Deeper analysis of Japanese launch indicates softer PS3 demand

Sony Corp.'s PlayStation 3 (PS3) shares declined once again, down 83.36 DKP (-1.95%), to 4,196.64 DKP (forecasts 41.96 million units sold worldwide) after some interesting revelations. The usual news that supply will be short this holiday season filled the news pipeline but this was not much of a surprise. Hardcore gamers getting refunds from Gamestop likely will not affect their intention to buy when supply does meet demand.

However, one indicator of bearish news came from analyzing information we had learned from the Japanese launch where scalpers dominated the initial sales. In an article by IGN, the game sales to PS3 hardware sales ratio was less than 1:1, meaning many customers bought a PS3 without any games. A disheartening story covered by Kotaku revealed that many customers were actually poor Chinese immigrants who couldn't even speak Japanese. They were hired by Japanese businessmen to stand in the cold and purchase PS3s for them to flip over the Internet.

The bad news for them, PS3 shareholders, and more importantly Sony (SNE) shareholders, is that the demand for PS3s in Japan is actually weaker than expected. Today's AP article revealed that auctions for PS3s (and some including games) were going as low as US$510 for the $599 60GB model. Everyone expected the retailers to sell out, whether to hard core gamers or to scalpers. What we didn't expect was indigestion for launch supply when resold. This may be an indicator of soft demand and bearish news for the PS3 stock and the Sony (SNE) stock (down 0.34 or 0.84%).