U.S. version of PlayStation2 to have modem, hard drive By Bloomberg News April 14, 2000, 5:05 a.m. PT TOKYO--Sony plans to outfit the U.S. version of its PlayStation2 home video-game console, to be released this fall, with a hard disk drive and modem, said a company executive who asked not to be named. Sony is discussing the size and details of the disk drive and modem--features not included in the PlayStation2 console sold in Japan--with computer companies and hardware makers, the executive said. The additions will be announced at the Electronic Entertainment Expo games show in Los Angeles, taking place May 11, 12 and 13. Sony had planned to await the widespread availability of high-speed Internet connections before releasing additional components for the PlayStation2. By including the additional hardware in the U.S. version of the console, Sony is responding to competition from software giant Microsoft, which will include an 8GB 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) who rates Sony a "strong buy." "Producing PlayStation2 with a hard drive and modem will allow the console to take root in the United States." For Sony, which has a 60 percent share of the world video game market worth about $13 billion in the United States and Japan, revenue from PlayStation2 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 PlayStation2 has tremendous capabilities, which are not all being used," said Alex Muromcew, a portfolio manager at Loomis Sayles, 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 Internet service provider. Rivals Watch video Sony's move comes after Microsoft's unveiling of the X-Box on March 10, a game console the company said will contain graphics chips three times faster than those in the PlayStation2, though it won't have built-in Internet access capability. It's also a challenge to Sega Enterprises, 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 PlayStation2 went on sale in Japan on March 4. Sony sold 1.4 million of the 39,800 yen ($375) units by the end of March and aims to have sold 10 million units worldwide by the end of March 2001. Sony's shares closed down 170 yen ($1.61) at 13,280 ($125.54). 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. Copyright 2000, Bloomberg L.P. All rights reserved.
