PS2 price drop speculation

[duffer]

With the recent price drop of the Xbox in Europe and Australia, there's been some speculation that a PS2 price drop is going to happen soon. Here are my thoughts on a potential US price drop for the PS2.

Sony's goal is to maximize long term revenue. To meet this goal, they want to maintain market share, and for a given level of market share, charge as much as possible.

Currently they have something like 90% market share in the US, with the rest split fairly evenly between Xbox and GameCube. Their share of new customers (and also of software sales) is more like 80%, and it's not clear whether or not this share is increasing or decreasing. (It depends very much on which games are avaliable on any given week. Without GTA3 it's possible they would be in a much worse position.)

The relatively slow sales of the GameCube shows that price is not currently the primary factor affecting purchases in the US. So there's little reason for Sony to cut the price of the PS2 right now -- they wouldn't increase sales very much.

Now, when will this situation change? In otherwords, when will the box and the cube start selling in large numbers?

When they have lots of great games.

When will this happen? Not until Fall at the earliest.

Now, to complicate things, there are all sorts of secondary issues:

1) If they don't have good games, the price drop will be seen as an admision of weakness.
2) Since so few consoles are sold between April and September, it doesn't matter very much (from a profit point of view) whether the price drop is made in April or September.
3) If Sony waits until November or later, there's a chance that the higher price will already have been so widely reported that consumers won't realize that the actual price is lower.

Taking all that into account, I think there are two reasonable strategies for Sony to follow:

Scenario 1: Super Agressive. If Sony thinks they have a killer fall game linup, or thinks Xbox or GameCube will have a great E3 showing, or just hates the idea of a strong competitor, I think they will announce a price drop to $199 at E3. The result will be a big groundswell of enthusiasm for PS2. Likelyhood: 60%
Scenario 2: Drop Prices as Nescessary. Sony monitors the sales of Xbox and GC, and drops prices only if they think the other two consoles are becoming popular. (Which wouldn't be until September at the earliest.) Likelyhood: 40%

 

[navanman]

my guess is that sony is going to really go for the jugular and lower the price to $199 to steal the limelight from nintendo,ms.

the price drop should really set them up nicely for a killer xmas season.

 

[Vince]

I predict they'll do the same thing they historically did with PlayStation1 - lower the price to $199 at E3.

 

[PC-Engine]

If SONY lowers PS2 price to $199, Nintendo will lower GC to $150

 

[Tommy]

I don't think Sony will drop the price soon unless Xbox sales start recovering.

Sony is simply dominating at this point.

And should the Xbox sales start to pick up later this year, I've read that Sony might release the PS3 as early as spring or summer 2003....which would probably bury the Xbox for good.

The GAMECUBE's future looks good, regardless of the Sony/Xbox battle. I'm a little surprised at how well the CUBE is selling even before a Mario or Zelda has been released yet.

 

[iscariot]

And should the Xbox sales start to pick up later this year, I've read that Sony might release the PS3 as early as spring or summer 2003....which would probably bury the Xbox for good.

Actually that would bury S0NY, so that will never happen. Anyway, I also think it will be at E3.

 

[V3]

And should the Xbox sales start to pick up later this year, I've read that Sony might release the PS3 as early as spring or summer 2003....which would probably bury the Xbox for good.

No, they won't release PS3 by 2003, even if Xbox pick up, Xbox still got along way to go, but they might start the hype of PS3 by the end of 2003 though

 

[BenSkywalker]

Currently they have something like 90% market share in the US, with the rest split fairly evenly between Xbox and GameCube.

At first I had to double check and make sure that wasn't posted in last November, Sony is losing market share much, much faster then that. As of right now if we use the NPD tracking data the US has roughly 11.9Million consoles sold between the three current set top offerings. Of those, Sony has moved about 71% of them total.

Their share of new customers (and also of software sales) is more like 80%, and it's not clear whether or not this share is increasing or decreasing.

Actually, it has been hoovering between 45%-55% and is on a continual decline trend in the US.

The relatively slow sales of the GameCube shows that price is not currently the primary factor affecting purchases in the US. So there's little reason for Sony to cut the price of the PS2 right now -- they wouldn't increase sales very much.

The Cube isn't a DVD player and has yet to push out a single major franchise while Sony just had their strongest lineup ever pushed out the door. Even under those circumstances the Cube is closing the gap with Sony(they have pulled ahead of the Box in weekly sales in the US). I think that a drop to $199 wouldn't do that much for sales, as MS and Nin would both move if Sony did.

Scenario 1: Super Agressive. If Sony thinks they have a killer fall game linup, or thinks Xbox or GameCube will have a great E3 showing, or just hates the idea of a strong competitor, I think they will announce a price drop to $199 at E3. The result will be a big groundswell of enthusiasm for PS2. Likelyhood: 60%

They can't match up with Nintendo this year, and based on what I have seen to date they can't even match up with MS. They 'used' all of their major franchises last year and with the exception of FF they are not annual titles. Throw on to that Nin's landing Square and a Rockstar announcement for the Cube, MS landing KOTOR as an XB exclusive at least for a while and the rest of their lineup and Sony should be looking at the strength of the competition a but more then in terms of possibility. Right now the Cube and XBox are blowing away the comparable life cycle tie in ratios of the PS2 along with units sold in the US. Sony's single edge in the US at the moment is that they launched early from a marketplace perspective.

