New PS3 to face test of its staying power

The great Christmas gift rush of 2006 begins in three days. Blink, and you'll probably miss it.

On Friday, Sony Corp.'s PlayStation 3 videogame machine goes on sale in the United States. If last weekend's sellout of the 90,000 units available in Japan is any guide, the entire American consignment of 400,000 PS3s will be gone by Sunday.

"I think that the initial shipment is going to sell out pretty quickly," said Kazuo Hirai, chief executive of Sony Computer Entertainment America.

The Japanese electronics titan might welcome such news after a year of humiliating blunders. The company had to fend off lawsuits after anticopying software on Sony music CDs made computers vulnerable to virus and worm attacks.

Millions of Sony's rechargeable batteries, found in the world's top brands of laptop computers, were recalled after defective batteries burst into flames. Production glitches hampered the PS3, which was supposed to have gone on sale months ago, and drastically limited the number of units Sony can ship before the holidays.

All these crises will be forgotten if the PS3 becomes as big a hit as its predecessor. The PlayStation 2 has sold 110 million units worldwide, making it by far the most popular game console ever. But much of its popularity came in later years, as the price of the PS2 fell from its original $300 to today's $129. The PS3 is priced at $500 for a basic model with a 20-gigabyte hard drive, or $600 for the premium edition, with 60 gigabytes of storage and built-in WiFi wireless networking.

Nobody expects Sony to have any trouble selling the first few million units to hard-core game buffs and early adopters who always purchase the latest gadgets.

"They could price this thing at $1,500 and still sell out," said Michael Goodman, a senior analyst at Yankee Group in Boston.

The real test is whether the PS3 can achieve the kind of enduring popularity that has kept PS2 sales strong for six years.

The secret of success, said Hirai, is building a machine with features so advanced that Sony can keep selling the same basic design for up to 10 years before it's forced to roll out a PlayStation 4. With each passing year, the cost of the hardware declines, enabling Sony to cut its price and sell more of the machines. The new owners buy more games, of course, and Sony gets a royalty for each one.

This long-term strategy explains many of Sony's design decisions for the PS3. The machine relies on an exceptionally powerful computer chip called the Cell. Codeveloped with IBM Corp. and Japan's Toshiba Corp. at an estimated cost of $2 billion, the Cell features nine separate processing cores on a single chip, making it far more powerful than the processors found in most desktop computers.

Sony also opted to abandon the DVD drive in the PlayStation 2 and embrace Blu-Ray, a high-capacity DVD technology codeveloped by Sony. Blu-Ray disks can hold up to 50 gigabytes of data, and are one of two formats being used by Hollywood studios to produce high-definition DVD movies for the home. Including Blu-Ray in the PS3 could help it become the standard high-definition DVD format, and beat out the rival HD-DVD standard. And the huge capacity of Blu-Ray disks will enable game designers to create virtual worlds far more detailed than any possible on the PS2.

"I think all those features and functionalities add up to a great value," said Hirai, who called the PS3 "a stable and relevant platform that does not go by the wayside in five year's time."

He admitted that despite its hefty price, Sony isn't making any money on the PS3 hardware.

"It's no secret that the profitability on the hardware is going to be a bit challenged," he said, but "at some point in time we expect to be profitable in the hardware."

Still, the inclusion of Blu-Ray has already cost Sony dearly. A shortage of laser diodes for Blu- Ray drives forced the company to slash the number of machines available in its vital Japanese and US markets, and to put off the PS3's European release until next year. These woes, as well as the massive cost of the PS3 launch, led Sony to predict that the company will lose $1.6 billion in its games business in the fiscal year that ends in March.

Once the first flush of gadget lust has faded, cooler consumers may wonder whether they should not hold off for a while. The PS3 will launch with a relatively paltry catalog of about 20 games, compared to more than 60 for Nintendo Corp.'s upcoming console, the Wii. Since its debut last year, Microsoft Co.'s Xbox 360 console has built up a library of about 160 games. And Sony admitted yesterday that some of the 8,000 games created for the original PlayStation and the PS2 won't work on the PS3, though it said that future software upgrades may fix many of the incompatibilities.

Jeff Brown, spokesman for Electronic Arts Inc., the world's leading maker of game software, said that first-generation PS3 games will generally be underwhelming, because programmers need more time to master the machine's capabilities.

Brown said truly impressive games for the new console probably won't appear until next year.

Such talk doesn't trouble Hirai, who said the PS3's success has little to do with how well it sells this Christmas season.

"We look at this business as being more of a marathon," he said.

Hiawatha Bray can be reached at bray@globe.com.