Console Wars Get Under Way at Tokyo Game Show

CHIBA, Japan – In the three-way struggle among Sony, Microsoft and Nintendo for year-end shoppers of next-generation video-game consoles, price is turning out to be a key weapon.

Like other game fans, Satoshi Yamakura, a 21-year-old Japanese student, is still undecided whether he will buy a machine and acknowledged he'd probably wait until prices come down to about $250.

After trawling the stalls and trying out the latest games at the recent Tokyo Game Show, he's leaning toward Sony's PlayStation 3.

"But it's still too expensive," he said.

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The annual three-day industry event ending Sept. 24 drew more than 190,000 people this year, up 10 percent from last year, underlining growing interest.

To win over skeptics like Yamakura, the makers are thinking bargain prices.

During the show, Sony Corp. (SNE) announced it was cutting the Japan price of the low-end PlayStation 3 model by 20 percent to 47,600 yen, or about $410 — the first time the Japanese electronics and entertainment company has slashed a console price before its release.

Tokyo-based Sony has no plans to lower PlayStation 3 prices in the U.S., where it will go on sale Nov. 17 at $499 for the 20-gigabyte hard drive version, and at $599 for the 60-gigabyte version.

The console will arrive in Japanese stores Nov. 11, but it has been delayed in Europe until March because of a production problem.

Adam Sessler, a game expert with U.S. cable network G4 who was in Japan for the show, believes the PlayStation 3 no longer has the leadership position it once had, and is likely to face a tough job fighting rivals this time.

Among the problems are the high price and attractive games in the pipeline for Microsoft Corp.'s (MSFT) rival console, the Xbox 360. Also, Nintendo Co.'s Wii is offering innovative entertainment, Sessler said.

"If you still don't know which console to get, wait and see," he said. "Give it another year."

The price cut in Japan puts the PlayStation 3 in the same range as the combined basic Xbox 360 and external high-definition DVD player, which Microsoft recently announced it's introducing, matching the PS3's built-in ability to play the high-definition disc format backed by Sony, the Blu-ray Disc.

The Xbox 360 went on sale last year, but has struggled in Japan, Sony's home turf. Microsoft has sold a combined 630,000 units of the Xbox 360 and the original Xbox in Japan, while Sony has sold nearly 20 million PlayStation 2 machines in the country.

To get traction, Microsoft is also cutting prices. It's set to release in Japan in November a cheaper, bare-bones version of the Xbox 360, already sold in the U.S. and Europe, for 29,800 yen, or $255, about $85 cheaper than its standard version.

The PlayStation 3 will have great graphics and price to match, said Hirokazu Hamamura, president of publisher Enterbrain Inc., but "just because people say they want it doesn't mean they're going to buy it. Most people are going to buy it when the price comes down."

The Wii, which analysts say has the potential to appeal to gaming novices with its wandlike remote controller that's swung around like a tennis racket or fishing rod, also has a pricing advantage: It will sell for $250 in the U.S. starting Nov. 19, and for 25,000 yen when it starts selling in Japan Dec. 2.

Analysts say the initial shipments of the PlayStation 3 and Wii are almost certain to sell out. The number of machines is limited at the start, and a loyal following of game fans is likely to snatch them up.

Sony, which is planning to ship 6 million PlayStation 3 machines by end of March 2007, has said it will only have 400,000 units in the U.S. and 100,000 in Japan for the launch.

Nintendo, based in Kyoto, plans to sell 6 million Wii consoles during the fiscal year ending March 2007 but has declined to say how many machines will be available on the first day.

"It's not going to happen overnight. This is a five-year-battle," said Hiroshi Kamide, director of research department at KBC Securities Japan in Tokyo, saying that at least 18 months are needed before a likely market leader emerges.

Kamide believes Wii could emerge the surprise winner, partly because of its pricing.

Nintendo lost out in the earlier home console battle with its previous GameCube, although the Kyoto-based manufacturer dominates the market for handheld gaming devices with its Game Boy Advance and Nintendo DS.

Takashi Sensui, who heads Xbox operations in Japan, said the long awaited perk-up in the gaming industry is coming after stagnation during which consumers held off on buying games as they waited to see what was in the works for next-generation machines.

Big names in the software business, including Electronic Arts Inc. (ERTS), sank into losses, while others such as Namco in Japan, of PacMan fame, were forced into mergers.

The diversity of the new generation of consoles is going to bring customers out in force again, Sensui said. "This is going to lead to a revitalization of the entire gaming industry."