Wii, not Xbox 360, may have prompted PS3 price cut in Japan

Chicago (IL) - Sony's unexpected price cut of the base PS3 comes just two days after Microsoft's announcement to offer a bargain priced HD DVD price for the Xbox 360. But Sony may not be worried about Microsoft, but rather about a strong Nintendo Wii in Japan, Chris Crotty of market research firm Isuppli suggests. And there may little reason for Sony to extend the price cut to the U.S.

The Tokyo Game Show 2006 is the last opportunity for the big console makers to once again promote the features and benefits of their devices. Microsoft was out the gate first announcing that it would be offering a 1080p-capable HD DVD extension for its Xbox 360 for a dumping price of $170. Perhaps not accidentally, the drive will launch on 17 November - on the same day Sony will unleash its PS3.

This morning, Sony appeared to react with a substantial price cut and the inclusion of HDMI functionality in its base model. The entry-level version will now sell for $430, undercutting the HD Xbox package deal of about $500. However, the two announcements may not be related.

Interestingly, the price cut as well as Microsoft's HD DVD drive are limited to the Japanese market. And especially in the Japanese market, Microsoft has been struggling and never was able to reach Sony's sales numbers. According to Media Create, Microsoft is currently selling between 900 and 1100 Xbox 360s per week and has sold just under 76,000 consoles until the beginning of September. In comparison, the PS2 sold in Japan 10 million units within two years of launch and currently ships at a pace of about 20,000 units per week.

The fact that even the PS2 outsells the Xbox 360 by a factor of 20:1 raises the question why Sony would be concerned about the PS3's value against the Xbox 360. Chris Crotty, senior analyst for consumer electronics at Isuppli, believes that Sony in fact may not be worried about the Xbox 360 and its newly announced HD DVD drive, but much more about the Nintendo Wii.

"I am wondering if this announcement has more to do with Wii and how strong the console will be in Japan," Crotty told TG Daily. "It could be an indication that Sony feels less confident about its content." Cutting the price of the console could increase the value proposition of the offering and may make the PS3 more attractive. "If you look at the controller and some of the content you see some unique features and it is much easier to develop content for the Wii than the PS3," Crotty said.

However, while Sony could have sensed some insecurity about its content, the price reduction could also be a sign of quite the opposite situation: "Whenever you lower the price of the console, you increase the burden to back the money through software. In this respect, you can argue that Sony could be feeling more confident that they will have great content [and can sell more games]," Crotty speculated.

If the analyst is right, then we should not expect a price war between Sony and Microsoft - which, however, may not mean that Microsoft won't be lowering the prices of its Xbox 360 in Japan. The premium version, which sells in the U.S. for $400 was introduced in Japan for $330 and will be complemented with a base model without hard drive for $256 soon.

It is also unlikely that Sony will extend the price cuts to the U.S. "If they intended to do that, they would have announced that all at once. The PS3 will do just fine at the high price point in the U.S. There will be plenty of demand." Crotty said. The battlefield appears to be limited to Japan at this time - and possibly to the Nintendo Wii and Sony PS3 only. But U.S. gamers at least can hope that they will receive their base PS3 with an HDMI port, as it is unlikely that Sony will be producing several different versions of the console for different markets. Sony, however, has not yet announced the addition of the feature for the U.S.