Patcher thinks MS will drop the price by $50 for the core/prem and $80 for the Elite Tuesday:
The first major news of the week is Sony’s Monday morning PS3 price cut, with its 60Gb model cut from $599 to $499. We expect Microsoft to follow suit on Tuesday. Sony also announced that it is introducing a PS3 (80GB) at $599, bundled with Motorstorm. The price cut confirms recent speculation and signals from the company following disappointing sales so far.
We expect Microsoft to follow with a price cut of its own, with the Xbox 360 core model going from $299 to $249, the Xbox 360 premium model going from $399 to $349, and Xbox 360 Elite model going from $479 to $399. Last week, Microsoft announced a slight Xbox 360 shipment shortfall (11.6 million units versus prior guidance of 12 million units
through June 30), and we do not believe that the company is prepared to allow Sony to erode its pricing advantage.
In our view, the value proposition for the PS3 is increased at the new lower price point, putting increased pressure on Microsoft to cut the price of its Xbox 360. The 80Gb and 60Gb PS3 models compare favorably to the 120Gb and 20Gb Xbox 360 models. Both PS3 models have WiFi built in, while it is an extra accessory for the Xbox 360. Sony’s
PS3s come with HDMI output, while only the Elite 360 model has HDMI. The Elite offers HDMI cables, while the PS3s do not. The PS3 80Gb version comes bundled with Motorstorm and there is currently a Blu-ray Disc Summer Promotion where PS3 (along with any other Blu-ray player) buyers will get 5 free movies. On balance, we think that
the lower $499 price point for the PS3 60Gb model offers consumers a compelling value compared to the current $479 price point for the Xbox 360 Elite model—while the Elite has a 120Gb hard drive and HDMI cables, it does not have WiFi built in nor does it offer Blu-ray playback capability, with both standard features for the PS3. Similarly, we think that the $499 PS3 compares quite favorably with the $399 Pro 360 model, which has only a 20Gb hard drive and no HDMI output. Because of this favorable comparison, we believe that Microsoft is all but compelled to cut prices, and we think the price cuts will come no later than at Microsoft’s Tuesday night press conference.
We note that the failure rate on PS2 was less than 1/2%, and according to Sony management, the failure rate on PS3 is even lower. Overall returns of PS2 were under 5% (people who didn't like it), and so far, returns for the PS3 are even lower. Microsoft’s $1 billion charge for Xbox 360 hardware failure problems last week suggests to us that the
failure rate is somewhere above 10% of all units shipped, given that the charge is approximately 25% of all revenues from Xbox 360 sales. Though we believe that Microsoft has corrected the design flaws that led to the hardware failure, we think that the company is under pressure to maintain its price advantage over Sony, and expect that it will follow Sony’s price cut this week.
We do not expect Nintendo to cut the price of its Wii or DS this year as sales for both are still very strong and are anticipated to remain so through the end of the year.
Bundle GTAIV and/or H3 for $350 for the Premium and you have a holiday winner. IMO, $50 is still too low though. I'd like to see atleast a 20% drop in price across the board.
