Sony Pushed Toward Early PS3 Price Cut

So, Sony is contending with the unfortunate timing of the "God of War 2" launch, the badly aging Japanese series like "Virtua Fighter," the slightly lackluster new properties like "MotorStorm" and the late arrivals of hotly anticipated PS3 games from "Heavenly Sword" to the next "Final Fantasy" and "Metal Gear Solid" iterations.

This spring is the moment when several small negative factors have turned into a cluster of woe for PS3. The cumulative weight is sinking the console, and I don't think Sony can afford to wait until next winter for things to turn around. The "Halo 3" juggernaut will likely arrive around September 2007 for the Xbox 360, and the new, highly innovative "Mario" game for Wii will probably launch a month or three later.

Both of these franchises are proven system-sellers; they have the rare power to increase the unit sales of their home consoles meaningfully. Sony will have to line up several hits just to neutralize their impact.

A second-quarter price cut is the most likely outcome of this dismal spring. Sony has to regain momentum before the rival consoles line up their biggest guns next winter. It will sting Sony's bottom line fiendishly as the subsidy for selling the expensive console shoots up before originally planned, and there is no guarantee of success. The early, steep price cut of the original Xbox did not do much to change the ultimate destiny of that console -- an also-ran status it shared with GameCube far behind the PS2 volume glory.

Investors are likely to interpret a price cut as an expensive gamble that may signal desperation to consumers. I am expecting more portfolio-flipping from Sony to Nintendo.