Microsoft's recent price reduction across the board on all of its Xbox 360 SKUs -- with the lowest-end Arcade model now less expensive than the Wii -- helps trend hardware price points into an "inflection point."
Lazard Capital Markets analyst Colin Sebastian explains that analysis of historical console sales shows that when hardware prices dip below the $200 point, it tends to foreshadow a growth in sales to a mass market audience.
"In addition, given the weaker consumer spending environment, the Xbox 360 should also now be in closer reach of more price-sensitive consumers," he says. Not surprisingly, he predicts Xbox 360 sales to accelerate in the upcoming Fall and Holiday season.
But what about the competing consoles? "At this point, we do not anticipate either Nintendo or Sony to match the Xbox 360 price cut," says Sebastian, citing continuing Wii supply constraints and past remarks by Sony that PlayStation 3 price cuts won't happen this year.
The price reduction for Xbox 360 could also boost sales of Guitar Hero and Rock Band in particular, says Sebastian, standouts in what may turn out to be an overall boost in sales of industry software and hardware both as a result of Microsoft's decision, which he calls "good news" for the entire industry."