PlayStation 3 delay? Don't panic!
Rumors of a later-than-expected launch shouldn't affect U.S. consumers.
NEW YORK (CNNMoney.com) The frenzy started late Friday, when word of an analyst report from Merrill Lynch began to circulate. The key phrase, setting off hysterics in the gaming press and the mass media was the PlayStation 3 "could be delayed by between 6 and 12 months, with the result being an autumn launch in Japan and a late 2006 or early 2007 launch in the U.S."
The suggested reason for this delay was the prohibitive cost of the PS3 which Merrill estimated at a whopping $900 per unit, thanks to special memory chips required by the system and the PS3's Blu-Ray drive.
Sony, as you might suspect, declined to comment on the report.
Granted, the possibility of a delayed PS3 launch and prohibitively expensive production costs make for some great headlines and message board chatter, but there are a few other realities to consider.
Perhaps the most important of those is market share. By pushing the PS3's launch beyond the 2006 holiday period, Sony (Research) would be giving Microsoft an enormous head start in the battle for consumers.
Microsoft rushed production of the Xbox 360 to launch the system in 2005. Product shortages prevented the company from getting the initial lead it had hoped, but the supply problems are widely expected to be resolved in the coming months, meaning it won't be so hard to find an Xbox 360 on store shelves. By this holiday period, they're going to be everywhere.
Additionally, the second round of games for the Xbox 360 will be on store shelves later this year, giving Microsoft (Research) another boost. These are titles developers have had more time to work on and show the extra effort, typically with more engaging gameplay and more striking graphics. ("Gears of War" from Epic Games is already building a strong buzz, for example.)
Let's not forget Nintendo, either. Granted, the house that Mario built isn't the powerhouse it once was and it's chasing a much different audience than Sony this generation but its approach has intrigued hardcore gamers, who might be willing to spend some of the money they had saved for a PS3 on Nintendo's next gen machine (currently code-named Revolution).
Nintendo will also likely see particularly strong sales in Japan, where it has seen a resurgence in popularity recently. Sony won't give up its dominance in its home country without a bitter fight.
Logic sometimes isn't enough, though. To get additional perspective on the situation, I spoke with several of Sony's partners (who are in regular contact with the company) and competitors (who keep a close eye on the PS3's launch window) about the report. No one was willing to talk on the record for fear of reprisal, but the consensus was nearly universal.
The promised spring launch (which was expected in Japan, but not North America) will likely be pushed back, they said. The North American launch, which was always expected to occur later this year (November is the consensus), is not expected to change. Europe may well not see the PS3 until next year.
As for that $900 per box wholesale figure, everyone agreed it sounded high. Sony will lose money on early PS3 hardware sales, just as Microsoft is losing money on Xbox 360 sales right now. But it's not likely to swallow $400 to $500 per unit.
The only wild card here is Sony hasn't discussed shipment numbers at all. Should production costs start reaching stratospheric levels, Sony simply has to dial those back internally. Consumers will hang onto their money, knowing that there's at least a chance they'll get a PS3, which potentially cuts down on sales for Microsoft and Nintendo.
The holiday 2006 season is going to be a frantic one for shoppers with next gen systems on their lists. Supplies of the PS3 (and likely Revolution) are going to be short. History has taught us that. But despite the current Chicken Little mentality, it's a safe bet they'll have three to choose from, rather than two.
Atari creeps closer to death. Read more
Morris is Director of Content Development for CNNMoney.com. Click here to send him an email.