Sony Cuts 8,000 Jobs — Time to Cut the PS3, Too?

playstation-3With the economy deep in the throes of a recession, the only question these days is who — or what — is next? Today it was Sony’s turn, which, citing “the sudden and rapid changes in the global economic environment,” said it’s laying off 8,000 employees in its electronics division and shuttering 10 percent of its manufacturing facilities. In the subsequent corporate restructuring to come, “unprofitable or non-core businesses” are in the firing line, Game Industry Biz reports — most notably, the company’s Playstation division is under review.

What this means is too soon to tell, but if you were to ask me, I’d say it’s time for Sony to walk away from the Playstation 3 as much as possible. Its $400 price point is uniquely ill-suited for these recessionary times, and while the company could lower that MSRP, it already loses $130-$260 on each sale (depending on who you believe.) Meanwhile, the Xbox 360 sold twice as many units as the PS3 in October, the most recent month for which data is available (though both consoles trail far behind the Wii.) With the PS3’s install base so small in comparison, and the appeal of its highly touted Blu-ray drive questionable at best, it’s hard to see Sony benefiting from Playstation 3.

I checked in with Wedbush Morgan game analyst Michael Pachter to get his take; he thinks that with the PS3, Sony has “too much at stake to walk away.” Instead, he continued in his email message, the company needs to “plug away until manufacturing efficiencies allow them to be cost competitive. I don’t see them taking many risks over the next few years, but think that they can get by with a relatively lean operation until they become profitable.”

Maybe so. I think Sony could invest more resources in its Playstation 2 line, which is still selling almost as well as the PS3, and can easily be revamped into an attractive, cheap alternative to the Wii. Even at an $130 MSRP, Sony sells the PS2 at a profit, and the line’s record-breaking install base of 140 million units means a large audience to which Sony can sell peripherals and upgrades.

Whatever they decide, Sony has some tough choices to make. Of course that’s true for most game companies nowadays, but since Sony’s stuck with the white elephant called the Playstation 3, that pain will be all the more keen.

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