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Tuesday, December 12, 2006

Sony Playstation 3 Shipments Worse than Thought

According to a recent article in the Wall Street Journal, Playstation 3 shipments were much lower than thought last month. A total of 197,000 unit were shipped in November rather than the expected 400,000 availabel for launch day. In addition, it seems near impossible that Sony will be able to get more than 400,000 to market before the end of the year, which is less than half the 1,000,000 units they were shooting for. Here is the article from the WSJ.

http://online.wsj.com/public/article/SB116588983025547206-E7NTlTuNUdpI5ZCgQGMwjOb3lrA_20071211.html

Wii! Wii! Wii! This Holiday Season Has Been a Wild Ride for Nintendo
By JOSEPH PEREIRA and NICK WINGFIELDDecember 12, 2006; Page B1

Last week, Wal-Mart Stores Inc. advertised it would be selling Nintendo Ltd.'s new videogame console, the Wii, on Dec. 6. Steve Fortune and a group of friends camped out the day before in a Wal-Mart parking lot in Quincy, Mass., to make sure they would each get one. For food, they arranged for pizza to be delivered to them in line, confounding the delivery boy when they gave "the shopping-cart area" of Wal-Mart as an address.

Some of the fortunate few who got Nintendo's Wii game console in New York City.
"We didn't want to lose our place in line because we knew that everyone in the world wants a Wii," explains Mr. Fortune, who works at the local Wal-Mart himself.

Not everyone has been as fortunate as Mr. Fortune and his four friends, who each managed to buy one. The Wii, which retails for $250, has emerged as this year's biggest must-have game console for Christmas. Long lines form hours before electronics retailers put them on sale -- usually no more than a few dozen at a time, if that, and often only every other week. In fact, the Wii -- pronounced we -- has proved more popular and harder to nab than Sony Corp.'s higher-tech, higher-price and highly touted PlayStation 3, which has superior graphics and a built-in, next-generation DVD player. The Sony machine comes in two models, priced at $500 and $600.
"It may be because the PS3 is so scarce, consumers have given up looking for one and are going after the Wii with a vengeance," theorizes John Taylor, a videogames analyst at Arcadia Investments Inc., in Portland, Ore. He says that reports of Sony's production problems and consumer confusion over some of the PS3's technology has driven shoppers to the simpler and less-expensive Nintendo machine.

Despite grumbling from some consumers, Nintendo insists it isn't deliberately causing Wii shortages in U.S. stores, saying that the company simply can't make the console fast enough to meet consumer demand. "Demand, as you can see from the reaction of consumers, has been greater than even we had hoped for," says George Harrison, senior vice president of marketing and communications at Nintendo's U.S. division.

He says Nintendo tries to be fair in divvying up Wii shipments but makes a special effort to supply retailers that advertise the product. "We try to do it equitably, but we don't want to embarrass the retailer by having them have no product," he says. The retailers that have made such advertising commitments include Wal-Mart, Target Corp., Best Buy Co., Toys "R" Us, GameStop Corp. and Circuit City Stores Inc.

In all, U.S. retailers estimate that 1.4 million to 1.5 million Wiis will be sold by Dec. 25, roughly twice as many as the PS3. According to NPD Group in Port Washington, N.Y., Nintendo sold 476,000 Wiis in the U.S. last month, versus 197,000 PS3s.

The Internet has been abuzz with consumers sharing Wii buying strategies; a forum devoted to the Wii on Amazon.com, which sold out its allocation of the machine last month in under a minute, has drawn thousands of messages. "Where (physically) do you camp?" was the subject of one discussion.

So-called Wii finders have sprung up, offering to send instant email alerts whenever an online retailer offers the console online. Matt Lewis, a Los Angeles software developer, launched an online finder for the PS3 last month, but says he was deluged with requests for a Wii finder. Charging $6.50 for the service, he says his Wii customers outnumber PS3 customers by a 10-to-1 ratio, although he won't disclose how many subscribers he has.

Some online retail sites, including Walmart.com and GameStop.com, have been requiring Wii purchasers to buy a "bundle" of games, which can bring the total cost to nearly $700. Nevertheless, the consoles and game bundles have been selling out within minutes. GameStop didn't respond to questions about their bundling practices, and a Wal-Mart spokeswoman would say only that the retailer is "working to take care of our customers and re-stock this popular item on our Web site as shipments are received throughout the holiday season."

Meanwhile, on eBay the Nintendo machines have been selling for a premium of more than $200. Some users of Craigslist.org have been posting offers to trade their unopened, more-expensive PS3s for the Wii, plus the price differential.

The frenzy has been welcomed by traditional retailers, even though many of their customers can't buy what they came to purchase. "All those lines in front of the stores brings a lot of energy and excitement to the gaming sector," says Jill Hamburger, vice president of movies and videogames for Best Buy, in Richfield, Minn.

Many analysts and industry executives credit Nintendo for pulling off a smoother launch than Sony, delivering a system with few technical glitches and a strong catalog of games. Sony's machine, which includes a new, high-definition DVD format called Blu-ray, ballooned its price tag, making it one of the costliest game consoles ever.

While the Wii offers its own innovations -- notably, a unique motion-sensitive remote controller that lets players, say, swing an on-screen tennis racket by swinging the device -- it relies on more proven technologies overall and is easier to manufacture than the delay-plagued PS3.
Game publisher THQ Inc. of Agoura Hills, Calif., predicted Sony would ship so few PS3s initially that it would be difficult to make money on games around its November launch. So THQ decided not to release any PS3 games until next year. The publisher was more bullish about the Wii, releasing four titles for its launch last month, says Brian Farrell, THQ's CEO.

Game-industry analysts say one factor in the shortage of the Nintendo Wii is the company's bottom-line focus. Sony and Microsoft Corp., maker of Xbox 360, are willing to lose money on their game consoles, making money on the games and accessories. But the more-conservative Nintendo is willing to lose only so much money. For instance, while Sony decided to ship all of its PS3s by air, Nintendo is sending slightly more than half of its Wiis from Asia by less-expensive boat transport. The ships take about 10 days to reach the U.S.

For Nintendo, the strength of the Wii this holiday season underscores how the company came back from potential has-been. During the last round of the console wars, Nintendo came in third behind Sony and Microsoft. While its much-larger rivals are focusing on providing the slickest, high-definition graphics, Nintendo chose to bank on novelties like its motion-sensitive controller -- a bet that seems to have worked.

It's too soon to know whether Nintendo will be able to translate its relatively strong launch into a more durable lead over Sony in the long term. "We feel very confident that the PlayStation fan is going to wait until they can get a PlayStation 3," says Dave Karraker, a spokesman for Sony's U.S. games division. "If they do pick up a Wii, it's as more of a novelty."

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