Nov. 14 (Bloomberg) -- Sony Corp., the world's largest maker of video-game machines, said its PlayStation 3 can't play software titles designed for older consoles properly, marring the company's launch of its newest player after a shortage.

Titles including the Gran Turismo and Final Fantasy series sold for the PlayStation and PlayStation 2 can't display menus properly and graphics sometimes freeze, Sony Computer Entertainment Inc., the company's gaming unit, said on its Japanese Web site. Software updates to the console will be provided to fix the problems, the statement said.

The software problem is another setback for Sony, which is banking on the PlayStation 3 to beat rival consoles from Microsoft Corp. and Nintendo Co. and to help revive earnings growth. A shortage of components for the high-definition Blu-ray DVD player in the machine caused Sony to delay sales in Europe by four months and halve shipments to 2 million for 2006.

``Some customers will refrain from buying the PlayStation,'' said Yuuki Sakurai, who helps manage $5.9 billion at Fukoku Mutual Life Insurance Co. in Tokyo. ``There's a chance Sony will lose its lead to Nintendo's Wii.''

The PlayStation 3's 49,980 yen ($425) price tag is almost double that of rivals. Redmond, Washington-based Microsoft sells a version of the Xbox 360 machine for 29,800 yen in Japan, while Nintendo Co. will offer the Wii console for 25,000 yen.

Shares of Sony gained 0.9 percent to 4,730 yen at the 3 p.m. close in Tokyo. The stock slid 9.7 percent in the past six months, compared with a 1.2 percent drop in the Nikkei 225 Stock Average.

Best Sellers

The original PlayStation, introduced in 1994, and its successor have each sold more than 100 million units worldwide, making them the two best-selling game consoles.

Sony Computer spokesman Satoshi Fukuoka said 7,902 titles were released for the PlayStation and 8,181 games for the PlayStation 2. About 8,000 were made for the Japanese-language market. He declined to say how many games are affected.

About 200 Japanese titles have issues, the Sankei newspaper reported today, without saying where it got the information.

Users can access Sony Computer's Web site to check which games are affected as each title has a different issue, Sony Computer said. A search for Gran Turismo, a racing car game, showed three issues including frozen graphics and miscued music.

Sony started sales of the PlayStation 3 last weekend, offering 100,000 units in Japan. Sales begin in the U.S. with 400,000 consoles available from Nov. 17.

The company said a day before the Japan launch on Nov. 11 that customers who buy the PlayStation 3 will need to download a software upgrade to be able to play against other online users.

Motion Controller

The PlayStation 3 employs a new Cell processor 40 times faster than the chip in its predecessor. Sony is also betting game fans will prefer the PlayStation 3's souped-up graphics and more lifelike characters over Nintendo's Wii console.

Nintendo's Wii console, which goes on sale in the U.S. on Nov. 19 and two weeks later in Japan, uses less-sophisticated graphics but woos game fans with an innovative wireless control system based on hand motions.

Sony forecasts profit this fiscal year ending March 31 will fall 35 percent to 80 billion yen, after saying it will book a 51.2 billion yen charge for recalling 9.6 million notebook computer batteries that were fire hazards.

The games business generated 918 billion yen in sales in 2006, 12 percent of Sony's 7.48 trillion yen revenue. Sales at the games unit gained an average 31 percent in the past two years, the second fastest after financial services, which averaged 34 percent. By contrast, Sony's consumer electronics business shrank by an average 0.9 percent during the past two years.

To contact the reporter on this story: Kanoko Matsuyama in Tokyo at at kmatsuyama2@bloomberg.net

Last Updated: November 14, 2006 02:58 EST