Sony Warns Of PS2 Shortages At Launch

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FOSTER CITY, CALIF. -- Citing shortages of critical components, executives with Sony Computer Entertainment America told dealers to expect only half of the PlayStation2 game consoles they had anticipated for the platform's Oct. 26 launch.

The company disclosed it would only have 500,000 units, instead of the 1 million planned for North America on or around the launch date.

Further, it reported supplies would continue to be lean through the holiday shopping season, although it will maintain weekly shipments to North America of 100,000 units from launch through the holidays. "I don't think everyone who wants one will get one" by Christmas, said unit senior VP Jack Tretton.

Sony, which assessed the overall impact as the equivalent of a month's production delay, said shortages of a number of unnamed electronic components are now being addressed. Player shipments will continue to fall short of expectations until January or February.

Despite the setback, the Sony executives said the launch of PlayStation2 would be the largest ever for any consumer electronics product. Shipments of 1.3 million units are still expected for North America by the end of the year.

Over 20,000 retail outlets will carry the PS2 platform across the country, and original allocations were determined by each retailer's size and sales performance, so the shortage "on day one will be pretty equally felt," Tretton said. "The actual reduction from 1 million to 500,000 will be dispersed equally, so each customer would receive about half of what they initially anticipated."

Individual accounts would determine how to distribute their inventory allocations to the different regions of the country they serve, Sony said. "You should be able to find [PS2 consoles] in virtually every market of the country," added Tretton, "and while it might be in short supply, it will be out there in broad-based distribution from day one."

Company executives refused to disclose how much of that initial inventory will be directed to its own Sony showrooms, where the company sells products to consumers, or to the new Sony Style e-commerce website, where Sony fulfills direct-mail orders for consumers online.

Some 26 PS2 game titles will be available at launch, and up to 50 are expected by the end of the year, reflecting an increase in software availability over originally announced plans, the company said.

The PlayStation2 console integrates the functions of a very high-quality game machine with a DVD-video player, CD player and TV-based Internet appliance. It also will play titles produced for the current PlayStation 1 device.

Industry analysts said they don't expect the delay to hurt the progress of the system, which Sony is heralding as the most successful CE product launch ever.

However, Jerry Kaufhold, principal analyst for converging markets and technologies at Cahners' In-Stat Group, said the delay should help boost sales of Sega's competing Dreamcast platform and the original PlayStation console.

"This is good news for Sega, which has timed the launch of its SegaNet online gaming service to compete with PlayStation2," Kaufhold said. "Up to now, no one's been able to make a buck on online games, due to the costs involved with providing an online service. But SegaNet is offering a number of multiplayer games that have done well on the PC platform for Dreamcast so that SegaNet users on Dreamcast can play users who have the same games on their PCs."

Sega has also lowered the price of Dreamcast players to $149 and has stepped up advertising to make Christmas shoppers, who might be looking for scarce PS2 consoles, aware that compelling alternatives are available.

"It will be interesting to see how some of the bigger toy chains react," Kaufhold said. "Typically, they will only carry two or three platforms at a time, but if they can't get enough PlayStation2 units they may have to carry more than that to get through Christmas."

Kaufhold added that Sony should also enjoy healthy sales of PlayStation 1 platforms as a result of the PS2 shortage as holiday shoppers realize that games from the legacy platform will work on the PlayStation2 platform. Buyers in pinch will pick up the PS1 player and a number of games that can still be used when the consumer eventually trades up to PS2 device.

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