Scenario 2: Drop Prices as Nescessary. Sony monitors the sales of Xbox and GC, and drops prices only if they think the other two consoles are becoming popular. (Which wouldn't be until September at the earliest.) Likelyhood: 40%

Following out the sales trends that have been established from January until now Sony could be the third best selling set top console in the US by September. Right now if you compare the total consoles that Nintendo is selling in the US, including the GBA, they are outselling Sony and MS combined by ~25K units a week. Sony is not close to as strong as you seem to be thinking.

All of that said, no matter where they move their price to, MS is going to follow. If they push to $199 then Nin is likely to counter with a drop to $150 if not lower pushing them in to the truly mass market price bracket($150-$99). If that happens, Sony's best shot at not losing marketshare at an even faster rate is if Nin can't produce enough consoles and MS decides to only go to $249(I'd wager rather heavily that MS will match Sony). Sony is losing ground very quickly in the US, the big question is if they will remain happy dominating the Japanese market and see what happens with the Cube launch and XB price drop in Europe or if they will try and act ahead of the curve to maintain their US market supremacy.

 

[V3]

Sony already started their Platinum range, those mid price top games couple with price drop might attract people who haven't got into next generation yet (i.e people that is still with PSX).

 

[duffer]

Ben, if you're going to count Gameboy Advance sales as part of Nintendo's sales, why not count Windows XP sales as part of Microsoft's sales?

I'm kidding, of course. But I just don't see GBA in the same market as the other next-gen consoles.

Perhaps that's the root of the difference is between the numbers you're quoting and the one's I'm quoting?

 

[zidane1strife]

Actually, i think sony's lineup this year is much better than last's year. There will be stuff like GTAIII miami, DMC 2, Onimusha 2, Xenosaga, Kingdom Hearts, Tekken 4, FFXI, Breath of Fire 5, Wild Arms, their online launch, maybe even GT3 concept will launch over here... not to mention a wide variety of platformers, and rpgs...

I've been with many friends who are interested in a ps2, but haven't gotten one because of the price... remember the gcn price analogy need not apply, since ps2 has an insane level of mindshare, and many people have been hyping it's games, thus alot of people want a ps2, but are waiting for da price drop.

In conclusion if sony drops the price to 199$ and not many games get delayed this fall, it's gonna get crazy, sales might as well double from their present point.

 

[BenSkywalker]

Perhaps that's the root of the difference is between the numbers you're quoting and the one's I'm quoting?

No, I didn't include any GBA sales in anything except the one comment about Nin outselling Sony+MS(they are moving more hardware units right now combining GBA and GC vs XB and PS2). The rest of my figures only include GC, XB and PS2. GBA numbers are relevant as it is an extremely lucrative market for developers and Nintendo uses that for leverage to get games made for the GC, but I wasn't using them in my percentage numbers.

If we were to include GBA sales the numbers would be... give me a sec.... 17.7Million consoles sold to date using NPD data with Sony having 47% of the total market while their weekly sales share would be about 32% of the market.

The numbers I posted in my last post was strictly set top consoles, they are losing ground very quickly in terms of their dominant position. If the current sales trends remained Nintendo would actually come out in front in the US followed by MS with Sony bringing up the rear by the end of the generation. It is far too early to say that will be the case, but Sony must be looking at their declining market when thinking about a price drop in the US.

 

[Johnny Awesome]

Of course, we're all ignoring another possibility: That MS drops the price of Xbox in the US first to $199. Showing off about 6-10 games at E3 that can't be done on PS2 and dropping price to $199 would be a bold move by MS and might really hurt Sony. I wouldn't put it past them.

I think Sony has to drop at E3, but I think that MS will follow. They aren't losing nearly as much as people think on Xbox production. Estimates of $200-245 US are what I'm seeing now. That's not that big of a loss to make up, given the excellent software tie ratios on Xbox.

Nintendo will surely go to $149 this year.

 

[duffer]

Ben: Huh, I must go recheck my figures, then.

Zidaine: Regarding Microsoft dropping the price before Sony -- that would be impressive, but seems unlikely. The Xbox has a hard disk and more RAM in it, so it has a built-in cost-of-goods disadvantage to the PS2. Xbox may get some benefit from being made out of standard PC parts, but its natural price point would seem to be higher than the PS2 by at least the cost of a hard disk.

Also, if Microsoft dropped their prices first, Sony could sue, claiming Microsoft was engaged in some sort of predatory pricing. It might be better for MS to wait for Sony to make the first move.

 

[aneep]

i think Sony will announce a price drop at E3 (to $199)
and MS will match it (their reason would be 'competitive pricing')
Nintendo would also follow the price drop i assume to maintain the image as the cheapest console (or some would say 'best bang for the buck')

but if Sony didn't announce any price drop, both MS and Nintendo won't either

all in all, i still think Sony will price drop the PS2 by the end of this year

-aneep-