PS3: Good, but not good enough

Sony’s decision to cut almost 10% of staff across its Sony Computer Entertainment Europe (SCEE) division, as revealed on marketingweek.co.uk last week, has led some to suggest its PlayStation 3 console is not the breakthrough product the electronics manufacturer had hoped for.

Up to 160 staff – or 8.9% of the workforce – will be made redundant, although SCEE insists that this is because of swingeing changes in the way games are packaged and sold.

SCEE, which is based in London, is responsible for the distribution, marketing and sales of the PlayStation range of hardware and software in 104 territories across Europe, the Middle East, Africa and Oceania. It is not known which areas of the business will be affected by the job cuts, although a company spokesman confirms they will be "across the board".

The news, delivered to staff in an e-mail last week, comes just days after Sony chief executive Sir Howard Stringer praised European sales of the PlayStation 3 console for bolstering the whole company.

Global shortcomings
It is the fastest-selling games console in the region, with 800,000 of the 1 million units shipped sold to date. Sony sold 600,000 units in the first two days alone, in spite of it being the last and most expensive of the new games machines to launch. The PS3 has endured sluggish sales in Japan and the crucial US market, with analysts predicting that price cuts could be just around the corner.

Sony president Ryoji Chubachi has admitted: "We are re-examining our [PS3] budget in terms of pricing and volume. Sales assumptions change and the market is competitive. We are in the midst of revisiting our strategy for the PS3."

Yet Sony is adamant that it is merely facing up to the future and that redundancies, part of the annual budgeting process, must be made regardless of the console’s European success.

Re-appraising strategy
A SCEE spokesman says the consultation will last at least a month to "try to mitigate losses". The decision is attributed to a sea change in the games industry, involving a shift to networking and online distribution away from packaged software sales.

The spokesman adds that: "It is very much a mediumto long-term view. The games industry is in a period of transition and the fundamentals of our business are changing." Gamers can download full-size games from the PlayStation store and SCEE sees this as an important method of building distribution, particularly in Europe where broadband use is high.

Rivals’ in-roads
But such strategic arguments fail to tell the whole story, according to some, who suggest that Sony – the market leader for a decade – has been rocked by the earlier launch of Microsoft’s XBox 360 and the unexpected success of the Nintendo Wii console.

Nintendo has reversed 20 years of declining sales for each successive console (excluding handhelds) with the Wii, while Microsoft had sold 2 million units by PS3 launch.

Games analyst Nick Gibson says/ "It is not surprising that Sony is feeling the pressure. But the PlayStation has always been a slow starter that builds momentum over the years – in both hardware and software. I don’t think there is any panic or great statement yet about the position that Sony is in."

Sony – itself predicting a ¥200bn ($1.7bn) loss for the year ending March 31 in its games business and said to be considering further job cuts in Japan and America – is clearly feeling the heat. But it is adamant that in the battle for gamers’ time, money and affection, such changes will stand it in good stead for the future.

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