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Last Updated: Monday, 6 December, 2004, 09:41 GMT
Retailers cash in on PlayStation
By Jeremy Scott-Joynt
BBC News business reporter


Redesigned PlayStation 2
The size of the PlayStation 2 has been significantly reduced
Severe shortages of Sony's PlayStation 2 (PS2) mean that some UK retailers make extra money by refusing to sell the games console on its own.

Supply problems have led to two weeks of pent-up demand, says Sony, which it is trying to alleviate by flying in PS2s on chartered Russian cargo planes.

Many retailers are now telling gamers they cannot buy just the console.

Instead, they have no choice but to pay as much as 100 for bundles of extras, often at close to full market prices.

At one retailer, the cheapest bundle available for users under the age of 18 is 237.94, whereas the recommended retail price of the console on its own is 104.99.

A bundle with games only suitable for people over 18 is available from the same retailer for 177.97.

First things first

Sony's redesigned version of the PlayStation 2 is half the size of the original.

We are offering what people want to buy, and we're offering them a bit of a saving
Game Group spokesperson

But supplies have been tight, after a two-week closure of the Suez canal delayed a ship headed for the UK.

The response from some UK retailers has been swift.

"Stock (of individual consoles) will not be available till January 2005," says the website of online retailer Gameplay.

"Please order the bundle, as any stock which comes in before Christmas will be allocated to that item."

At 134.99, the bundle packages a memory card and a DVD remote controller. The total price of the items, if bought separately on the website, is 137.97, for a saving of just 2.2%.

Slim savings?

Similarly, Game Group, the UK's biggest High Street games retailer, sells a bundle including the season's hottest title, Grand Theft Auto: San Andreas, for 177.97.

GAME'S GTA BUNDLE
GTA: San Andreas
PS2: 104.99
GAMEware controller (own brand): 14.99
Sony memory card: 19.99
GTA: San Andreas game & official guide: 42.98
Total: 182.95
Bundle price: 177.97
(Prices correct if items bought from Game's website in a single transaction)

Using the prices on Game's website, the total cost of the bundle's contents if bought separately but at the same time would be 182.95 - a saving of 2.7% assuming the full price for the console itself.

Many retailers, however, are likely to sell the PS2 for 99.99, to match the rival Xbox console.

If Game follows suit, the bundle would become more expensive than the items included in it.

GTA: San Andreas is an adult title. The cheapest package for under-18s is 237.94, for items worth 242.93, assuming a full-price PS2.

A Game spokesman told the BBC News website that the company's research showed that most of its customers preferred to buy bundles.

"We have very limited stock," he said.

"We are offering what people want to buy, and we're offering them a bit of a saving."

BBC News was unable to reach Gameplay for comment.

'It's their store'

High Street electronics retailer Dixons is also offering only bundles, priced 149, on its website.

But a spokesman told BBC News that stores were free to sell the console on its own.

"There's nothing in law to stop us from bundling, if we want to," he said, " and sometimes we think there's better value in a bundle.

"But if a customer wants to buy just the console, we'll sell them just the console."

A Sony spokesman said the company was not dictating how retailers chose to sell the new PS2.

"We're not allowed to tell them what to do," he said. "At the end of the day, it's their store.

"If the savings are thin on a bundle, the customer can go to a different store."

Slim margins

Experts pointed out that bundling was nothing new in the games industry.

GAMEPLAY'S BUNDLE
PS2: 99.99
Sony DVD remote control: 17.99
Sony memory card: 19.99
Total: 137.97
Bundle price: 134.99
(Prices correct if items bought from Gameplay's website in a single transaction)

But they also noted that the imperative got stronger as prices for the consoles slid despite the retailer's overheads - in staff, property and other costs - stayed the same.

"The margins don't change in percentage terms as the price changes, but that means they decline in cash terms," said Rhys Williams, analyst at Seymour Pierce.

"The average console gives a margin of about 20-25%. Games are about 35%.

"And if the retailer makes its own accessories, the margin on them can be nearer to 70%."

Seymour Pierce recently predicted that Game Group might see slimmer profits this year partly because of the PS2 shortage.

"Retailers will have been counting on Christmas sales and the shortages will be hurting them," "Mr Williams said.





SEE ALSO:
Decade of dominance for PlayStation
03 Dec 04 |  Technology
Slimmer PlayStation triple sales
04 Nov 04 |  Technology
Sony shrinks PlayStation console
21 Sep 04 |  Technology
New PlayStation set for May debut
12 Jul 04 |  Technology
Game console sales start to slip
26 Nov 03 |  Technology
Next gen consoles spark concern
28 Aug 03 |  Technology


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