PS3: price does matter; Xbox 360: maybe not

Stan Beer
Tuesday, 10 July 2007 20:02

Opinion and Analysis

Alright then, we know what's going to happen next. Microsoft, after nervously watching an instantaneous PS3 sales spike in reaction to the US$100 price cut in the world's biggest games market, is going to follow suit with its own US$50 cut to Xbox 360. But will it work? The short answer is no.

The big bugbear for gamers with PS3 has been price from the get go. Yes there aren't many games yet, but the Wii has the same problem and it's selling up a storm. Everyone knows the games are coming. However, from the very first time Sony announced its PS3 pricing, there has been non-stop grumbling in the media and blogosphere about the high cost compared to its two rivals.

As a result, PS3 sales have had a sluggish start, while the sweetly priced and surprisingly innovative Wii has sprung out of the blocks like a sprinter and the moderately priced early to market Xbox 360 continued to maintain and even widen the one year sales lead it established over PS3.

However, there was no way that Sony's more than 100 million strong loyal fan base was just going to evaporate into thin air. Many of those PS2 users who weren't among the 4 million or so early adopters knew a price cut was coming sooner or later and were simply prepared to wait. Evidence of the pent up demand became apparent soon after the price cut announcement with US retailers reporting huge spikes in PS3 sales.

And, oh yes, the PS3 is now once again the equal cheapest Blu-ray player on the market.

Meanwhile, the games division at Redmond must be pondering what effect the obligatory Xbox 360 price cut forced upon it will have on console sales. Microsoft, probably already knows the answer and it's not pretty. Having been released early and at about the right price point, sales have been steady and there is no pent up demand for Xbox 360. A US$50 price cut is probably not going to spur a hungry horde of loyal Xbox users to race out and grab a new Xbox 360 console.

What's more, the Sony announcement couldn't have come at a worse time for Microsoft. The company has just admitted that Xbox 360 has serious hardware quality issues and is preparing to cough up more than US$1 billion to alleviate the concerns of customers who have returned faulty consoles. With failure rates of up to 30% being reported, would be Xbox 360 customers are not likely to be inspired by a US$50 price cut.

Outside of North America, Playstation fans will be annoyed if Sony doesn't now pass on a substantial price cut - especially since the PS3 was already even more expensive in Europe and Asia than in the US. As for the Xbox 360, right now intending buyers would probably be more concerned with the dreaded Red Ring of Death than price.