PSP price cut might be imminent

August 12th, 2006, 12:14 Posted By: wraggster

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News from CNN

While the price of the PlayStation 3 may prove to be too high for some this holiday season, it's looking more and more likely that Sony will try to tempt consumers with a less expensive handheld gaming system.

As it prepares to launch its next generation machine, Sony is apparently stockpiling finished gaming hardware, which analysts believe to be the PSP (PlayStation Portable). That, they believe, is a signal that the company plans to reduce the price of the PSP as the holidays get closer.

Sony is expected to cut the price of its PSP handheld gaming system this holiday season.

"There is a price cut coming in the second half of the year," said P.J.McNealy of American Technology Research. "[The PSP] has lost momentum. Nintendo has had a great run since it launched the DS Lite and Sony needs to regain some ground."

McNealy said he expects Sony (Charts) to drop the PSP's price by $50 to $149. It's possible the company will also bundle the cheaper system with a game or two as well, though not certain.

The timing's about right for a PSP price cut. (You could argue that Sony has yet to lower PSP prices, although it'd be a pretty weak argument.) When the system first went on sale in early 2005, it was only available via a $250 bundle, which included headphones, a carrying case and other accessories. This March, the company dissolved the bundle, selling just the system for $199.

PSP sales have been solid so far, with 20 million units shipped worldwide (with over 8 million of those to the U.S.). That's essentially a tie with the Nintendo DS, which has sold over 21 million units - but the numbers don't tell the whole story.

While the DS has been on the upswing, thanks to commercially and critically successful games such as "Brain Age" (which has sold more than 4 million copies worldwide), "Nintendogs" and "New Super Mario Brothers," the PSP has not had a game truly capture the gaming world's attention since the release of "Grand Theft Auto: Liberty City Stories" (published by Take Two Interactive (Charts)) last October.

This holiday, in addition to the expected price cuts, the PSP will see the release of "Grand Theft Auto: Vice City Stories," which should help boost sales. And waiting in the wings is an online Sony store that will allow PSP owners to buy, download and play classic games from the original PlayStation system.

A $149 price point would put the PSP in the same range as the DS, which currently sells for $129. Nintendo is less likely to reduce its price as it continues to have problems meeting demand for the machine worldwide.

That could give Sony an advantage - as the PSP can also double as a portable video player. While many studios and retailers have abandoned the system's UMD discs for movies, Sony has struck deals allowing people to transfer content from their Tivos and Web videos.

As for Sony's other big system - the PlayStation 2 - things are likely to remain unchanged for now. While a price cut to $99 is certainly coming eventually, it likely won't happen until next year, say analysts. The installed base of video game machine owners is considerably larger than it was five years ago, making it less critical to get systems in people's hands.

"PS2 sales are still pretty solid, so why would Sony bother cutting their prices if the flow through retail is still pretty good?," asked Colin Sebastian of Lazard Capital Markets. "Also, Sony still talks about a 10-year life cycle for the PS2. They've typically been doling out these price cuts every couple of years [and they lowered prices earlier this spring]."

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