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Retailers grappling with expected PlayStation2 shortage

As Sony works to pump up anticipation for the game console, retailers struggle to figure out how to handle the expected shortages when the device is released next month.

Culture
As Sony worked today to drum up enthusiasm for the PlayStation2, retailers were struggling to figure out how to handle expected shortages when the game console is released next month in North America.

Sony Computer Entertainment gathered game developers, analysts and the press in San Francisco today to pump up anticipation for the new game console, just a day after the company announced that only half of the expected 1 million game consoles will be shipped here for the Oct. 26 launch.

Although the electronics giant vowed it would quickly ramp up shipments after the launch to 100,000 a week, demand is still likely to far outstrip supply during the critical holiday shopping season.

"The third week of November is really the critical time for retail," ARS analyst Matt Sargent said today. "If they don't have good inventory on the shelves by then, that's when parents start saying, 'Screw it, I'm buying a Dreamcast,'" the rival game console from Sega.

Peter Moore, president of Sega of America, hopes to reinforce such thinking.

"Speaking as a dad, you don't wait until the first week of December to do your shopping, especially for what would clearly be the major gift," Moore said. "That's why we've been stockpiling inventory for the last two months."

Even if Sony can pull Christmas sales out of the fire, it's still guaranteed to face thousands of cranky consumers at the end of October, as customers who preordered the systems from retailers leave stores empty-handed.

Prepaid orders no guarantee
Hundreds of retailers, ranging from software chains to mom-and-pop stores, allowed customers to prepay for a PlayStation2 to ensure they'd have one as soon as the devices went on sale. The practice of preordering has become increasingly common for hot consumer items, even though Sony executives said they did everything they could to discourage the practice with PlayStation2.

"We warned (retailers) that whether they presell a million units or one unit, that will have no effect on what they get," Jack Tretton, senior vice president of Sony Computer Entertainment, said today at PlayStation2 Gamers' Day in San Francisco.

Analysts expect that diehard gamers who are the most intent on getting the device will camp out in front of retailers on the night of Oct. 25 and bid up the price of units on auction sites such as eBay.

PC Data game analyst Matt Gravett said there are already more preorders out there than Sony's initial shipment of 500,000 units can satisfy. "I'm pretty sure preorders had exceeded that number," Gravett said. "I guess there will be long lines in front of stores Oct. 25."

And a good chunk of the customer ire generated will rub off on Sony, Tretton acknowledged.

"They're going to get mad at the retailers to some degree, but ultimately they're going to get mad at Sony," he said. "That's why we tried to get retailers to hold off on preorders; we knew this had the potential to put us in a bad light."

Gartner analyst P.J. McNealy said yesterday that the cut in shipments could be a big headache for small retailers who had originally thought they would be getting the systems.

"Big distributors are going to satisfy their big customers," McNealy said. "It means the mom-and-pops of the world are going to be shut out, or close to it."

Inventory an unknown
Even big-box stores are likely to face some tough decisions, however, especially as they plan their holiday advertising campaigns, Sega's Moore said.

"If they're going to run a national


Gartner analyst Paul-Jon McNealy says Sony again got caught in the gap between expectation and performance with its announcement that only half the expected 1 million PlayStation2 game consoles will be shipped on its launch date.

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ad Thanksgiving weekend, they need to know they'll have the inventory," he said. "A Christmas flier is just too critical. It can make or break a retailer's holiday season."

Moore said Sega has already received numerous inquiries from retailers looking to increase Dreamcast supplies in the wake of yesterday's announcement.

"It created a mild panic among retailers," he said. "As the brand that takes advantage of this best, it's our job to find the inventory."

Although mom-and-pop stores may get the shortest end of the stick, online stores could also fare poorly.

"They'll probably get some, but certainly nothing that compares (to) what a Toys 'R' Us or Best Buy gets," Gravett said.

Richard Martinez, owner of online store Orderplaystation2.com, said he has taken about 4,000 orders but is not sure when he'll be able to fill them. The cut in initial shipments only adds to the uncertainty.

"It's probably going pretty much all to retailers," Martinez said. "If they had a million or if they had more," he added, his store might have a better chance. Martinez still hopes to scrounge up 100 to 200 systems in November and aims to fill half of the preorders by December.

Amazon.com re-examines strategy
Amazon.com spokeswoman Kristin Schaefer said the online retailer is re-examining its strategy but said it had expected that the units would be in short supply.

"There's been talk about what the allocation is going to be for some time," she said, adding that Amazon has not been taking preorders for the console. "If we've got them to put on sale when the product launches," she said, "then they will be there."

At least one Sony game console should be in plentiful supply for holiday shoppers: the PS One, Sony's curious attempt to extend the life of the original PlayStation design. Sporting a trimmer case--about one-third smaller than the original PlayStation--and $99 price tag, the PS One went on sale last week in North America.

Sony executives at Gamers' Day acknowledged that it's an unusual move to have two generations of a system on the market at the same time, but they said PS One should appeal to entry-level gaming fans scared off by the $299 price tag of PlayStation2.

The execs also touted a vision of portable gaming somewhere between a full-size TV console and Nintendo's Game Boy. Sony Computer Entertainment senior vice president Andrew House said the company will introduce a 4-inch LCD screen for the PS One next spring. He added that a power adapter that can run the device off a car's cigarette lighter is a definite possibility, making the PS One the leading contender for the nascent market of car gaming.

"We're not talking about competing with the Game Boy with a handheld device," House said. "We're talking about something you can take with you on the road, something kids can put in their suitcase on a vacation."

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