Sony Corp. plans to outfit the version of its PlayStation 2 home video-game console to be released in the U.S. this fall with a hard-disk drive and modem, said a company official who asked not to be named.
Sony is discussing the size and details of the disk drive and modem--features not included in the PlayStation 2 console sold in Japan--with computer companies and hardware makers, the official said. The additions will be announced at the Electronic Entertainment Expo. games show inbefore releasing additional components for the PlayStation 2. By including the additional hardware in the U.S. version of the console, Sony is responding to competition from Microsoft Corp., the software maker which will include an 8 gigabyte hard-disk drive in its X-Box game console due to go on sale in the second half of 2001."Sony is one step ahead of Microsoft," said Masahiro Ono, an analyst at Warburg Dillon Read (Japan) Ltd. who rates Sony a 'strong buy.' "Producing PlayStation 2 with a hard drive and modem will allow the console to take root in the U.S."
For Sony, which has a 60 percent share of the world video game market worth about $13 billion in the U.S. and Japan, revenue from PlayStation 2 console sales is less important than creating a network of users to whom the company can sell games, music, and other online services for initial storage on the hard-disk drive.
"The PlayStation 2 has tremendous capabilities which are not all being used," said Alex Muromcew, a portfolio manager at Loomis Sayles & Co., which manages $70 billion. Adding a modem and hard drive "upgrades it to the next level, though we'll need to see what it does to the price of the machine."
A modem, which can retail in Tokyo for as little as 1,000 yen ($9), will also allow Sony to earn subscription revenue from customers who access the Internet through its Sony Communication Network Corp. Internet service provider.
Sony's move comes after Microsoft's unveiling of the X-Box on March 10, a console the company said will contain graphics chips three times faster than those in the PlayStation 2, though it won't have built-in Internet-access capability.
It's also a challenge to Sega Enterprises Ltd., whose Dreamcast console does include a modem though no hard drive. Sega said on April 3 it will give away the Dreamcast to users who signed up to its Internet service for two years at a cost of $22 a month.
Still, including a hard-disk drive inside the console will limit the size of the storage device and the amount of data able to be stored. It may also make upgrades difficult, said Warburg's Ono.
The PlayStation 2 went on sale in Japan on March 4. Sony sold 1.4 milliosold 10 million units by the end of March 2001 worldwide.
Sony's shares closed down 170 yen at 13,280.
The stock led a decline by Internet and computer-related shares after U.S. retail sales rose in March, triggering concern the Federal Reserve may raise interest rates again to curb demand and spending by companies on computers and other services.