From October to December 2006, Sony's game division posted a loss of 54.2 billion yen ($460 million), way down from the year-ago quarterly profit of 67.8 billion yen. Sony blamed PS3 startup costs and the decision to sell the console below manufacturing cost.
Obviously, demand will improve once Sony drops the price. But Sony faces other challenges, such as the dearth of world-beating exclusive PS3 games. True, there's no shortage of mere product; Gamestop's "Coming Soon" pages list about 80 PS3 games scheduled for release through the end of 2007, compared with about 90 for the Xbox 360 and 46 for the Wii. But as blogger Bill Harris observes, "In the U.S., through the end of May, there's one non-Sony-developed exclusive: Coded Arms Assault by Konami. The only other Coded Arms game came out on the PSP and has a 60.7% average review score at Game Rankings. Ouch."
The longer Sony waits to cut the price, says the common wisdom, the more developer exclusives they will lose. The PS3's installed base grows by the week, yet it falls ever farther behind the Xbox 360 and, especially, the Wii. If the gap widens too far, and if Blu-ray doesn't win big, the PS3 might never gain dominion to match the PS2. For a console so expensive, so (what was the word?) over-engineered, even middling-good sales could constitute failure.
If the console does need rescue, Sony can still pull that off. The PS3 sells fewer units than the cheaper Xbox 360, but not much fewer; this may indicate pent-up demand from legions of buyers waiting only for a price drop. Though it may cost Sony over $800 to build each PS3, the company can nonetheless afford to drop the price at any time - this summer in particular, after the release of Spider-Man 3 makes Sony rich.
Meanwhile, even now, the ongoing PS3 launch still makes waves. The March 23, 2007 European release (weeks in the future, at this writing) excited early condemnation when Sony removed PS2 hardware compatibility from the European PS3 - the "Emotion Engine" - in favor of software emulation. Sony seems committed to reducing the madness and fatality rate of the PS3's European launch in comparison to North America's, through a curious yet, nowadays, increasingly Sony-like tactic: They make customers less eager to buy it.