Sony Will Fall Short of 2006 PS3 Shipment Target, Top Official Says

It wasn’t yet clear whether Sony had been able to meet the 400,000 day one shipment target for N. America, SCEA CEO Kaz Hirai told Consumer Electronics Daily. That “was the goal that we were shooting for,” Hirai said, but he said he wasn’t sure whether the company hit it, or how close it came to the number, which he called “kind of a moving target because we were airing stuff in” from Asia “and, literally, some of the retail locations probably will get additional shipments today.” The company needs “several days and [to] wait for the dust to settle before we can really tally up the numbers and [say] with a certain degree of confidence… how many units were shipped [and] whether product actually sold out or not,” he said.

SCEA said in Sept. it expected to ship 400,000 units for the N. American launch and then an additional 1-1.2 million units by the end of Dec. (CED Sept 8 p2). It also said then that 100,000 units were expected for day one of the Japan launch Nov. 11 and an additional 1-1.2 million there by Dec. 31. The Sept. numbers represented only about 50% of the 4 million units -- 2 million at launch and 2 million by Dec. 31 -- that Sony said at May’s E3 it planned to ship worldwide this year. The Sept. reduction came as a result of its decision to delay the European PS3 release until March because of a Sony production delay in blue-laser diodes (CED Sept 7 p3).

But Hirai told us Fri. that SCEA is now “shooting for [a] range” of 1-1.2 million PS3s total to be shipped in N. America by the end of calendar 2006. “What we're saying is upwards of a million units shipped out of the factory for the North American market by the end of the calendar year -- it may be 950 [thousand], 980 [thousand], it could be 1.1 million -- I mean somewhere in that range is what we're looking for,” he said.

Unclear at our deadline was the reason for the latest reduced forecast. Hirai told the Consumer Technology Ventures Conference early this month in San Jose the company had made progress on the blue-laser diode shortage and he didn’t expect the issue to figure strongly in its ability to make large numbers of consoles available for PS3’s Japan and N. America launches this month (CED Nov 9 p5). The company went on to ship only about 88,400 PS3s of the 100,000 units planned for day one of the Japan launch (CED Nov 14 p12) and was silent last week on the number shipped there since. A U.S. shortfall didn’t come as a surprise. Although SCEA had been tight-lipped until Fri., recent retail channel checks conducted by 2 analysts indicated SCEA was shipping only 150,000-200,000 PS3s for day one of the launch (CED Nov 15 p1).

The company typically ships consoles by boat from Asia, but Hirai said it decided to rely on air shipments this time to speed deliveries. Shipping by boat takes 12-14 days, “so we put [PS3s] on planes and flew them out to the West Coast and turned it around as quickly as possible to get it to the retailers” for the launch. “This is probably something that we're probably going to continue for a while to make sure to we get as many units as possible with the shortest amount of lead time into the North American market,” he told us.

SCEA intends to make additional shipments daily, Hirai said, telling us: “As soon as the planes land and we get them turned around we'll get them to the retailers. So, literally, it may not be every single retailer getting something daily, but… it’s not” going to be a case in which “we ship the first initial batch and then we go quiet for 3 weeks; I mean this is something where we're constantly trying to replenish the market as soon as we receive the product. So, from that perspective -- especially if you're talking about the retail locations -- they'll be getting shipments on a regular basis and not go dry through a certain period of time.”

Asked the breakdown of 20 GB PS3s vs. the 60 GB SKU, Hirai said, “generally speaking, this is a number we had to basically pick because, you know, we obviously don’t know until we actually start the sales, which is just happening as we speak.” The company decided to go with “about 20% of the 20 gigabyte version, 80% of the 60 gigabyte version, really based on our conversations with the retailers that we had been having over the months since E3 and we kind of landed at that ratio as a starting point,” he said. “Now, obviously, depending on consumer demand, we'll ratchet one up, ratchet one down as the market dictates,” he added.

