Price cuts are the last refuge of the beaten business. Has Sony admitted defeat at the hands of Nintendo in the first battle of the current console war?

Sony has slashed the price of the PlayStation 3 by 17 per cent in the United States – a move expected to be followed in the UK as soon as this week. It says it expects the move to double sales.

At first site, the tactic looks to have been prompted by the runaway success of Nintendo’s Wii – a machine that is outselling the PS3 by as much as five-to-one in Japan and will still cost about half the price of the cheaper PS3 in the US.

But analysts argue that the Wii and PS3 are too different for constructive comparison. The real rival to the PS3, they say, is Microsoft’s Xbox 360, which is a year older and now only about $20 cheaper than the $500 60-gigabyte PS3 (Sony has also launched an 80-gigabyte version).

The logic stands up. Both the PS3 and Xbox are aimed at hard-core gamers who spend long periods playing and who demand powerful machines to support the latest whiz-bang graphics. The Wii, by contrast, is a relative lightweight in processing terms. It offers “casual games”, designed to be dipped into periodically.

Meanwhile, both the Xbox and PS3 have been designed to occupy a central place in the new generation of digital living rooms. Each offers users the ability to download content such as films through the internet, and to store them on an internal hard drive. The Wii lacks a hard drive and so far Nintendo has only made old games titles available on its own virtual store (which can be stored on a separate memory card).

Moreover, analysts reckon that the Wii has about four years until its innovative “magic wand” controller looks jaded.

"The Wii's target market could be saturated more quickly than its competitors as the technology looks increasingly tired by comparison," says Piers Harding-Rolls, an analyst for Screen Digest.

A shorter lifespan means that third-party software developers are less likely to pump in resources to develop new compelling games – a problem Nintendo has faced in the past. In particular, the Wii’s “tie ratio” (games sold to systems sold) could fall far short of the PS3’s.

By contrast, the PS3 is expected to be around – and relevant – for as long as a decade, a much longer period to sell lucrative games. Analysts expect the PS3 to be the market leader in terms of units sold by the end of the decade. Sony may have lost the first battle, but is fighting a much longer war.

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