It is an inevitability that each console life cycle will eventually see a decline in sales the more time there is between those consoles and the next generation. As this particular cycle has lasted longer than those prior, the steady drop off is unfortunate if not expected, but that will not stop the console manufacturers from trying to push their hardware in any way possible. Sometimes, these pushes are necessary, as analyst firm Baird Equity Research has stated.
One of the company’s analysts, Colin Sebastian, has recently proposed the need for a price drop, not only for the Xbox 360 and PlayStation 3 but for software as well. Baird believes because gamers know the next generation is inevitable, they see little reason to pick up consoles if they have held off for years. Even Microsoft‘s possibly impending new version of the Xbox 360, priced at $99 with a $15 monthly subscription commitment for two years, is not the ideal step to take in Sebastian’s opinion. The analyst suggested an actual price drop would be a smarter decision for promoting sales, and I’m inclined to agree with him.
Too many options can confuse casual consumers, and Microsoft has already had experience with an excess of models on the market. They would be wise to not repeat the unnecessary mistake of selling the traditional model, the arcade unit, and the Xbox 360 Elite simultaneously when a simple price cut is easy to convey and attractive to buyers.
Regardless of the company’s hardware choices, Sebastian also believes that the price of retail games should be reduced to be more attractive to consumers this late into a life cycle. I certainly wouldn’t complain about prices returning to a $50 price point of years past, but the possibility of Sony taking a loss on royalty rates in the wake of massive layoffs and major gross declines is unlikely at best unless they believe it would encourage highly improved sales.
Sebastian’s suggestions are reasonable attempts to reverse the expected decline in sales, as Baird believes April software sales will dip 25% – 30% from last year’s numbers. This console cycle has broken the mold from what the industry expects, and while some of his advice may seem unreasonable with the current financial situations, it is too soon to rule out any major changes. The industry is experiencing a major shift, and if the companies see these options as sensible business moves, I would be all for shaking up tradition and finding improved ways of producing revenue.