Price cut - When/How Much

[mkozlows]

catofellow said: Maybe I overestimated the price cut, but I guarantee that if Microsoft cuts its price, both Sony and Nintendo will respond in kind. Remember, the original XBOX saw a price cut in the same time frame.

Microsoft WAS desperate. Remember the position that they were in with the original Xbox: They had no credibility at all in the console gaming world, lots of people were predicting that they'd abandon the market quickly, and they were up against the behemoth of the PS2, which had a solid head start and lots of exclusives. Sony's going to be desperate before this is all over, but right now, I doubt they're quite as intently focused on gaining credibility as Microsoft was. Remember too that Microsoft's desperation meant that it lost enormous piles of money ($4 billion!) on the original Xbox, by doing price reductions without cost reductions. That's fine for Microsoft, which makes its money by the bushel on Windows and Office sales -- but for Sony, for whom videogames have actually been a major part of their profit in the last ten years, subsidizing a money-losing gaming division is not a realistic option. Or to put it another way: With the original Xbox, Microsoft was happy to buy an extra 10% of market share for an extra two billion dollars. Sony won't take that deal with the PS3; they need it to start paying for itself at some point. Also, consider this: If Microsoft cuts prices $100, giving us a $199/$299 360, we're getting down now to the mainstream value sort of prices. If Sony "matches" this with $100 cuts, now they're at $399/$499, which is still shockingly expensive and roughly double the 360 price. It was important for the Xbox to match PS2 price cuts, because Microsoft couldn't be more expensive than the PS2. The PS3 will be more expensive than the 360 -- and a lot more expensive -- whether or not Sony cuts prices. Sony's hope lies in making people believe that the PS3 is somehow worth the phenomenal price premium, not in trying to match the price of the 360.

I understand your doubt, but Sony sold over 20 mill consoles in 2002, close to Gamecube/Xbox lifetime totals. They still cut the PS2 price the following May.

The difference between the PS2 and the Wii is that Nintendo is having severe supply shortages with the Wii. There's no point cutting prices if you can't keep up with current demand. Obviously, by May this should have slackened significantly, but still. Until they're piling up unsold, Nintendo won't do anything; that's why I said they'd likely wait a bit after the 360 price cut to make their decision.

So are you stating that noone will cut prices?

No. The 360 will absolutely get a price cut this year. I'd guess $100, but it might be $50 and a spec upgrade (HDMI and/or larger hard drive). The PS3 won't follow suit unless sales are absolutely disastrous. Nintendo will be much more likely to match the price cut, but won't be eager to do so immediately. That's my prediction, anyway.