Gamers Line Up as PS3 Launches in Japan

After considerable delays, Sony finally fired its long-awaited salvo in the next-generation gaming console war, launching the PlayStation 3 to anticipated huge demand in its native Japan.

Stores began selling the PS3 early Saturday morning, with media outlets predicting long lines and a fast sell-out. Sony has said it would make about 100,000 of the consoles available for sale in Japan upon launch. Another 400,000 units are being shipped to U.S. retailers, where they are expected to be sold starting next week.

Supply and Demand

Sony now predicts it will get up to 1 million of the game consoles, which feature improved graphics and sound, DVD playback, wireless connectivity and other advances, into stores before the end of the year. That’s about half the amount it originally forecast would be available before production slowdowns began to dog the company.

The PS3 is being pre-sold in some locations for prices that are well above the retail costs, with some pre-sales fetching as much as US$1,500 on eBay.

Sony still hopes to meet its original forecast of having 6 million PS3 units on the market by end of March, 2007. However, missing the holiday season in many key markets — European consumers likely won’t see the devices available until early next year — could prove costly for Sony and a boon to rivals such as Microsoft’s Xbox 360 and Nintendo’s Wii, which will launch in the U.S. within a few days of the PS3 at about half the price. The Xbox has had a nearly full year’s head start and also sells for far less than the PS3.

The launch is a glimmer of hope that Sony can end 2006 on an upbeat note. In addition to the PS3 delays, Sony has been at the center of the battle over next-generation DVD technology, with the market split over whether to adopt its Blu-ray standard or the competing HD DVD. Meanwhile, it has been forced to recall nearly 10 million laptop computer batteries worldwide after problems with overheating were discovered.

Gaming War Casualties: Profits?

The PS3 has been closely watched since its development began in the wake of PlayStation 2’s launch. Sony has long dominated the gaming console market, holding approximately 70 percent of the market based on the success of its earlier version of the PlayStation. Some 200 million consoles have been sold under the PlayStation brand to date, not counting the PlayStation Portable handheld device.

Sony has run into numerous problems in getting the PS3 to market, from issues with sourcing components to questions surrounding pricing. It also announced recently that users would have to download a software update in order to use all of the advanced Web connectivity functions.

Some have questioned whether there’s a viable market for the most heavily loaded PS3, the 60 GB hard drive version that will retail for around $600.

Sony has already cut projected prices on the console, reducing the price in Japan by some 20 percent at the last minute, likely exacerbating the losses it will see in its gaming division. Sony itself has said the unit will lose $1.7 billion during the current fiscal year, which ends in March, 2007.

Still the King

Another issue with the launch will be a dearth of custom-made gaming titles. At launch, just five titles will be available for the device, a fact that may cause all but the most hard-core gaming devotees to postpone purchases. Sony has said another 20 gaming titles are in development and will launch soon after the consoles.

The delayed launch is costly because it often takes a year of development time before gaming software titles are refined to the point where they work perfectly on any given platform, according to Yankee Group analyst Mike Goodman.

“The second or third generations of any given game title are usually the ones that blow people away, because developers have had a chance to figure out how to make the most of a platform,” Goodman told the E-Commerce Times.

That may be especially true with PS3 because so much of the technology inside the console is brand new, down to the processors and video drivers.

The PS3 has been well received in previews, with many reviewers saying the graphics in games approach DVD movie quality.