Hirai disputed published reports that only the top 5 U.S. retail chains -- Best Buy, Circuit City, GameStop, Target and Wal-Mart -- and Sony’s stores were shipped any PS3s to sell for day one of launch in the U.S. “I was not in charge of retailer allocation myself, so I wouldn’t be able to give you specific percentages but I do know that we were servicing a lot more than our top 5 retailers” for the launch, Hirai said. “We tried to go to all of the retailers that worked with us, that have supported the PlayStation products in the past and we certainly don’t limit it to the top 5,” he said. Therefore, he said, “I think the smaller retailers also have an allocation of PlayStation 3s” at launch -- although it was “obviously probably a smaller number than perhaps the top 5 retailers, but that’s a function of the size of the business that we have with them from the PlayStation business, the PS2 business, the PlayStation Portable business. But we have not limited the distribution or the allocations to top 5 retailers. We wouldn’t do that. We've never done things like that. We always make sure it’s a very equitable arrangement and allocation that we have with all of our retailing partners because they've all supported us in one way or another and we want to make sure that we do right by them.”

But Blockbuster’s Rhino game retail chain issued a statement at its website early in the week, saying “due to industry-wide extreme hardware allocations imposed by Sony, Rhino will not be receiving any PS3 systems on launch day.” It said Sony had informed it that a “limited quantity shipments of PS3 hardware should be available over the next couple of weeks and will be available on a first come/first serve basis.” Meanwhile, “select” Blockbuster Game Rush stores “will receive PS3 hardware beginning in early December,” a Blockbuster spokeswoman said Fri. She said Blockbuster stores wouldn’t have any PS3 consoles but “corporate” locations “will carry a selection of PS3 and Wii software for rental” over the launch weekend. Trans World Entertainment didn’t respond to a request for comment about console allocations for its stores.

Amazon.com’s website Fri. morning indicated it had no PS3 units in stock Fri. and was offering only preorders of the Japanese version through retail partner FashTek at about $2,000. Later in the day, the preorder offer was gone and Amazon posted a statement saying: “We are currently out of stock. Allocations of the PS3 have been very limited but we are working with Sony to secure future allocations.” It did, expect to have Wiis available for sale at the website at launch Thurs. but warned that “we anticipate that we will sell through our inventory very quickly as we've received 100 times more Wii email signups than consoles we'll have available for sale.” Amazon said “for every Nintendo Wii we'll have for sale, over 100 people have signed up to be notified” but it expects to “receive periodic shipments” from Nintendo “throughout the holidays.”

Although PS3 is a more expensive game system than rivals, some consumers may have lined up to grab one because it’s the cheapest Blu-ray player yet available. Asked whether SCEA is concerned that some consumers may use PS3 to play only Blu-ray movies and not games, Hirai said “I think that even if” the initial motivation for some consumers “looking at a PlayStation 3 was for the Blu-ray movies, I think it’s a compelling enough system for videogaming as well that at some point in time a lot of the people [will have] tried the videogame aspect of the PlayStation 3 and once they do I think you know they'll really enjoy the experience and be a gamer.” Also, he said, “when you look at the worldwide sales of PlayStation 2 six years into the business,” it’s clear “a lot of people are playing games already and it’s really hard for me to imagine anybody that buys it for anything else other than games will never try games.”

SCEA held midnight launch events at the N.Y. Sony Style store and San Francisco PlayStation stores Thurs. night, where thousands of consumers started lining up early in the week to be the first consumers to buy a system. Hirai said he was “not exactly sure how many” PS3s the N.Y. store had to sell when the system went on sale at midnight “but I believe we probably had between 300 to 400 people in line waiting for the event to open and it’s my understanding that all [those] people were able to go home with one.” SCEA had said before the event that the first 400 consumers in line there would be able to buy a system, but it wouldn’t say how many units were on hand. A rumor circulating among those in line that at least some of the additional few hundred people who lined up after the first 400 customers would be able to buy a PS3 as well. But Brian Roche, a 27-year-old gamer who traveled to the store from Allentown, Pa. told us he heard no guarantee from Sony after he started waiting on line 4 p.m. Thurs. At that time, he estimated, there were at least 600 consumers ahead of him on the line, which snaked around the block. As rain poured on the crowd, Roche said he was hoping to buy one of the 60GB units because of the larger HDD capacity and built-in Wi-Fi. Although the $599 price for that SKU initially “seemed a little steep,” he said it was actually a “relative bargain” compared with other Blu-ray players. Roche plans to use the PS3 mainly as a game system but he told us he also plans to use it to play Blu-ray movies, noting he already owned an HDTV. He already owned PlayStation and PS2 consoles but no Xbox or Xbox 360; if he buys a 2nd new console it will more likely be a Wii than a 360 because Nintendo’s system is “more of a party console” targeted at families than the other systems, Roche said.

