Game Console Price Cuts Likely in May
Price cuts for two video game consoles, the Xbox and the PlayStation 2, are likely to kick in as soon as this month, due to slowing retail sales ahead of the summer months, an analyst said on Monday.
In a research note, Gerard Klauer Mattison analyst Edward Williams said he believes price cuts will be announced at the industry's annual Electronic Entertainment Expo (E3) because a drop in sales has retailers worried ahead of the summer, usually the industry's weakest season.
Williams said he believes Microsoft Corp. , fighting to gain a share in the competitive game machine market, will kick off the cuts, bringing the Xbox down to $199 from $299 at a news conference scheduled for May 20.
Sony Corp. , the market leader, will likely follow, also cutting the PS2 price to $199 from $299, he said.
"Given a need to increase its installed base and a lack of exclusive key titles to help do so, we expect Microsoft could use this opportunity to pre-empt Sony and take a leadership position in dropping the price of Xbox," he said.
The Xbox, after selling nearly 1.5 million units in the last six weeks of 2001, sold between 300,000 and 400,000 units in the first quarter of this year, according to various analysts' estimates, and a consensus has developed in recent weeks that the price of the Xbox will be cut this year.
Rumors have repeatedly cropped up since last summer that a PS2 price cut was imminent, and analysts are still generally divided as to whether Sony might cut the price at E3, or in September, at the start of the strong fall and winter season.
"However, the recent slowdown in hardware unit momentum, coupled with the competitive threat of Xbox at a lower price, makes a price cut on the PS2 more likely, in our view," Williams said.
Even so, a price cut was not entirely necessary for Sony, he said.
"Given this enormous market share -- and apparent demand for the product -- the company does not necessarily need to cut the price of the hardware, especially when you consider that the company has experienced weakness in some of its other businesses -- making the profit derived from PlayStation that much more important," he said.
Williams also said he expects the price of Sony's older PlayStation One console to be cut to $79 from $99.
As for Nintendo Co. Ltd.'s GameCube, which came out three days after the Xbox at a price of $199, Williams said a price cut at E3 was unlikely, though a cut to $149 is possible this fall as Nintendo releases a number of anticipated game titles
News source: Yahoo
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