As part of his "August 2007 Video Game Monthly" report, Wedbush Morgan Securities analyst Michael Pachter talked about the current state of the industry and he speculated on possible price cuts coming in the near future.
Although he does not anticipate any further price cuts on the PS3 this year following the drop on the 60GB model from $599 to $499, he does believe Sony will have another opportunity to drop the PS3's price next year, right on time to coincide with the launch of the recently delayed Grand Theft Auto IV.
"We do expect Sony to be in a position to cut the price of the PS3 in early 2008, when blockbuster games Grand Theft Auto IV and PS3 exclusive Metal Gear Solid 4 will launch," he said.
Timing a price drop around a huge release like GTA IV could be a solid strategy. Microsoft just announced its own price cut on the 360 to coincide with the juggernaut that is Madden Football. It'll be interesting to see what the up-tick in sales is like as a result.
Pachter also speculates that the PS2 could finally receive another price drop this holiday season. A number of analysts have been speculating for some time that Sony would bring the old console down to the $99 sweet spot. The question, however, is: Does Sony need to drop the price on PS2? In June, the PS2 sold through over 270K units in the U.S. – quite respectable.
Overall, Pachter believes that hardware sales will continue to be hindered by high pricing. "We continue to think that hardware unit sales will be more modest than they were in the analogous period of 2002, when console prices averaged under $200. We continue to expect higher average console prices to be an impediment to rapid sell-through of hardware, and we expect cycle-to-cycle declines of 10% or more for hardware sales to persist through the end of summer 2007," he said.
Nevertheless, Pachter is quite encouraged by the current console transition. "Should industry sales continue to be strong, we think that investors concerns about a secular shift away from video games will subside, and we expect the U.S. publisher stocks to continue to appreciate. It may take until after the holidays when concerns about the 'stalled' cycle are fully alleviated, and we expect volatility for video game stocks through the year, though with an upward bias. We believe that investors should opportunistically add to positions of Activision, Electronic Arts, GameStop, THQ, and Ubisoft, and recommend that investors sell shares of Take-Two," he concluded.
by James Brightman
source:gamedaily.com
