Lower Wii price and PSN troubles…should Sony worry?

Yesterday Nintendo announced a lower price for the Nintendo Wii, USD 149.99, and while the package is different (includes Mario Kart and wheel attachment) the price drop could boost sales - respondents to ABI Research surveys have time and again placed price high among the critical elements used when evaluating CE purchases. But the Wii also finds itself in a precarious situation. As the most common platform (installed base) amongst current generation consoles there is less room for growth, but this limitation is not tied to penetration alone. Considering the lack of HD and less robust hardware the console is also lacking the necessary tools to adequately compete with the PS3 and 360 amongst many “hardcore” gamers – gamers who are more likely to purchase updated units and games/peripherals. While the next generation Wii is expected to address these issues (expected after March 2012) Nintendo has to weather the weaker market for what appears to be at least a full year more.

Recently, however, there have been a number of large scale data breaches or interruptions in cloud based services with Sony’s PlayStation Network as one such example – the service has been offline since April 20, 2011, following the “external intrusion” (offline as of May 5). With the potential for over 70+ million PSN user data (and possibly account data from Sony Online Entertainment MMO services) stolen the repercussions could extend further than service downtime alone, particularly if credit card data was lost as well.

Will consumers feel safe storing their personal content online? We can question Sony’s online security but in the recent past other companies like Epsilon have fallen victim to breaches of security and data. Some might wonder what actions Sony will take to better safeguard private data – in other words if Sony is able to “beef up” security then why wasn’t more done initially to protect this data? Sony may have also compounded the problem by taking an inordinate amount of time informing their customers that the potential exists their personal data might have been stolen; for reference Sony shut down PSN and Qriocity services on April 20th, news broke on the 25th that personal information was potentially stolen, and some PSN users did not receive emails until the 27th.
Sony will likely face some backlash, although in the long run the effects will likely prove minimal as many consumers will return once services are reinstated; although some might choose to refrain from giving Sony their credit card information again, which could hurt the platform’s appeal as a central hub for digital content. Nintendo’s lower price could pull in additional customers, but at this juncture in the lifecycle of the current generation of game consoles these sales probably won’t have a significant impact on PS3 demand. In the end, even with a relatively significant number of PSN subscribers threatening to defect for Microsoft’s Xbox Live, with most of the PSN services free to consumers simply turning services back on could very well be the only apology Sony needs to appease these customers – free is almost always compelling.