Sony slashes price of PS3 by $100, introduces thinner model [Updated]

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Sony slashes price of PS3 by $100, introduces thinner model [Updated]
August 18, 2009 | 11:23 am
New-PS3
Sony introduces lighter, smaller PS3 with a slimmer price at $299. Credit: Sony

It's official. Sony today slashed the price of its PlayStation 3 game console by $100 to $299 in an effort to goose sales ahead of the crucial holiday shopping season. Sony also unveiled a sleeker, thinner model of the PS3 that packs an 120-gigabyte hard disk drive, 50% larger than the current model. The newer model is expected to hit store shelves by Sept. 1, said Peter Dille, Sony's senior vice president of marketing.

"This is a game changing moment for us," Dille said in an interview. "There’s a lot of pent-up demand for the PS3. It's been a tough economy, and a lot of people have been sitting on the fence waiting for the price cut."

The announcement, made at a Sony press conference in Cologne, Germany, was widely anticipated by a number of analysts who said a price cut would help the company gain momentum. Game publishers have also been pushing Sony for a price cut in order to broaden the base of console owners to whom they can hawk their software.

"A price cut is long overdue on the PS3," said Colin Sebastian at Lazard Capital Markets, who earlier this year predicted a price cut. "We expect an uplift in unit sales, which is the typical pattern at retail when console prices are cut. But the question longer term for Sony is whether they can sustain market share gains, especially when competing platforms, such as the Xbox 360 lower their prices as well."

Sony's cost for making the console has fallen 70% since introducing the device in November 2006, according to Daniel Ernst, an analyst with Hudson Square Research.

The PS3 currently lags behind in the three-way console race. Nintendo has sold slightly more than 50 million Wii consoles worldwide, while Microsoft has sold slightly more than 30 million Xbox 360s, according to Sebastian. Sony, meanwhile, has sold roughly 24 million PS3s as of June 30, according to Dille.

Besides the smaller price tag, Sony is hoping the sleeker PS3 will beckon reticent buyers this coming holiday. The new model, which will replace the existing version, is 36% smaller and weighs 7 pounds, or 32% lighter than its predecessor.

"Even in the tough economy, families have been reluctant to give up their at-home entertainment," Dille said. "For $299, you’re getting a game machine, a Blu-ray player and a 120-gig hard drive you can use to download movies. It’s a tremendous value."

[Updated at 11:51 a.m.: This post has been updated to include comments from an interview with Sony.]

-- Alex Pham