It was too soon to gauge how many games and accessories most consumers were buying with their PS3s, Hirai told us. He was only aware of what the first 3 customers at the Sony Style store bought, telling us one bought 4 games and the others 2 games each, while 2 of the 3 bought an extra controller as well.

A total of 14 first- and 3rd-party games were made available Fri. and “that number is going to go up to 21 or 22 by the end of the calendar year,” Hirai said. It was “hard to tell at this point in time” what will be the best-selling games among them, he added, saying “I think we really need to, again, wait for some more data to come in from our retail partners before we can really ascertain without getting into a lot of speculation.” SCEA is also marketing a Sixaxis wireless controller at $49.99 and a memory card adaptor at $14.99. A $24.99 Blu-ray remote will ship in “mid-December,” Hirai said.

After a fight broke out at a Palmdale, Cal., Wal-Mart store among customers lined up for a PS3 ahead of launch (CED Nov 17 p5), there were published reports that a man waiting for a console was shot early Fri. morning outside a Conn. Wal-Mart store, after 2 armed men tried to rob customers. Wal-Mart declined to say whether it was sold out of its initial PS3 allocations late Fri. morning, but a spokeswoman said “we will continue to receive shipments weekly throughout the holiday season.” She said the company expected that “shoppers will line up early” to buy a Wii Sun., just as they did with PS3. She declined to say how many units of either system Wal-Mart had available at launch.

Circuit City also declined to provide specific allocation numbers for either system. But “initial PS3 inventories in some of our stores were in the single digits… in other stores, double digits,” a spokesman said Fri. “We have 6 stores where we sold 100 PS3s during special midnight openings and, of course, our website had its own allotment.” He said “in the last couple of days, I've spoken with a lot of our store managers around the country, and they all had lines of people outside, waiting to buy PS3; in many cases, customers camped out in tents and sleeping bags.” The same thing was witnessed at multiple Best Buy stores. The Circuit spokesman said “we expected to sell virtually all of our initial inventory very quickly (within minutes)” on PS3 as stores opened 8 a.m. Fri. “Supplies, as you know, are very tight,” he said, adding “we didn’t want long lines waiting for relatively few consoles; so, to prevent customer disappointment, we decided on Wednesday to post signs at our store entrances, telling customers how many PS3 consoles we would have to sell today at those locations.” Circuit was “told we will receive additional shipments during the holidays” and “we're advising customers to keep checking back with us, in stores and online,” he said. Supplies of Wii, however, “are much better than PS3” although, “as we did for PS3, we will post signs at our stores to let customers know how many consoles will be available at each location [and] we expect lines at many of our stores for Wii.” He said Wii supplies “will vary from location to location: Some of our stores will have more than 100 Wii consoles to sell on Sunday.”

GameStop didn’t respond to requests for comment by our deadline on its PS3 sales. But it had said earlier that only customers who preordered the system would get any at launch. It also informed customers at its website “we will have an extremely limited” number of 20 GB PS3 bundles available for preorder Fri. night (Nov. 17) at $994.28 plus tax and handling that it expects to ship “on or before December 1.” It told customers it wouldn’t start selling 60 GB units online until it fulfilled the store preorders that had been made.

In Canada, the initial PS3 stock that retail chain Future Shop received “did sell out” quickly Fri., a spokeswoman said, telling us “the number of systems per store varied per market size, so I don’t have an average for our stores as it ranged across Canada.” The PS3 launch, along with an Xbox 360 “in-stock guarantee” and exclusive one-day sale on 360 bundles “is bringing in lots of gamers,” she also said, adding: “For ongoing PS3 stock replenishments, we are currently working with our vendor on finalizing the next shipment in coming weeks with larger numbers of product. There was a shortage globally, so we are doing our best to acquire a schedule and as much stock as we can from now through to the holidays. We'll continue to provide updates to our customers via our website.” She said Future Shop expected to see “similar line-ups starting sometime tomorrow [Sat.] across Canada for Wii.” But she said “we have larger numbers of this product at launch, ranging from a minimum of 15 up to approximately 60 units per store.” Nevertheless, “as with PS3, we expect to sell out of our initial stock, so we will continue to work with our vendors on scheduling replenishments,” she said.