Sony : sales of PSP and PS3 to rize 10-15% this year

[HappySqurriel]

Squilliam said:

HappySqurriel said:

Squilliam said:

HappySqurriel said:

Well, year over year PS3 sales seem to be down about 10% in 2009 and it doesn't have the benefit of having Grand Theft Auto 4 and Metal Gear Solid 4 being released later this year ...

About the only way I could se their estimate comming true is if they reduced the price by $100 fairly early in the year and had some unannounced big games to release this year.

An early price cut would almos certainly net a higher overall revenue as the elasticity is higher as the price approaches the ideal for maximising volume. Therefore an early price cut of that magnitude would have larger effects.

 

 

Which is exactly the reason it has to be a fairly early price reduction if they are going to make this target ...

A sales boost from (pretty much) anything tends to have a very large initial effect followed by a dramatically smaller effect over time. If the price reduction happens relatively soon, the PS3 could recover its "lost" sales from the initial boost and would only need to maintain a sales rate of 10% over 2008 to make their target ... If the sales boost happens much later in the year there is no way that the initial boost will recover the "lost" sales this year, and the sustained sales would have to be dramatically higher than is possible for Sony to meet their target.

If the price is cut by 25% then one would expect sales to increase by more than 25% over the long run compared to present levels as the price approaches an 'ideal' level alongside the large short run increase in sales. The PS3 is in demand and its elasticity in the long run will be greater than 1 which means overall revenue will increase with a price cut.

 

Why would a price reduction of 25% necessarily translate into a greater than 25% boost in hardware sales?

Certainly there have been price cuts that had that kind of reaction but it has typically been the result of one console manufacturer reducing the price of their console without their competition making a similar move; the reason why these boosts are dramatically better than you typically see is that one console's sales improve at the expense of another console primarily because the price reduction changes how the consoles compare against eachother. The two most obvious cases of this is the XBox 360's price reduction in 2008 and the PS3's price reduction in 2007 ...

At the end of this year it is highly likely that Microsoft and Nintendo will increase the "Value" of their consoles (potentially) through minor price reductions, bundling, new "Slim" and more energy efficient models, and the introduction of colors (and what not).

Basically a $300 PS3 might see a noticeable sales increase (potentially 25% or greater) against a $200/$300/$400 XBox 360 and a $250 Wii; but a $300 PS3 would not see the same sales increase against a $179/$250/$300 XBox 360 or a $200 Wii, especially if the lower priced Wii and XBox 360 come bundled with additional accessories (Controller/Wiimote+Nunchuck, classic controller, MotionPlus or Wii Fit), if they come with bundled games, or if the system is smaller and more energy efficient.