Next chapter in the price war is starting
Last modified on Monday, 08 September 2008 14:04
As we predicted the Xbox 360 price drops are now in full effect and they are drawing at least some reaction from the Sony and Nintendo camps as the holiday season continues to draw closer.
While it is too early to see what impact the price drops have on actual sales, it is obvious that both Sony and Nintendo did expect Microsoft to make this move to take the pricing war to them this holiday season. The most important thing to note is that with the price drop on the Xbox 360 Arcade system to $199, Microsoft is now the cheapest of all three console vendors heading into the holiday season. The $199 price tag is especially significant to Nintendo who was the low price leader with the Wii.
Several analysts are predicting that Microsoft could enjoy as much as a 20 percent boost in sales this holiday season due to the price drop. Of course, many of the consumers looking to buy in at the $199 price level are more concerned with the major titles and primarily sports titles which are an area where Microsoft does enjoy a bit of a lead over the competition at the moment.
Sony does not see the price cut as a big deal, as they are heading into the holiday season. While they have admitted that they do expect Microsoft to see a bump in sales because of the price cut, they do not think the sales numbers will be sustainable over the entire holiday season. Sony will continue to stress their Blu-ray drive and several titles that they have in their lineup for the holiday season as their primary weapons to counter Microsoft.
Nintendo, on the other hand, is working hard to make sure that they have enough consoles ready to meet the expected demand for the upcoming holiday season. The unexpected popularity of the Wii has kept Nintendo on its toes to continue to pump out enough consoles to meet demand. However. the fact is that we believe that because of the lower price of the Xbox 360 Arcade system, those buying a console as a gift might be drawn to the lower price of the Xbox 360 and elect to substitute it for a Wii.
We do still expect sales of consoles to be brisk this holiday season, and while Sony is not talking about a $50 price cut right now, we do think that if they are losing too much ground going into the final months of the holiday season as they may have no choice but to slash prices. U.S. inventories of the console systems will be tight this holiday season as a whole, because companies continue to send bigger amounts of their inventory outside the U.S. because of the weak dollar.