14 DAY TRIAL // As we've started another glorious month, analysts are once again called upon to share some insight on how video games and video game consoles have sold during the previous month. As it is still summer, you can bet that things weren't that great for console manufacturers, and the trend recorded in June, with drops across the board, will continue.
This is largely due to the fact that the manufacturers are still holding the high price tags on their products, says Wedbush Morgan analyst Michael Pachter, who recently issued a report to investors. He reveals that this error in marketing strategy is seeing its results during these months, when sales are slow, and that “the manufacturers have made a strategic error by maintaining pricing for too long.”
“The Wii remains at its November 2006 launch price of $249.99, and the core PS3 SKU has not seen a price cut since October 2007. We think that the negative software trend is less attributable to a weak software line-up, and can only conclude that until consumers are sufficiently interested in buying consoles, it will be difficult for publishers alone to drive sales higher each month,” Pachter states.
Once again, the analyst reiterates some of the rumors that are currently flying around in the industry and may or may not come true in the following months. “Fortunately, we anticipate imminent price cuts to occur soon. Rumors of an imminent price cut by Sony and a console upgrade by Microsoft are rampant. One rumored scenario includes clearing the 80Gb PS3 model to $249 from $399 and launching a new 120 Gb PS3 Slim for $299 and clearing the 60 GB Xbox 360 Pro at $199 and re-pricing the 120 Gb Xbox 360 Elite at $249.”
“We have no information that a price cut or console upgrade is planned in the near term, although the Internet pictures of the PS3 Slim and of the new Xbox 360 packaging appear real to us. The actual pricing decision has not been leaked, and rumours of a $299 PS3 or of a $249 Xbox 360 are merely speculation, with the ultimate outcome potentially $50 higher for each.” Pachter further underlines.
He concludes by saying that, without a price cut, the estimated amount of profit forecasted by both Nintendo and Sony just can't be met. “We do not think that either Nintendo’s or Sony’s console hardware forecast figures are achievable without a price cut, and we expect one by October for the PS3 with either a price cut or a different bundle for the Wii within the same time frame. We also think the Nintendo DS will be cut to $99 from $129 with the DSi cut to $149 or lower from $169. We anticipate the PSP will be cut to $129 from $169, and the PSP Go launch price of $249 to get reduced to $199 by some time in 2010.”
These are certainly a lot of price cuts, but considering the state of the economy and how the recession has made an impact on the gaming budget of a lot of people, they might be the only thing to kick-start the industry.