Playstation 3 by $100, from $599 to $499. It also said it would soon release a new 80GB version for $599. Considering that the PS3 had been selling about as well as a stack of Chewbacca dolls at a Trekkie convention, people considered this genuinely good news -- maybe Sony would finally pose real competition to the cheaper, more popular Microsoft Xbox and Nintendo Wii systems.

But then something unscripted occurred. David Reeves, who heads Sony's European games division, told that the company's American operation was "not really" lowering prices. "All they're doing is taking their stock in trade that they've got at the moment of the 60GB model, marking the price down and it will all be gone by the end of July," Reeves said. The interviewer asked, So once the 60GB is gone, that will be the end of the 60GB then? "In America, yes," Reeves said.

Naturally, then, outrage! Sony told us it was lowering prices, but it turns out that the reduced prices aren't going to last long, and come autumn we'll be stuck once more with a too-expensive PS3. Sneaky.

But not at all, says Sony's American division. Dave Karraker, a spokesman for Sony Computer Entertainment of America, contacted the game blog Joystiq to say that the European Reeves had been misinterpreted. Reeves had meant that the 60GB model would sell out if the company also lowered prices in Europe. But it's not doing that. So there are enough 60GB models for America. Ah, OK, good then. We can sleep easy.

But what's this? In an interview caught on video, Kazuo Hirai, the president of Sony Computer Entertainment, says, "The $499 price adjustment that we did for the 60GB version for the American market, we're no longer in production for that product." Aha! So it is a clearance sale!

Well, then again, maybe not. In another statement -- same Joystiq post update 4 now -- Sony's American spokesman Karraker says (emphasis mine): "The 60GB PS3 will be available in North America for $499 until supplies of that unit are depleted. We have ample inventory to meet the immediate needs of consumers in this territory for several months to come." And in a post on the company site, Karraker reiterates that point, saying the company has "ample" supplies to meet customers' needs "for the foreseeable future."

Huh. Now everyone's confused. So is Sony making the 60GB version anymore or not?

Sure looks like not; "no longer in production" from the company president seems to seal that. Instead, it's just selling out extra stock. Now, this may be a lot of extra stock or it may not; we don't know, and how long it lasts probably depends on how customers respond to the price drop. If current sales trends continue, maybe Sony's "ample" stock will last forever!

But why, you ask, would it do this? The $599 PS3 was widely considered too expensive, so why would Sony decide to stop producing the cheap version and focus on the top-class affair?

Ars Technica has the answer. The new 80GB model is cheaper to produce than the current 60GB model. Unlike the 60GB model, the new 80GB PS3 does not include hardware to allow it to play Playstion 2 games. Instead, like the PS3s Sony sells in Europe, the 80GB PS3 runs people's old games through a software emulation system.

For gamers, the PS2 emulation could lead to reduced playability for old games. But for Sony, removing dedicated PS2 hardware from the PS3 will lead to reduced manufacturing costs. And guess which side wins that argument?

By Farhad Manjoo

Farhad Manjoo is a Salon staff writer and the author of True Enough: Learning to Live in a Post-Fact Society.

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