Saturday, November 11, 2006

Sony PlayStation 3 Debuts in Japan to Long Lines, Short Supply

By Stuart Biggs

Nov. 11 (Bloomberg) -- Akihiro Okawa waited all night to be among the first to buy Sony Corp.'s Playstation 3 game console when it went on sale at 7 a.m. in Tokyo.

Okawa, a 25-year-old office worker, was the first of more than 1,000 fans who queued overnight to buy Sony's latest game machine at Yodobashi Camera Co. in Akihabara, an area of Tokyo famous for its electronics stores.

Demand outstripped supply at the store because Sony, which halved its 2006 shipments forecast to 2 million because of a shortage of parts, limited initial deliveries in Japan to 100,000. The company said last month it would cut the new machine's price to 49,980 yen ($425) from 59,800 yen after complaints from gamers. The Playstation 3 goes on sale in the U.S. on Nov. 17.

``When Sony announced the Playstation 3 I really wanted one, but thought I should wait because of the high price,'' Okawa said. ``When they cut the price, I decided to go ahead.'' The Tokyo resident told reporters he bought the console along with the ``Gundam'' game.

Yodobashi's Akihabara store had 1,980 consoles available, the most in Japan, according to store manager Shinichi Adachi.

``Even if we had 4,000 we'd still sell out today,'' Adachi said. ``I'd like to know when we'll get another delivery from Sony, but they're not saying.''

The Playstation 3 employs a new Cell processor 40 times faster than the chip in its predecessor. Sony is also betting game fans will prefer the PlayStation 3's souped-up graphics and more lifelike characters over a competing console from Japanese rival Nintendo Co.

Digital Home

Sony spent 200 billion yen ($1.7 billion) to develop the Cell processor with International Business Machines Corp. and Toshiba Corp. making it faster than rival chips thanks to nine processing cores that let it carry out more instructions simultaneously.

The Cell chip is part of Sony's strategy to beat Microsoft Corp. and Apple Computer Inc. in controlling the digital home, a future network in which appliances are connected to each other and to the Internet.

Nintendo's Wii console, which goes on sale in the U.S. on Nov. 19 and two weeks later in Japan, uses less-sophisticated graphics but woos game fans with an innovative wireless control system based on hand motions.

The PlayStation 3's ``graphics capability is probably two generations ahead of the other consoles,'' Hirokazu Hamamura, chief executive officer at researcher and publisher Enterbrain Inc. told reporters in September.

Battery Woes

Sony will need all the help it can get. The company is in the process of recovering from a 51.2 billion yen recall of 9.6 million laptop batteries on concern they catch fire. The cost contributed to Sony cutting its net income forecast for the year ending March 31 to 80 billion yen from 130 billion yen.

The games business generated 918 billion yen in sales in 2006, 12 percent of Sony's 7.48 trillion yen revenue. Sales at the games unit gained an average 31 percent in the past two years, the second fastest after financial services, which averaged 34 percent. By contrast, Sony's consumer electronics business shrank by an average 0.9 percent during the past two years.

At 49,980 yen the Playstation 3 is almost double the cost of its rivals. Microsoft sells a version of its Xbox 360 for 29,800 yen, while Nintendo will offer the Wii console for 25,000 yen.

Cupertino, California-based Apple plans to sell a $299 device called iTV in the first quarter of 2007 that lets viewers see movies on their TV sets by using a connection to a computer.

High Cost

``It could be expensive if you think this is just a games machine,'' said Yuuki Sakurai, who oversees investment planning at Fukoku Mutual Life Insurance Co. in Tokyo.

Sony and Toshiba have talked about building televisions and home-networking boxes using the Cell to pump several video channels to different outlets in the home.

The Cell would be unable to compete on price with chips from STMicroelectronics NV or Zoran Corp. which can already handle the most processor-intensive video compression rates, said Paul O'Donovan, Gartner Inc.'s London-based analyst on emerging technologies and semiconductors.

``Home networking won't reach the mass market for another four to five years,'' O'Donovan said. ``These companies talk about products that will contain the Cell in the future but none of them will hit the mainstream anytime soon.''

Parts Shortage

The processor isn't the only hardware Sony gambled on with the PlayStation 3. A shortage of laser components for its Blu-ray DVD device, which offers at least five times the data storage capacity of earlier DVDs, caused the company to delay the PlayStation 3's debut in Europe until March.

Redmond, Washington-based Microsoft has sold more than 6 million Xbox 360s worldwide since introducing the console a year ago, helped by its Xbox Live online service. The company is targeting 10 million units this year.

Microsoft this week said users will be able to rent and own high-definition movies and television shows from CBS, MTV Networks and Warner Bros. on its Xbox Live service from Nov. 22.

Kyoto-based Nintendo will get exclusive games from Walt Disney Co. for its Wii console.

``Giving rivals a head start in an industry like this gives them an opportunity to come out with an even more competitive product,'' said Fukoku Mutual's Sakurai. ``Sony will make up the lost ground only if its rivals remain stationary, and that is wishful thinking.''

To contact the reporter on this story: Stuart Biggs in Tokyo at


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