price cuts would be great for everybody!

microsoft of course can afford to cut $100 off xbox. it's not like they're really in the video game business to make money... not in the short term anyway.

>>2. In my honest opinion, Microsoft need to reduce the cost of the 360. Their sales have slowed down considerably and a $100 pricecut would help boost much needed sales before the Wii takes over completely.

MS is going to hold out until post-Halo 3 for a price cut, in all liklihood. They'd simply make a lot more money that way, and the $100 cut for the PS3 probably won't even cut into the 360's marketshare. I know MS wants to crush Sony, but the best Sony is mustering is the ability to keep up, they aren't going to hurt 360 sales any.

ckmlb said: What's the difference in profits per game sold between 3rd party games and 1st party games for Sony? You said 10$/game, this isn't the same for both types right?

It depends on how the game sells. If we think that 600 000 copies sold is the point to break even for both, 1st party games won't make any profit for Sony before that, unlike 3rd party games, which make profit for Sony from the first game sold. From 1st party games Sony gets a bigger share per unit sold, but they are a little cheaper at retail. So, if a game costs 20M to develope, that means, at 600 000 breakeven point, that developer gets a bit more than 33$ per copy. If Sony 1st party games are 5$ cheaper at retail, and Sony gets 38$ per copy, they break even (at 20M costs) at 526 000, when it needs about 715 000 copies to be sold to make 10$ profit per copy on average.

I suspect MS screwed up by not cutting price this Christmas. I understand their thinking:

1) Sony overpriced the PS3 to the degree that the 360 easily maintained an edge on pricing. It's like getting a price cut without actually cutting the price. Since the PS3 supplies were limited, and sales were likely to be sluggish post-holiday, they probably felt justified in standing pat (and I think sales back them up here).

2) Nintendo overpriced the Wii at $250. That left only a $50 difference between the Wii and the technologically superior 360. Given Nintendo's record the last 2 gens, and the absence of a killer app other than a GCN port, the 360 still looked to be in a strong position. Like the PS3, they expected to see Nintendo sell out for Xmas, and then fall into a normal, slow sales pattern, though in this case because of the target audience rather than price.

Unfortunately for MS the Wii never stopped selling, and the audience largely wrote off the Core system. While the 360 hasn't sold terribly, and is doing better than it's predecessor, it looks to be standing still next to Nintendo.

To be fair, no one, including Nintendo, foresaw the Rise of the Wii. But I suspect if MS had to do things over again, they would have cut the price last holiday. And once the holiday was over, there wasn't much point to cutting price as there were no KA's with which to maximize the PR value.

TheSource, interesting analysis and predictions. What confuses me a little though is your conclusion about the 5% and 10% marketshare boost from a $100 price drop for PS3 and X360 respectively.

I know the PS3 and X360 are moving units at a pretty stable rate of 200.000 (PS3) and 300.000 (X360) units world-wide currently, and the Wii is at almost 1 mill/month on average. Total world-wide next-gen market would therefor be 1,5 mill consoles/month at the moment.

So, in other words after doing the maths, the PS3 currently has roughly 15% marketshare and the X360 has about 20%.

But the 5 and 10% boosts in market share TheSource predicts from a price cut would would give 20% to PS3 and 30% to X360 and - assuming the total market grows accordingly, to about 2 mill/month - translate into approx 400.000 PS3s/month and 600.000 X360s/month, and the Wii would continue selling 1 mill/month (these numbers are "normal season sales", without any Halo3 or other killer-app or holiday effects).

Woh! That would mean doubled sales for both consoles after just a $100 price cut - and that's certainly impossible, isn't it?

TheSource, could you explain your maths and market share predictions in more detail?

Price cuts will not increase market share. At most it will stop the decline, not increase marketshare.Simple as that. The market share will only be increased with games.

As I said in another thread:

"Odds are greater every day [that Microsoft will drop the price at E3].  It's been over a year and a half since the 360 launched and MS doesn't like being seen as a follower.  If Sony is dropping the PS3's price, MS must drop the price for the 360.  A $500 60GB PS3 is a much better value than a $480 Elite or $400 Premium.  Since the MS keynote is before Sony's, MS may try to steal some of Sony's thunder by dropping the price of the 360 first Tuesday night."

I think MS has to drop the price for the Xbox 360 right now. I mean think about. Xbox 360 Elite is selling at $479 and a PS3 (60GB) is selling at $499. There is a $20 price difference, yet you get a high quality product (failure rate is much lower) with a blue ray built into it. The sales for Xbox 360 Elite will stall completely. $50 Seems too small, so I think they'll just follow and slash $100 off. If they cut more. Kudos to them. If Core starts to sell at $199 (with $100 off), Wii sales will collapse. Xbox 360 still ha s agood chance to maintain the lead. Especially with decent supply, Halo 3 on Horizon, price drop and holiday season.

If the core were to move to $199 I think that it may receive a boost as it puts the price at a much more mainstream level. I do not believe, however, that Wii sales will collapse because of it. In fact, I do not believe that Wii sales will be significantly affected, (if at all) by the Sony price cut, or a potential MS cut. There is a significant Wii title coming out for both July and August (Mario Striker and Metroid Prime 3), that should keep Wii's momenton going until autumn at least.

Edit1: Added some words to make the post more clear

Edit2: At $199 I would actually strongly consider picking up an X360 to go with my Wii.