...whoops, they did it again...underestimating the competition bodes ill for the big players...
Sony (NYSE: SNE) has had another change of heart following its recent PlayStation Portable price cut. Now it's discontinuing the least expensive, 20-gigabyte model of its PlayStation 3. (Want one? Run and get it now, since it will still be available until supplies run out.) It's a stretch to call the PS3 a dud, but Sony clearly now faces a more difficult competitive landscape than the once-dominant brand experienced in the past.
Apparently, the 60GB PS3 has been outselling the 20GB version by a 10-to-1 margin. That may be a little bit surprising, since many people wondered whether gamers would reject the 60GB version's high price point. On the other hand, there's only a $100 discrepancy between the two consoles, with the 60GB version priced at $599. It's not surprising that anybody hardcore enough to shell out for the PS3 would go ahead and fork over another Benjamin for 40 extra gigs of storage space -- not to mention a few high-end features, like Wi-Fi capability, that aren't on the cheaper version.
Sony's already facing impressive pressures in the video game arena, of course. Motley Fool Stock Advisor pick Nintendo (OTC BB: NTDOY.PK) has enjoyed a surprise hit with its new Wii console, attracting surprisingly diverse customers at the industry-low $250 price point. Microsoft's (Nasdaq: MSFT) also a hungry and fully competent contender with the high-end Xbox 360, which is also jam-packed with features. For the high-end, hardcore gamer market, rumors are circulating that Sony plans an "elite" PS3 with an 80GB hard disk.
I can see why it might be a good strategy to make a good run rather than a bad stand by backing away from the less popular model, which commands a lower price anyway. With the inexpensive Wii jumping off shelves, it probably makes sense for Sony to focus on the hardcore, brand-loyal gamers most likely to buy the high-end PS3. Of course, since this comes less than six months after the PS3 launch, it's a fast run. (Could Sony be giving up on the low-end model too soon?) At any rate, it's a sign that Sony's got its hands full with the current cutthroat console competition.
Microsoft is a Motley Fool Inside Value pick.
Alyce Lomax does not own shares of any of the companies mentioned.