PS2 and XBox go head to head with price cuts

Independent games retailers received a shot in the arm with the news that Microsoft and Sony had made identical prices cuts to their Xbox and PlayStation 2 consoles.

Prices on Xbox and PS2 were cut from $399 to $329, in a move that All Interactive Distribution managing director, Sherard Kingston, said would give independent retailers more of a look-in against the mass-market retailers.

“There’s nothing like a straight-up lower price for the customers and the independents,” Kingston said.

The move away from discounted bundles would end the sacrificing of margin on additional items, and could stimulate more of a relationship with end user customers, he argued.

The mass merchants, along with games specialists such as Electronics Boutique, have a stranglehold of 80 to 85 per cent of the console market.

Mass merchant retailers had been able to sell “considerably cheaper than wholesale price”, Kingston said, and, in combination with retail stores credit cards and customer reward points, had presented a “fairly compelling argument” to customers.

“We had a bizarre situation where indys were purchasing their hardware from mass merchants, and breaking down the bundles,” Kingston said. “We’ve all come to the conclusion that it’s impossible to make margin from the hardware.”

The move away from bundles could also help indys gain customer loyalty, he said.

A bundled sale of console, peripherals and games might mean a retailer “won’t see the customer again for four months”, making it hard to build a buying habit with the customer, he said.

Inform research figures for the first four weeks of May gave PS2 58 per cent of the console market, Xbox 34 per cent and Gamecube had 8 per cent.

Inform research director Phil Burnham said the figures reflected a “slow rise in the ratio of Xboxes to PS2s".

While the pricing of consoles could stimulate sales “the other factors are the number and quality of games,” Burnham said. “We have seen PS2 lose a little market share in terms of titles.”

Exclusive rights to big games tended to see console market share swing between vendors, Kingston said. “PS2 has a massive software collection, but things are beginning to even out now."

If Microsoft was to continue to chip away at PS2 market dominance, it would “need some big, exclusive titles for Xbox”, he said. One such title was Doom 3 which would only be available for Xbox.

Popular games could have a very strong impact on console sales, Burnham said, pointing to the handheld gaming console market. While the handheld market had been “dropping fairly substantially” over the past year, the release of new Pokemon games for Nintendo’s Gameboy Advance had seen a reversal of this trend, he said.

“It does show that as with most of the console market, it’s increasingly title driven.”

The latest price cuts bring Xbox and PS2 in line with overseas price drops.

Microsoft said the price drop kept "Australia in line with new international prices for the console from the US and Europe”. Sony said: “Local market conditions have allowed us to facilitate more affordable prices in Australia.”

In other console news, Microsoft, this week, kicks off its consumer beta test of its Xbox Live online gaming service, that is set to debut in October.

Sony is already beta testing an online gaming service, and has several new consoles on the cards, including PSX, the next generation of PlayStation, that will include a built-in DVD recorder and hard drive.

While the PSX is expected to be available in Japan by year’s end, there is no word on when it will hit Australia.

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