Sony Nixes Low-End PS3 Model

Sony (NYSE: SNE) confirmed Wednesday it has discontinued production of the 20 GB PlayStation 3 in North America. The announcement came after several weeks of speculation stoked by the gaming blog Joystiq, which asserted that electronics retailer Best Buy (NYSE: BBY) had classified the 20 GB model as "discontinued."

"Due to the overwhelming demand for the 60 GB model from both retailers and consumers, we have ceased offering the 20 GB model here in North America," Dave Karraker, senior communication director, said.

More Popular Model

The 20 GB PlayStation 3 (PS3), priced at US$499, was the cheaper of the two models Sony released in November. At the time the game manufacturer believed that the less expensive model would attract gamers who could not afford the pricier model, Mike Goodman, principal analyst at Yankee Group, told TechNewsWorld.

Unlike the 20 GB model, the 60 GB PS3, which sells for $100 more, offered gamers considerably more options, including built-in WiFi connectivity, flash memory card readers and chrome trim. Sony had been shipping a mix of the consoles to retailers, with the 60 GB model accounting for 90 percent and the 20 GB model at 10 percent of orders, according to Karraker.

"In addition to the larger internal hard drive, the 60 GB PlayStation 3 features added storage media slots and built-in WiFi not found in the 20 GB system. Based on retailer and consumer feedback, we have decided to focus our current efforts on the more popular 60 GB model," Karraker said.

What's 100 Bucks?

"[Sony] always wanted to push consumers toward the higher-end model," Goodman explained. "The only reason you'd be the 20 GB version is the price point. For your $100 you get a whole heck of a lot more for your money. And for the person who's going to spend that much, there's not enough of a difference to make it worth while to get the lower end unit."

The console maker had not originally planned to discontinue the 20 GB model in the long run, Karraker told TechNewsWorld. "This decision was based purely on retailer and consumer demand," he stated.

While some industry watchers have speculated that the 20 GB model's demise will lead to an earlier than planned price reduction for the 60 GB model, Karraker said Sony also has "no plans to drop the price of the 60 GB PS3 any time in the near future.

At the time of the PS3 line's launch, "we offered two separate models of PlayStation 3 to meet the diverse needs and interests of our PlayStation fan base. Initial retail demand in North America was upwards of ninety percent in favor of the 60 GB SKU (stock-keeping unit), so we manufactured and shipped in accordingly," Karakker said.

"If there's no one buying them, then manufacturers won't build them," Goodman noted. "It's good money after bad. And if they are just going to sit on shelves then you might as well take your manufacturing capacity and build more of the 60-gig units."

PS3 Woes

From the beginning, it seems the PS3 has been plagued with problems. From the one-year delay in its launch, which allowed Microsoft (Nasdaq: MSFT) to sell its Xbox 360 virtually unchallenged in the next-generation console market, to the unexpectedly strong sales of the Nintendo's Wii and less than stellar sales of the PS3, Sony has come up short with the PS3 compared to its previous blockbuster, the PlayStation 2.

The gaming industry is somewhat down on the PS3 right now, Bill O'Rourke, principal analyst at InStat, told TechNewsWorld. That view, he said, somewhat justified because the next-generation console has not performed as promised.

"It is sort of getting it's rear-end kicked by the Wii," O'Rourke commented. "And there is some justification for being pessimistic. But I'm not sure that discontinuing the 20 GB PS3 is anything to get pessimistic about. It's just a matter of giving the consumers what they want."

It is the tendency in all markets, he noted, that anything with a hard drive, whether it is a PC, MP3 player, or gaming console, will move to greater capacity.

Microsoft, for example, recently unveiled the Xbox 360 Elite, featuring a 120 GB hard drive that will hit stores April 29 and sell for $480. Xbox Premium owners with a paltry 20 GB hard disk drive will be able to purchase a detachable accessory separately for $180.

There is a move among the console makers, O'Rourke noted, to provide more downloadable content in the form of games, programs and even TV shows. This requires a lot of storage capacity, and consumers are drawn more to the larger hard drives as a result.

"I didn't exactly expect this, but it's not really a surprise," O'Rourke continued. "People are gearing up and buying the 60 GB hard drive. They want to be future-proof. They may not be sure exactly what they will be using the PS3 for in a few years, but they want to be ready for whatever is out there."