Sony has cut the price on its box by 15 percent, while Philips has cut nearly 25 percent off its device. The companies produce the only two products based on software and an Internet access service from WebTV Networks.
Although both consumer electronics companies claim the WebTV devices have been selling well, analysts believe the price cuts are due to sluggish sales. Neither WebTV nor its licensees will release sales figures.
Introduced last fall, WebTV was designed to bring Internet access to a much wider audience than has been possible with costly PCs. The devices, coupled with ordinary television sets, give users access to email, the Web, and discussion groups. That vision of bringing the Internet to the masses convinced Microsoft(MSFT) to purchase WebTV Networks for $425 million two weeks ago.
Apparently, Sony and Phillips found that the masses wanted Internet access to be cheaper still.
A Sony spokeswoman said today the company has slashed the price for its WebTV product to $299 from $349. Reacting to Sony's price cuts, Philips yesterday reduced its product to $249 from $329. The new figures are suggested retail prices so the actual cost of the devices in stores could be even lower.
One analyst said the price cuts came in response to mediocre sales.
"If they had been selling really well, they would have been happy with the extra margin," said Kevin Hause, an analyst with the personal systems group at International Data Corporation. "The price cuts are definitely are an attempt to spur sales."
Gary Arlen, president of the Arlen Communications consultancy in Bethesda, Maryland, said he believes Sony and Philips will concentrate on selling their WebTV devices more in specific demographic groups such as seniors, where the devices have sold better. Arlen estimates that 90,000 WebTVs have been sold, most of them around Christmas time.
"I tend not to think of this price reduction as a big desperation fire sale," said Arlen. "If they were doing that, the prices would be a lot lower."
Indeed, Sony and Philips said that sales of WebTV devices have been meeting expectations.
"It has been received very enthusiastically by the consumer market place," said Michele Caselnova, a spokeswoman for Sony. "The reason for the price cut is that we are able to produce larger quantities. It's possible it will sell at price lower than $299."
"Sales have been very healthy. I wouldn't characterize sales as slow," said Jill Greenman, a spokeswoman for Philips Electronics. "They've been healthy. We think the price cuts will have a very positive impact on sell-through."
Bob Gunst, chief executive of retail outlet The Good Guys, said he didn't believe price cuts were attributable to slow sales, though he would not reveal how many WebTV terminals his stores have sold.
"It's typical to see prices get cut after an introduction," said Gunst. "Most people will tell you that they were disappointed with the rollout, but they hit my numbers about exactly on."
WebTV will continue to offer a dial-up Internet service for consumers that costs $19.95 a month.
"It's a natural evolution of a consumer electronics product, for prices to go down," a spokeswoman for WebTV said.