Retailers Demand PSP Price Drop

[Erik Aston]

MS technically makes a profit on hardware (at least the 400 SKU), but XBox as a whole is still in the red. There was speculation that all the losses of the division were from Zune at this point, but Peter Moore is still talking about acheiving profitability, and he has nothing to do with Zune. He's said something along the lines of "making a small profit on each console sold doesn't mean anything if we spend 100 dollars in advertising to get that sale." XBox should become profitable as a whole within 6 months, but there's a similar timeframe on a price cut. Hopefully, for their own sake, cost reduction goes off perfectly, because it'd be a shame to cut the price and create another 6 months of red ink. PSP appears to be doing okay, but look at the year over year sales. PSP launched in March of 05... In the Mar-Dec period of 05 and 06, the 06 sales were only higher in two months... In the key month of December, sales were about 150K lower in 06... For the DS, sales got better every month of 06 over the comparable month of 05, usually by a ton... To put the sales acceleration another way... DS launched 4 months before PSP, including a better launch and an Xmas season... Yet DS crossed the 4 million sold mark in NA in Dec 05 and PSP hit the mark the next month, nearly catching up... Today, PSP is yet to reach 8 million in sales, while DS just reached 11 million, and could blow by 12 million as soon as Pokemon hits. Looking WW, while PSP has sold 20 million in just over 2 years, its looking unlikely it will reach 30 million in another year, while DS could get to 60 million in the same time frame. So you can see why retailers might be irked. PSP appears to be losing steam, its being outperformed by several systems, and being smashed by its main competitor. Yet it costs as much to stock as it did when it was a hot item.