February 23, 2010 - Electronic Arts can't wait for more console price cuts. 

During the Goldman Sachs Technology and Internet Conference today in San Francisco, Electronic Arts' chief financial officer Eric Brown held a talk regarding the current state of the games industry. On the subject of current console pricing strategies, Brown said he believes prices have not fallen fast enough compared to the previous console generation. 

"I think pricing has not come down as much as we would have expected at this point in the cycle compared to the last," he said. 

Brown highlighted two key occurrences from this past holiday to make his point. The PlayStation 3's price cut to $299 saw Sony enjoy an 84 percent increase year-over-year for the quarter, and Wal-Mart's free $50 gift card promotion on any Wii purchase helped Nintendo significantly increase sales. 

"We do have a long way to go with respect to pricing. Last cycle, approximately 48 percent of PlayStation 2 units were sold at a price point of $149 or less. Clearly at $299 we're nowhere near that price point." 

When asked about the expected life cycle of the current consoles, Brown noted things will be different this time around because consumers won't be able to take advantage of any noticeable graphical increase. 

"It's a possibility that we don't see a sharp and distinct console transition like we've seen in the past. Today, we have two of the three consoles operating at full, high-definition and are running games at 60 frames a second," he said. 

"If you have a multi-billion capital investment to develop the next generation hardware, the question I would ask is, 'If you were to produce that, what would you display it on?' There's really nothing in terms of broadly available consumer viewing technology other than 1080p televisions." 

"You could upgrade in theory, but you wouldn't get the obvious graphic benefit that we saw that drove the transitions in the prior cycle," he added. 

Brown also noted over time the new development focus on online multiplayer, digital content extensions, and the additions of the motion controllers from Sony and Microsoft this fall are just some of the catalysts that will extend this current console life cycle.

http://xbox360.ign.com/articles/107/1071385p1.html

Wow, I never realised just how many of the PS2's sales came after it hit the $149 mark. It'll be interesting to see just how much higher all of these consoles could go in sales.

I think the PS2 price cuts were an exageration. If they'd cut the price slower most of the people would have bought the console at a higher price point. Say for example, probably 50-70% of people who bought the PS3 for $299 for the slim/cut would have bought it for $350-$400. We can see this because when the PS3 is out of stock on the 120GB SKU people are still buying the $349 250GB.

I think instead of making constant price cuts they should add stuff to the systems to retain their value

i personally dont agree with that method, i think a price cut is what gets people, i mean the ps3 has always had amazing bundles, but no one cared when it was 400 dollars

Yes I agree that no one cared about the ps3 when it was $400, but they have come to a point where they are very affordable, I dont think they

should lower the price any more.

So, Wii will sell another 60+ million after it hits $149? Sonofabitch!

Also, we could see 600 million home consoles sold if this holds up this gen

Price cuts simply go hand in hand with reduced production costs. There really isn't any reason for either MS or SCE to take losses on every unit sold (however small), much less increase those losses for the sole reason of opening up the MSRP to lower price demographics.

Dropping price simply to entice more consumers is almost a subtle form of product dumping.

While it's accepted most units for a given console platform will sell under $200 (overall lifetime sales), that price point happens when manufacturing and material costs minimize or eliminate losses on hardware sales.

Kind of stupid comment/observation IMO given that the PS2 debuted at $299. Naturally a $599 PS3 isn't going to drop to the same price as a PS2 after it had been on the market for 3 years.

A more intelligent thing to say would have been (the obvious) that the PS3 in particular will sell more than half of its lifetime sales at a price under $200.

2 of the damn manufacturers are having shortages, and they should drop price as-is?

I would be interested in seeing how many gamers there are out there without a current gen console that want to buy one eventually when prices are lower. On this site that demographic is rare (its a gaming forum after all) but it would be interested to see how much of this group is in the general public. I'm sure this demographic must have some significance. Historically, $300 is a lot for 3-4+ year old consoles and for gamers that prefer one of 360/PS3 to a Wii, I wouldn't be surprised if there are a lot of gamers waiting for a hard drive model 360 or a PS3 to hit $200. Who knows though. We're not the ones with the market research.

What we do know is that this gen's hardware sales are not that far from catching up to last gen's hardware sales. I think we're at the 75-80% point. But the Wii has attracted a lot of new customers. We have to take that into account too. There may be a lot of last gen gamers left who don't have a current gen console (but want one. Or maybe many of them left console gaming? Who knows).