If you want a PlayStation 3 for Christmas, you chances just got a lot worse.
Due to production problems, Sony said Wednesday that it will come up short with the supply of PlayStation 3 video game consoles for the critical holiday selling season and delay its launch in Europe until March.
Sony's production problems with the PlayStation 3 could be a big boost for rivals Nintendo and Microsoft, but they could create big headaches for video game publishers such as Electronic Arts that have been counting on healthy sales of new software this holiday.
"Sony didn't have their ducks in a row this time,'' said Michael Pachter, an analyst at Wedbush Morgan. ""It hurts their image with investors and consumers. I think Euorpean consumers will be rightfully angry.''
Previously, Sony promised it would have 2 million consoles available in November to support simultaneous launches in North America, Japan, and Europe. Dave Karraker, a spokesman for
Sony's U.S. game division in Foster City, says it will now have only 400,000 consoles in North
America and 100,000 in Japan in November. Sony hopes to increase supplies in both Japan and
North America to a total of 1 million to 1.2 milion each by the end of the year.
In May, Sony promised that it would ship in all three major regions in November and supply 2 million consoles in November, 2 million more units by December 31, and 2 million more by March 31. Sony still promises a total of 6 million units by March 31, but analysts found that hard to believe, given the production problems.
Sony's game chief, Ken Kutaragi, announced the delay in Japan and apologized to consumers. He said that Sony was having trouble producing the Blu-ray high-definition storage components, which can store five to 10 times more than a typical DVD. The Blu-ray technology has now been the reason for two delays in the PlayStation 3 schedule, but Sony argues it will provide much more value to the consumer and give the PS 3 a technological edge over rival game systems.
Asked why Sony's projections were too rosy and why Sony took a long time to revise them, Karraker said, "That is Ken Kutaragi's style. He pushes his internal teams to hit the numbers. When it became clear we couldn't hit the numbers, Ken revised it.''
For the rivals, Sony's problems all but ensure that Microsoft will gain market share in the current generation, said David Cole, an analyst at DFC Intelligence. He also says Nintendo has an opportunity to gain market share with its Wii console. Nintendo hasn't set its launch date yet, but it says it expects to ship 6 million Wii consoles by March 31. Nintendo has scheduled an event in New York city on Sept. 14 where it is expected to provide launch details.
"When Sony makes forecasts, I automatically downgrade them,'' Cole said. ""But I was expecting them to get out in Europe this year.''
Sony has roughly 70 percent of the current-generation console market, with Microsoft at a distant No. 2 and Nintendo at No. 3. Part of the reason was that it had a head start of 20 months before Microsoft launched its Xbox console.
Microsoft launched the Xbox 360 in three major markets last November, but its launch was plagued by a shortage of consoles. It sold only 1.5 million units in its first holiday season. By the time Sony launches in Europe with 1 million units in March, 2007, Microsoft will already have been selling the Xbox 360 in that market for 16 months. Cole said he expects Europe will be a critical battleground in determining the winner of the new console war. Microsoft will have 160 games in the market by the holidays, while Nintendo and Sony have yet to describe their launch titles.
A spokeswoman for Microsoft said, "We know how challenging it is to pull off a global launch, particularly with unproven technology, so it's not surprising that Sony has backed away from their previously announced launch plans. Europe remains a priority for us.''
Karraker at Sony said that the PlayStation 2 continues to outsell the Xbox 360 and that in the long run the initial shipment delays won't matter. Karraker said that production is scheduled to start at the end of September in factories in Japan and in Asia. He said that the lone component in short supply are the blue-diode lasers used in the Blu-ray storage media.
For game publishers such as EA, Pachter said that the impact won't be severe because it may just mean that those publishers will sell more Nintendo and Microsoft console games. But the publishers missed earnings estimates and laid off employees last year after Micrsooft's shortages disrupted the entire video game market.
In particular, Kutaragi said the crystallization process at the epitaxy reactor is behind schedule. While Sony could get back on schedule in the long run, the analysts said it's still going to hurt the company's image.
"Those sales that they lose to Microsoft and Nintendo this season could be consumers that are lost forever,'' Pachter said.
Most of the analysts said that the big battle will take place in 2007, when all three companies will likely have worked out any production problems.
EA spokeswoman Tammy Schachter said in a statement: "
This is disappointing news for European consumers who were anticipating the arrival of the PS3 this year. Although delayed, Sony should still have opportunity for a strong launch next year in Europe. EA will have a great portfolio of games ready when the console arrives in Europe.
EA has a strong line up for all next-gen consoles - the Xbox 360, the Wii and the PS3. There is room in the industry for a multi-console market and EA is well positioned with great games for all next-gen platforms."
Note: Let's all give a hand to Dave Karraker, Sony's new senior director of corporate communications for the U.S. division in Foster City. Dave is a veteran of video game PR, but he is jumping into the fire here. Maybe his job is not so different from the last one. He was mostly recently the top spokesman for Allied Domecq Spirits and Wine, the maker of liquor brands such as Stolichnaya. How about that leap?