Is 2008 the year of the PlayStation 3?

While the beleaguered PlayStation 3 still faces an uphill battle, Sony believes the console is spring-loaded for a turnaround.

Why? The success of Blu-ray, an upcoming slate of much-needed exclusive games and new numbers from the NPD Group showing that the console bested Microsoft's Xbox 360 for the first time in January.

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Since the system's November 2006 debut, the PlayStation 3 has consistently been humbled by the Nintendo Wii and its chief rival, the Xbox 360. But numbers released Thursday show that the PS3 outsold the Xbox 360 in last month, moving 269,000 units in the U.S. and coming in second only to the Nintendo Wii.

Jack Tretton, Sony Computer Entertainment America's CEO, was upbeat in a email sent to reporters after the release of the NPD data: “Coming off a great holiday sales season we see strong momentum behind PS3 in 2008, and feel confident about the year ahead."

So will 2008 be the breakout year for the PS3? Probably not. The changing tastes of the market are not on Sony’s side, and a twitchy economy doesn’t help the company's chances, either. Plus, one month of besting the Xbox 360  — in a month where none of the systems sold more than 300,000 units — doesn't necessarily signal a turnaround.

Colin Sebastian, an analyst with Lazard Capital Markets, sees January as an aberration due to short Xbox 360 supplies following their successful holiday season.

"There may be a substitution effect there," he says. "It says as much about Xbox 360 supply issues as it does about PS3 sales."

Blu-ray boosted PS3
But the PlayStation 3 isn’t down for the count. The immediate advantage Sony has going into 2008 is something that initially looked like a liability: its Blu-ray DVD player. It was pretty cool to have the cutting-edge player inside every game system, but it also hoisted the price of the PS3 to $600 — at least initially.

"The added cost of Blu-ray to the PS3 hurt it. Consumers didn't see it as a compelling value,” says Sebastian.

But Sony has dropped the price of the PS3 since launch.  The base model, which sells for $400, makes it one of the cheapest Blu-ray players on the market.

And even though the PS3’s sales looked anemic in comparison with its competitors — even in comparison with its older sibling, the PlayStation 2 — 3.2 million units sold surely helped Blu-ray in its apparent triumph over HD-DVD.

This week, online DVD-rental site Netflix threw its weight behind the format. And last month, Warner Bros., the largest movie studio in Hollywood, announced it was going exclusively with Blu-ray.

...But high-def hasn't caught on like DVD did
Having HD-DVD on the ropes is a good thing, but high-definition movies have not caught on like DVD did back in 2000. And after several years of the iPod's stratospheric ascendance, consumers are now plenty comfortable downloading their entertainment. For a new generation, physical media is just so yesterday.

Indeed, Apple recently announced the launch of HD movie rentals via its Apple TV box, mirroring something Xbox 360 owners have been able to do for a year. And let's face it — for a large number of consumers, DVD is simply good enough.

This dovetails with another problem Sony had in 2007 — a situation that is unlikely to change this year: The PlayStation 2 was also apparently good enough for many consumers. Last year was a good one for the eight-year-old system, which outsold the PS3 by almost 1.5 million — thanks to a $129 price point and a host of great games, such as "God of War 2."

There are also thousands of PS2 games on shelves, many in the $20 range, making them not only impulse buys, but also more comfortable purchases in an economy that has many consumers minding their bank accounts.

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