Lower Price But Where Are The Must Have Games?

Implications: Is Sony preparing to launch a lower cost PS3 alternative in the US? How will a lower price point affect the current hardware market? Why will the consumer care?

Analysis: There has been speculation for quite some time that Sony would offer a lower cost alternative this holiday season to compete more favorably against Microsoft with the Xbox 360 and Nintendo with the Wii.  Now that Sony has made this new system official in Europe we have some details that we can use to make an educated guess as to what we can expect for the US marketplace. 

The system will be a stripped down version of the current PS3's on the market with a 40GB hard drive and reduced functionality.  The most significant change is that the system is expected to not be backwardly compatible with the PS1 or PS2.  The other changes will probably not be terribly significant to the average consumer but backwards compatibility was important to Sony and was used as a benefit of theirs in past PS2 and PS3 marketing.  The removal of this function may be perceived by consumers who have invested heavily in PS2 libraries as a real negative essentially making the lower priced PS3 a nonviable option for them.

While price is certainly important for a consumer looking to make a purchasing decision for any product including a video game system, there are several other factors as or more important than price.  In the case of a video game console the most important aspect are the games that you can play and the entertainment value that you derive from those games.

Bottom line content is king!  It is certainly a step in the right direction for Sony to lower prices and will be necessary to hit critical mass but the lack of exclusive games for the platform will ultimately be their Achilles Heel in the short term.  Both Microsoft and Nintendo have significant titles for their respective platforms that are currently exclusive to their platforms.  Microsoft has Halo 3, BioShock and others exclusive to their platform and Nintendo has Super Mario Galaxy, Super Smash Bros. Brawl and others as well.  In addition to compelling exclusive titles Nintendo has price in their favor which considerably helps to make up for a lack of a compelling online presence. 

While Sony does have some exclusive titles for the PS3, none that are currently available are true hardware movers while the titles mentioned previously for the Wii and Xbox 360 are hardware movers. 

The Xbox 360 also has a much stronger online experience with Xbox Live than Sony does with the PlayStation Network.  While Sony has done a good job of continuing to improve their service they are still quite a bit behind Microsoft and are unlikely to catch up any time soon. 

In summary, the expected new price on the PS3 is welcome and will certainly help the PS3 sales.  However, the advantage that Microsoft has with stronger exclusive titles and a robust online experience with Xbox Live and that Nintendo has with exclusive titles, attractive pricing and significant market momentum will not change the current market conditions this holiday season. 

The PS3 will continue to be a distant third until there is a convergence of price, content and a compelling online experience to give the consumer a compelling reason to purchase the PS3 over the Xbox 360 or Wii.  I agree with the analyst's opinion that a lower priced PS3 will have minimal to no effect on the sales of the Xbox 360 this holiday season.