PSP World

Sony to boost handheld game sales with PSP price cut

According to MarketWatch, Sony cut the price on its PlayStation Portable, on Tuesday in an effort to boost sales of the handheld gaming device, which has so far been far outsold by rival devices from Nintendo. Sony said Tuesday that it will shave $30 from the retail price of the PSP, cutting the price from $199 to $169.

The move, effective immediately, comes as Sony has come under pressure for its expensive gaming consoles. Both the PSP and the company's flagship console - the PlayStation 3 - are the most expensive devices in their respective categories, which analysts believe has hurt the company's share of the growing video game market.

"Basically, the PSP turned out to be too much money for kids and too much machine for adults," said Kaufman Bros. analyst Todd Mitchell.

In a note to clients Tuesday, Mitchell said he believes that game publishers were "instrumental" in pushing Sony to lower the price of the PSP.

Edward Williams of BMO Capital Markets noted that retail giant Wal-Mart offered the PSP for sale at the $169 price point for five hours on Black Friday - the kickoff to the Christmas shopping season in November. He believes more than 100,000 PSP units were sold during the promotion. "We expect PSP hardware sales to experience a good lift from this price cut," Williams concluded.

The PSP has recieved stiff competition from Nintendo's DS which currently sells for about $130, has been the top-selling gaming console for the past three months, outstripping next-generation home consoles such as the PS3, the Nintendo Wii and the Xbox 360. According to data from the NPD market reasearch group, since its 2005 debut, the PSP has sold about 7 million units in North America, whilst Nintendo's DS - which hit the market four months earlier - has sold 9.9 million units.

Sony's rivalry with Nintendo has taken on a new dimension of late. The two companies target different audiences; Sony has long sought the hard-core gamer crowd, while Nintendo has typically been more popular with families and younger children. However, Nintendo has a genuine hit on its hands with its Wii, which launched in the U.S. in November. Analysts feel that Sony's sales have been a bit of a disappointment in comparison due to the heavy price tags.

Mitchell of Kaufman Bros. speculated that the PSP price cut may actually be an effort by Sony to clear out inventory before launching a new version of the device later this year.

"It has been broadly speculated in the video game industry that a new model of the PSP is in the works," Mitchell wrote. "We expect the new PSP will be in a slimmer form factor and have an enhanced communication and community features, highlighted by enhanced connectivity to the PS3." He added, however, that Sony is not expected to offer the new device at the lower $169 price point, "which could prove problematic."