Sony defies Activision ultimatum over PS3 price cut

Sony says it has no plans to cut the cost of the PS3, despite threats by one major games producer to boycott the console until it becomes cheaper.

Last month, Bobby Kotick of Activision (the firm behind Call of Duty and Guitar Hero) said the high price of the console meant those who do buy it tend to buy fewer games than with other machines. He said it was much more profitable to make games for the Xbox 360 and Wii, and that when considering development plans for 2010 and 2011, “If we are being realistic, we might have to stop supporting Sony.”

That’s a pretty powerful threat as Activision claims to have paid Sony $500 million in royalties for 2008. That’s a serious chunk of Sony’s income considering the firm’s games division is reported to have lost $597 million last year.

Howard Stringer (pictured), the chief executive of Sony, told Reuters the threats would not work. “He likes to make a lot of noise,” Stringer said, when asked about the comments. “He’s putting pressure on me and I’m putting pressure on him. That’s the nature of business”

While most analysts agree that the PS3 is too expensive compared with rival consoles and needs a price cut to boost sales, the biggest problem may well be Sony stockholders. None of the three major manufacturers are making any serious profits on the consoles themselves: Sony may be making a small loss, and it would have to take a serious loss per unit to come anywhere close to matching the price of the rival consoles.

However, while people who follow the games industry can see the logic that selling cheap consoles may be worth the loss because it increases the audience for games (and thus the royalties), stockholders looking at an already loss-making division might not see it that way.