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Sony's Stringer Rebuffs Activision Calls on PS3 Price

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By Adam Satariano and Andy Fixmer July 8 (Bloomberg) -- Sony Corp. Chief Executive Officer Howard Stringer spurned calls by Activision Blizzard Inc., the world’s largest video-game publisher, to cut prices of the PlayStation 3 because the $400 console is unprofitable. Activision CEO Bobby Kotick said last month the publisher of the “Guitar Hero” and “World of Warcraft” games may shift away from developing products for Sony’s PlayStation 3 toward cheaper machines by competitors of the Tokyo-based company. “He certainly likes to make a lot of noise,” Stringer, 67, said in an interview yesterday in Sun Valley, Idaho. “I lose money on every PlayStation I make.” Daniel Dematteo, head of GameStop Corp., the world’s largest video-game retailer, said during a company earnings call in May that console prices are “too high” given the economic environment. Revenue in the U.S. video-game industry has fallen for three consecutive months, according to data compiled by research firm NPD Group Inc. Sony dropped 1.9 percent to 2,310 yen as of 1:37 p.m. in Tokyo trading, bringing this year’s gain to 20 percent. Japan- based Nintendo Co., which makes the Wii, the best-selling game console, has slumped 21 percent this year, and U.S.-based Microsoft Corp., the maker of the Xbox, has climbed 16 percent. The PS3 trails the Wii and the Xbox 360 in sales. The Wii sells for $250 and the least expensive Xbox costs $200. Sony cut the price for the PlayStation 3 in the U.S. in July 2007 and in Japan in October that year, when it introduced a new model. Price, Sales “Price cutting hasn’t always contributed to increased sales,” Osamu Hirose, an analyst at Tokai Tokyo Securities, said today by phone. He rates the shares “above average.” The game unit has been Sony’s biggest money-loser during the past three years, accumulating 415.3 billion yen ($4.4 billion) of operating losses. The deficits began after Sony introduced the PlayStation 3 in the fiscal year started April 2006. Operating profit is measured as the value of sales minus the cost of goods sold and administrative expenses. “We’re very happy with the price point that we have,” Kazuo Hirai, the head of Sony’s game division, said during the Electronic Entertainment Expo trade show in Los Angeles on June 3. “We will move when we think it’s appropriate at some point in time.” Sony, which invested about 200 billion yen to develop the PS3’s central processor, plans to replace the console’s main chip with a 45-nanometer model from 65 nanometers, Daisuke Nakata, a spokesman for the game unit, said today by telephone, without specifying when the upgrade would be released. New Chips A nanometer is one-billionth of a meter and measures the width of the transistors packed in a semiconductor. The new chips will be smaller, and such models usually generate less heat, enabling a reduction in the number of components and leading to lower costs, Nakata said. Ashley Dyer, a spokesman for Activision Blizzard, didn’t immediately return a message left by Bloomberg News seeking comment after regular business hours in Santa Monica, California. “He’s putting pressure on me and I’m putting pressure on him,” Stringer said of Kotick. “That’s the nature of the business.” Last Updated: July 8, 2009 01:07 EDT

Last edited by fairlanefastback on 08-Jul-2009 at 11:07 PM.
Last edited by fairlanefastback on 08-Jul-2009 at 11:06 PM.

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