14 DAY TRIAL // Michael Pachter, an analyst working for Wedbush Morgan, has predicted that Microsoft will announce a price cut for the Xbox 360 during the month of June, probably at E3, and that both Sony and Nintendo will then feel the pressure and also make their own consoles cheaper, allowing a wider number of gamers to pick them.
In a research note the analyst says that, “In order to sustain a rebound to sales growth, we think it is imperative that the console manufacturers cut price. We expect Microsoft to announce a price cut at this year's E3 Expo in June, and expect Sony and Nintendo to rapidly follow suit.”
He added, “The current price structure has been in place for 18 months, and prices remain at historical highs this far into a console cycle.”
Pachter says that Microsoft now has the lead in sales on the all important United States market and that this position allows it to drive down prices, with the aim being to increase its lead in sales and take the title of best-selling home console for the entirety of 2011.
The problem with price cuts is that, while they tend to drive up unit sales, they also drive down the actual revenue that Microsoft, Sony and Nintendo draw from selling their home consoles.
At the moment, the Xbox 360 and PlayStation 3 sell for 299 dollars in the United States while the Nintendo Wii can be bought for 199 dollars.
In order to keep their console revenue up, the three manufacturers need to get more money from selling add-ons, like the Kinect and the PlayStation Move motion tracking systems, or need to get more money from the publishers that deliver video games for the platforms.
None of the three companies has so far talked about launching a new generation of home consoles, which might justify keeping current prices at the same level for a while longer and then dropping them when an official announcement of a new hardware is made.