Is The PS3 Dead Already?

There’s a nice article on Kotaku today that details The Decline of the PS3 Grey Market. Long story short, there’s now a glut of Playstation 3s for sale on eBay going for just slightly over retail. Some who had hoped to profiteer from the PS3 are now returning them to the stores where they were bought. And PS3s seem to be staying on the shelf at retail a relatively long time. So what happened? Is the Playstation 3 dead?

There was a great outcry when the final price for the Playstation 3 was initially announced. For many, $600 is just too much to pay for a games console. Some argued, perhaps correctly, that $600 is a good value for what you get in the PS3. Still it appears that many consumers have decided they cannot afford that much value. Not only that, many decided that Nintendo’s Wii console at $250 was a much better deal and to date have bought over 3 million of them.

While I’m sure that the Xbox 360 probably benefited a bit from the scarcity of PS3’s and their high price, clearly the winner of the holidays console contest was the Wii. The geek in me wants to say that the Wii won because of innovative game play, fresh ideas, yadda, yadda, yadda. But the moms and dads buying Wiis don’t care about that geek stuff. To them, the Wii represented an exceptional value from a company that still has a lot of kid friendly cred. And the armies of so called casual gamers who cut their Nintendo teeth on the DS, probably didn’t hurt sales either. The choice was pretty simple, buy the $600 console that’s hard (or even dangerous) to get and comes with no packed in game, or buy the much less expensive $250 console that’s a lot easier to get without risking health or life, and comes with a nifty packed in game.

So what is Sony to do now? If it is true that Playstation 3 sales have plateaued this early, then clearly they will not be able to continue selling them for such a high price. And how long will 3rd parties wait before they abandon the platform for greener pastures? Will Sony wait until after the European launch in the spring before dropping the price? If things are really so bad, I don’t see how they can wait that long. There’s already news that Microsoft is preparing to move CPU production for the Xbox 360 to 65nm which ultimately means a less costly to manufacture console which would allow them to drop the price to compete better with the Wii. Lucky for Sony, the new Xbox 360 CPU has been delayed until mid 2007, but it is coming and could mean cheaper Xbox 360s in time for next Christmas. Can Sony really wait that long to drop the PS3 price?