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Sony Strikes First, Microsoft Expected to Follow with More Price Cuts

9 Jul, 2007 By: John Gaudiosi

Sony will bow a new 80GB PlayStation 3.

Sony Computer Entertainment America (SCEA) in August will offer an 80GB PlayStation 3, packed with the racing game MotorStorm.

The new console includes the same features as the standard 60GB version, plus extra memory for PlayStation Store downloads, at $599.The 60GB PS3 price will be lowered to $499 in North America.

The million-selling MotorStorm allows up to 12 players to play online at one time. There are currently more than 60 playable games and game-related downloads available through thePlayStation Store, with expanded entertainment content coming soon, Sony reported.

Throughout the holidays and this fiscal year, more than 120 new first and third-party software titles will be available for North American PS3 user, in addition to the more than 40 software titles currently available, Sony reported.

“As we move into the next phase of PS3, it's important that we continue to evaluate our product line, offering consumers the technology and features that meet their growing needs for new forms of media and the way in which it is delivered,” said Jack Tretton, president and CEO of SCEA. “The introduction of the 80GB PS3, the new pricing for the current 60GB model, the availability of more than 100 new software titles this fiscal year and, finally, the expansion of services for PlayStation Network, will provide even more options for users and will help bring new consumers into the PS3 fold.”

Sony discontinued its original $500 20GB PS3 months ago because of poor sales.

“In an apparent preemptive move Monday morning, Sony cut the price of the 60GB PS3 from $600 to $500,” said Michael Pachter, videogame analyst, Wedbush Media Securities. “We expect Microsoft to follow tomorrow with a price cut for all models of the Xbox 360. We expect the Elite model [currently priced at $480] to drop to $400, and the Pro model [currently at $400] to drop to $350. We do not expect Nintendo to cut the price of its Wii or DS.”

Microsoft currently leads the new console war with 5.4 million Xbox 360s sold in the United States, followed by 2.8 million Wiis and 1.36 million PS3s. Microsoft got a one-year head-start with Xbox 360 in November 2005 with both Nintendo and Sony entering the race last November.

While at first glance this looks like the same two price points that were available at launch — and they are — these two consoles pack a lot more for the money. The 60GB hard drive will allow gamers to store the movies, TV shows and games that Sony will be unleashing through its broadband PlayStation Network. That 80GB PS3 will not only have more storage capacity, but it will also come with one of the best PS3 games available — a game that currently sells for $50.

“In our view, the value proposition for the PS3 is increased at the new lower price point, putting increased pressure on Microsoft to cut the price of its Xbox 360,” said Pachter. “The 80GB and 60GB PS3 models compare favorably to the 120GB and20GB Xbox 360 models.”

Both PS3 models have WiFi built in, while it is an extra accessory for the Xbox 360. Sony's PS3s come with HDMI output, while only the Elite 360 model has HDMI. The Elite offers HDMI cables, while the PS3s do not.

“On balance, we think that the lower $500 price point for the PS3 60GB model offers consumers a compelling value compared to the current $480 price point for the Xbox 360 Elite model — while the Elite has a 120GB hard drive and HDMI cables, it does not have Wi-Fi built in nor does it offer Blu-ray playback capability, with both standard features for the PS3,” Pachter said. “Similarly, we think that the $500 PS3 compares quite favorably with the $400 Pro 360 model, which has only a 20GB hard drive and no HDMI output. “Because of this favorable comparison, we believe that Microsoft is all but compelled to cut prices, and we think the price cuts will come no later than at Microsoft's Tuesday night press conference.”

Pachter believes that Microsoft has to cut its prices, despite the $1 billion charge for Xbox 360 hardware failure problems last week. Microsoft has extended the warranty on its Xbox 360 and will replace all defective consoles. Although the problem has been fixed, Pachter believes over 10% of Xbox 360s were plagued by the design flaw, which caused the console to overheat and die.

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