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The Divnich Tapes: Xbox 360 Price Cut Hardly Hindering PS3 Sales
The Divnich Tapes: Xbox 360 Price Cut Hardly Hindering PS3 Sales Exclusive
October 20, 2008 | By Jesse Divnich

October 20, 2008 | By Jesse Divnich
More: Console/PC, Exclusive

[Following last week's release of NPD's September North American sales figures, EEDAR's director of analytical services Jesse Divnich presents his Gamasutra-exclusive study of September's hardware and software trends.

In this analysis, Divnich looks at how Microsoft's recent Xbox 360 price cut hasn't affected PlayStation 3 hardware sales.]

When Microsoft announced its new Xbox 360 pricing scheme in September, most industry experts agreed that the price cuts would have two effects:
  1. It would increase the sales for Xbox 360 hardware, and
  2. It would decrease the sales of its competitors, mainly Sony's PlayStation 3

Our data indicates, however, that a price cut from either system plays a minimal role in affecting the others' sales, with the most recent example being the September 2008 price cut by Microsoft.

While Xbox 360 weekly sales jumped by 42 percent, it played no role in hindering PlayStation 3 sales, which actually saw a small (.1 percent) increase.

In the same respect, looking back to last year, the PlayStation 3 had a 100 percent increase in weekly sales following its July 2007 price cut, but was of no nuisance to the Xbox 360, which achieved a 7 percent gain in the same month.

While it is tough to conclude using only a few data sets, both situations show an emerging trend -- a price cut for one system does not hinder sales of the competition.

While I still maintain my original analysis that the current PlayStation 3 price point is too steep to spur sales this holiday season, it may not affect its overall potential install base in the end.

In other words, those potential PlayStation 3 owners who are turned off by the current high price point may just delay their purchase until prices come down, instead of buying the cheaper Xbox 360.

Of course, that would only be true if pricing was the only differentiating feature that drove hardware sales, and, as we will see tomorrow, there is another factor -- exclusive releases -- that plays a much bigger differentiating role than hardware pricing.

We should note that we could not find any practical data points looking at sixth generation consoles since most price cuts between the original Xbox and the PlayStation 2 happened simultaneously.

[Jesse Divnich currently serves as the director of analytical services at Electronic Entertainment Design and Research (EEDAR). The preceding is the views and opinions of one person and not of EEDAR, The simExchange, GamerMetrics, or Gametrailers.]

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Jay Lee
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Yes and no. We know from ChartTrack (UK) that it did drive down PS3 sales by 8% on a week over week basis post price cut. With that said I have a hard time understanding NPD's logic with the PS3 having a stagnant month in the US if we know for a fact that is not the case across the pond. While it may not be analogous as a straight line comparison a logical deduction would have shown at least a slight decrease. With that said, one month is a very small sample to play with and the next 3 months may provide a better picture.

Matt Ponton
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Couldn't it possibly be that it prevented an increase in sales, in a month where two of the three competitors had major increases from a previous month? This applies to both your '08 and '07 charts.

Steve Watkins
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But what were the software releases for each machine in the time period(s) compared ? People will look at a machine that just got a price cut, but if they don't see compelling software titles, they aren't going to buy the hardware.

Also, PS3 is interesting because they are still being cannibalized

by PS2 hardware sales. That alone suggests to me the BluRay argument isn't the factor Sony had hoped it would be.

Geoffrey Mackey
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It's kinda funny looking back at how the first two years of the PS2 DVD was such a huge factor. It crushed the Dreamcast which had such a great library and a big price advantage. Of coarse there were so many wheels already in motion.

Not sure where I'm going but Steve is right, the majority of people have little interest in Blu Ray especially with the expectation that digital distribution is going to take over.

Even with the new xbox price drop I would think they would come off the shelves faster.