A few years back when Sony's PlayStation 2 was ruling the videogame universe, the company was seen as doing little wrong. It's long term dominance wasn't questioned.
Amazing how fast things can change.
Sony's high-priced PlayStation 3 has struggled to catch the PS2 audience and now the company is eliminating jobs because of it.
Sony announced Thursday that it's cutting positions to remain competitive, but didn't release numbers. Published reports said Sony was cutting three percent of its 1,600-person videogame workforce in its Foster City, CA, branch.
The job cuts in the U.S. follow similar cuts in Europe in April.
The PS3 went on sale in November, at the same time as Nintendo's Wii. The Wii, at $250, was more than 50 percent cheaper than the current version of PS3, which sells for $599.
Sony, which doesn't expect to post game business profits until 2009, has shipped 5.5 million PS3 machines in the fiscal year through March 31, fewer than the 6 million the company targeted.
Nintendo shipped 5.84 million Wiis worldwide in the same time frame.
In April, Nintendo sold 360,000 Wiis. Microsoft sold 174,000 Xbox 360s and Sony had just 82,000 PS3s sold in the United states.
In Japan, Wii outsold the PS3 by 5-to-1 in the month of May, when Sony announced a $563 million loss in the fourth quarter of its fiscal year, blaming PS3 development costs and lower-than-expected sales.
I have said this many times. The PS3 is the best game unit, but it's priced too high. With Sony recently dropping its Blu-Ray player to $499, down $100 from initial speculation, expect the PS3 to drop as well.
Sony is taking a hit for each PS3 sold. Published reports have that loss at anywhere from $200 to $350 per unit. But when Sony announced the cheaper Blu-Ray DVD player, it said costs to manufacture had dropped. That should mean costs for PS3 development should drop, too, given the PS3 has a built-in Blu-Ray player.
It's not too late, but PS3 needs some quality games that give gamers something they don't get from Wii or 360 and Sony's online experience needs to ramp up to match Microsoft's.
This needs to happen fast. Videogamers are notorious early adopters and once you've spent $1,000 on a system and games, it's hard to try to do it for another system.
The race is on.