Can Price Cuts Revitalize Console Sales?

Can Price Cuts Revitalize Console Sales?

Maybe the current generation of game consoles is wheezing and writhing in the shadow of upcoming systems like the Wii U and the PlayStation Vita, or maybe the digital and free-to-play markets are increasingly eating up gamers’ time. Either way, sales of boxed retail game product appears to be stagnating in Europe and the UK.

UbiSoft believes that price cuts for the Xbox 360 and the PlayStation 3 will shock some new life into the fading consoles.

“[Game revenue in] the UK is declining quite fast. It’s declining, if we don’t take into account the digital revenue,” Ubisoft CEO Yves Guillemot told GamesIndustry.biz in June. Guillemot then speculated that it’s highly likely that sometime later this year Sony and Microsoft will feel “pressure” to cut the prices of their consoles given the Wii price cut that occurred last spring.

A price cut would undoubtedly be a good short-term solution for the plodding retail situation overseas: There are plenty of gamers who own an Xbox 360 or a PlayStation 3, but would enjoy owning both–and the PS3’s Blu-ray player is definitely enticing. But would a price cut serve well in the long-term?

After all, Nintendo will be the first out the door with a next-generation console (not including the PlayStation Vita, which is a handheld). Could it be that people are saving their money for Nintendo’s next system? Would they throw away any measure of their entertainment budget on an “old” system until they at least got a better idea of what the Wii U will offer?

The comments thread on GamesIndustry.biz’s story garnered some very interesting suggestions on what Sony and Microsoft should do to revitalize their stakes in the industry without resorting to price cuts. One commenter, an artist at Crytek named Richard Gardner, said that Microsoft and Sony should hold off on price cuts, gather their resources, and launch a “massive attack” on Nintendo at next year’s E3. Then, once Sony and Microsoft have revealed new consoles that will (presumably) be more powerful than the Wii U, they should slash the prices of the PlayStation 3 and Xbox 360 and entice gamers into waiting for the follow-up systems around the corner.

“It’s not so much about being profitable for that year, but crushing your competitor before they get the chance to do the same to you,” Gardner wrote.

Another commenter, a student named James Finlan, concurred. “That is exactly the approach they should take,” he wrote. “Literally cut the price in half a week before Wii U launch and cut them right out of the market for at least 6 months, just as they are recovering you announce your own next-gen machine with specs 4x of greater those of of Wii U. At that point both Microsoft and Sony give themselves a huge opportunity to steal bucketloads of marketshare from Nintendo.

“This time around [Sony and Microsoft] both need to be a lot smarter, why it took them 4 years to get some form of motion control out is beyond me. They should have just cloned the Wii controller idea and cut them off at the knees way before they swallowed nearly half the market.”

But Joe Winkler, a salesman in game retail, brings up a very good point: As far as modern game consoles go, the war isn’t just about price cuts and system power. It all comes down to peripherals (like the Kinect) and software.

“People don’t recognize offers if they didn’t show interest for those things in the first place,” Winkler wrote. “It’s not always a question of “how much does it cost” it’s a question of “what can I do with it?”

At this point in time, we know next to nothing about Sony and Microsoft’s plans for their future consoles. While launching an “attack” against the Wii U is an interesting suggestion, it’s not a safe one unless Microsoft and Sony have something substantial to back it up by E3 2011. What’s more, Nintendo’s number-one strength is its franchises: Fans of Mario, Zelda, and Pokemon won’t easily turn away from the Wii U. The next PlayStation and Xbox 360 probably won’t dazzle with specs alone unless it has some seriously compelling games in a variety of genres to back up those specs.

In other words, price cuts to the Xbox 360 and PlayStation 3 are the best way for Sony and Microsoft to pep up sales in the UK and Europe for now. It’s not an exciting plan that will give rise to a coup, but it’s a wise way to woo gamers into adopting both an Xbox 360 and a PlayStation 3. If the price cut is deep enough, even a gamer who’s saving up for a Wii U might be interested in buying after all.

About Nadia Oxford
Nadia is a freelance writer living in Toronto. She played her first game at four, decided games were awesome, and has maintained her position since. She writes for 1UP.com, Slide to Play, GamePro and other publications, and is About.com’s Guide to the Nintendo DS.

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