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Sony to Phase Out $500 PlayStation 3

Reuters
Monday, 16 Jul 2007 | 8:28 PM ET

Sony plans to phase out the cut-priced $499 model of its PlayStation 3 video game machine, leaving only a higher capacity $599 model for sale in the United States, the company said on
Monday.

The revelation undid some of the praise Sony won from the gaming industry last week for its 17% price cut on the machine, a move seen as leveling the playing field with Microsoft's Xbox 360 console.

But one analyst said Sony had left the door open to further price cuts, saying another would almost certainly happen when the cheaper PlayStation 3 sells out.

Sony dropped the price on the PS3, which comes with a 60-gigabyte hard drive and high-definition Blu-ray DVD player, by $100 last week in a bid to boost sales of the console by passing on lower costs onto consumers.

It also said it would launch a new model featuring a hard drive with 33% more capacity -- 80 gigabytes -- and a copy of its off-road racing game "MotorStorm" in August.

A company spokesman said Sony would sell the $500 version until "supplies of that unit are depleted," estimated to be months after the August debut of the new, pricier model.

"We have ample inventory to meet the immediate needs of consumers in this territory for several months to come," Dave Karraker said in an e-mailed response to questions. "We won't be making any further announcements regarding our PS3 model hardware strategy in North America until the 60GB model is exhausted and market conditions are evaluated," Karraker said.

The statement confirmed remarks by David Reeves, president of Sony Computer Entertainment Europe, carried last week on gaming news Web site GamesIndustry.biz saying the 60-gigabyte model would be discontinued.

Gaming circles voiced disappointment in the development with popular blog Joystiq.com saying it amounted to more of a "clearance sale" than an actual price cut.

Wedbush Morgan analyst Michael Pachter said in a research note that Sony had an estimated 2 million to 3 million 60-gigabyte models in inventory and that once they were sold out, it would lower the price on the 80-gigabyte version.

"Although we think that Sony's public relations gaffe was unfortunate, we do not believe that the company has ill intent, and we expect the $499 price point to be maintained until early next year, when the 80GB model will likely by cut again to $399," Pachter said.

The PS3 lags the Xbox and Nintendo's Wii console in sales. The Xbox, which launched in November 2005, has sold 5.6 million units in the United States through May of this year.

The $250 Wii, with its unique motion-sensing controller, has become a surprise hit, selling 2.8 million units in just seven months after its November 2006 launch, compared to the PS3's 1.4 million units in that time.

Microsoft's Xbox 360 comes in three models priced from $300 to $480. The most expensive model, the Elite, comes with a 120-gigabyte hard drive but lacks the PS3's high-definition DVD player, built-in wireless technology and bundled game.

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