Hi,

One of the main themes about console sales has always been that with a price cut, more numbers of consoles are sold. I wanted to look at the numbers and see how true that is. While I do agree that a cheaper console would mean that more people would want to buy it, but I always thought that it only attracts new people. I personally thought the number of units sold per month would stay the same. To better explain my view, I thought that even if there were a price cut, the number of units sold would not necassarily change. For instance, if there was a price cut for the xbox360, it would still be selling around 275k a month as it is doing now.

My point being, the only thing that really matters are the games, not price cuts. I have looked at the numbers for Playstation2, PS1, Xbox and Gamecube. I still have not finished my work with the numbers, but I will put up PS2 numbers here. Wait for future numbers. (I'll try to squeeze them in my free time)

Here I will put up a chart containing sales and price cuts.

source: http://www.scei.co.jp/corporate/data/index_e.html

While price cuts do generally increase the number of units sold per month, it doesn't have the effect that some people here think it might. Some price cuts didn't work either and units sold per month actually decreased.

In my opinion it is all about the games. Price cuts wont necassarily work.

Wait for future analysis.

There is no set formula for figuring out which console will be the most popular. Secondly, price cuts will attract new people, but they will also attract the people that have been wanting to get a PS3 or whatever for a while, but haven't because the cost was prohibitive.

The only "formula" that I would reccomend using, would be the entirely subjective Value/Cost ratio. The PS3/360/wii is worth more to some than others given their income, spending power, like or dislike of the console system, etc and the console companies are always trying to make that ratio go higher, hence we have online gaming and a lot more things going on than 10 years ago. That is also why you will frequently see price-cuts for mass-produced products, so that companies can gain market share, and hopefully choke off the competition.

To awnser your question more directly, all else equal, a decrease in price of a product will increase the quantity demanded of that same product.  Of course, price isn't the only thing going on with any market, so a more comprehensive analysis should be undertaken than just looking at the whole thing on a price basis.

I didn't provide a formula; I was just debunking the claim that price cuts will boost consoles sales. It is not necessarily true, and games would be much more important. Therefore, if a company was trying to gain market share, personally I would try to get better games than to make them cheaper. Regarding your value/cost ratio, basically you are describing life. That would be true about anything. So it doesn't help that much.

Edit: Regarding your response, the number suggest otherwise. Why didnt a drop of 15%, 16% help japanese sales, or a drop of 10% or 17% help us numbers? I do agree with you that if all else is equal, a price cut will make it more accessible and more units will be sold. I was just pointing out that it seems other factors are more important that price deductions.

"Therefore, if a company was trying to gain market share, personally I would try to get better games than to make them cheaper. "

That is the philosophy of Sony, apparently. Ultimately, I think that having a more expensive console that is better will prove very well for them. But, this doesn't mean that you can IGNORE pricing altogether, since it does have a big influence on customer's buying decisions.


Also, to awnser your question, look at the edit that I did. I think the last part of the post should awnser your question.

"Edit: Regarding your response, the number suggest otherwise. Why didnt a drop of 15%, 16% help japanese sales, or a drop of 10% or 17% help us numbers?"

This is a gaming industry market idiosyncracy. As time goes on, all of the potentially interested customers end up getting a console at some price or another, and therefore, the demand for hardware will go down while demand for software will grow much longer than hardware will. Keep in mind that the point isn't to make $$$ on the console. The point is to move consoles and then make $$$$ with the software, and as much of it as possible so it ends up being a balancing act between emphasizing market share ( lowering prices) or profits ( keeping prices level) with respect to your products.

I never questioned why they had price cuts, I was pointing out that price cuts don't necessarily increase units sold. To everything else you said: agreed.

price cuts will increase demand for the short term. I think that if you go back and look up the PS2's sales data, you will find that sales for at least the next couple of months following a price cut, will be higher. Of course, this won't reverse the trend of a peaking, and then declining amount of sales inherent with any gaming console.

The statistics don't support your claim. While a price cut will increase sales for 1 month, it all goes back to normal after that. But the overall number of consoles sold with that price per month does not change, and that is what is important, not the 1 month after a price cut. You could look at the data I have aquired, and calculated. It is much easier to prove with numbers than with how we feel about things.

look at the data again, the next couple of months after a price cut. Sales should be higher than previously.

You said that you looked at the data, and it showed otherwise? If so, could you post this? thanks.

unfortunelty the data that I have access to only has increments in 3 months, so I had to average per month. I am not quite sure on how price changes affect in the first 3 months, but they generally do increase for the first 3 month period. (not always) But after that its just randomness, sometimes it is higher sometimes lower.