Saturday October 14, 12:02 am Eastern Time
Playstation 2 Shortage Is More Than A Blip
By Amy Doan
Sony is giving its rival Sega a lovely holiday gift, while offering lumps of coal to its investors and game developers.
The Playstation 2 game machine looks more likely than ever to be the most coveted gift of the 2000 holiday season, since Sony has announced that it will ship half as many units this month as it had expected.
But the underproduction of these new machines, due to Sony's component shortage, has resulted in lost opportunity for Sony and its software developers.
Sony has done a wonderful job creating a buzz around the product. It could have sold millions of units to holiday shoppers outside the hard-core gaming category since the console plays DVD movies as well as games.
Many Japanese consumers who snapped it up were lured by the DVD function.
But the console's holiday impulse market in the U.S. has been eliminated because of a production problem with one of the product's parts--most likely a graphics component that Sony itself makes.
Sony had planned to ship 1 million machines on Oct. 26. Now it says that it will ship half a million units on that date, with 100,000 units per week shipped until the end of the year. So the only customers likely to get their hands on the new Playstations are serious gamers who have pre-ordered the machines or people willing to hand eBay auctioneers several hundred dollars over the $300 price tag.
``Nobody is more disappointed than we are, but this is not a gloom-and-doom scenario,'' says Molly Smith, a communications director with Sony Computer Entertainment in Foster City, Calif.
Sony will still meet its target of 3 million machines by March. But that quantity has disappointed the market all along. And while nobody disputes that consumers are excited about Playstation 2, Nintendo's GameCube and Microsoft's Xbox are lurking around the corner, expected to ship in 2001.
Sony should have had this holiday season to itself, but now it's essentially gift-wrapping customers and handing them to rival Sega. Sony has 50% of the $10 billion global videogame market, but Sega has been gaining on it.
``Six months ago, we were in a situation where too many developers were just drinking Sony's Kool-Aid,'' says Charles Bellfield, a Sega of America vice president in San Francisco.
Now, he says, third-party developers are deciding to port their games to Dreamcast more quickly than planned, and retailers are wooing the company.
Sales of Sega's Dreamcast machine have been much stronger than expected, in part because Sega slashed its price to $150 for gamers who subscribe to its new gaming network.
The short-term victims of Sony's misstep are game developers and publishers. Investors, impatient with the industry's long ``transitional period,'' have pounded stocks like Electronic Arts and Activision. Playstation 2 was expected to pull software sales out of a slump, but now Sony is asking investors to wait even longer.
``Sure, we wish they were going to have more product out there,'' says Paul Eibler, president of Take Two Interactive in New York City. Take Two will have two titles ready for the Playstation 2 launch. But Eibler says investors have hit game software stocks harder than they should have, given that Playstation will have a four- or five-year lifespan.
And Playstation 2 will see plenty of holiday seasons, says Bobby Kotick, president of Activision in Santa Monica, Calif. He says he expects the product to sell a total of 100 million units during its lifetime, compared with 75 million for the original Playstation.
Even so, Sony would have preferred to enter the U.S. with a splash, not a trickle.
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