Analysts: PS2 Price Cut on the Horizon
by VGLN Staff

Monday, May 13, 2002

Expect a price cut as early as tomorrow - PS2 to $199; PSOne to $49.

Gaming industry analysts report that Sony Entertainment of America will lower the price of the PlayStation 2 console to $199 as early as tomorrow, with the PSOne price being lowered to $49.

A source inside Sony and three retailers have also confirmed the cut. The reduction from $299 is expected to steal some of the thunder from Microsoft, which is expected to announce a price cut on the Xbox on May 20 to $199 as well.

"We have argued in previous days that slowing retail momentum and a relative paucity of new releases should set the stage for a price reduction on the PS2 at E3 or before," said John Taylor, a video game industry analyst with Arcadia Research and Investments. "We are also hearing that an announcement could come as soon as tomorrow."

"What this reduction will mean is that it’s going to take Sony, which is currently running in the six to seven million unit range, and give them a tail wind that should propel them to a nine to 10 unit run rate."

Official sources at Sony would not comment, saying nothing has been announced yet.

The news comes on the heels of Microsoft's recent decision to lower the price of the Xbox in Europe and Australia, with indications that the U.S. price will also be lowered to $199.

Earlier this week, Edward Williams, an analyst with industry consultant and investment bank Gerard Klauer Mattison, told GameSpyDaily that the Xbox cut would cause a ripple effect at Sony.

"It's not a slam dunk for Sony to follow right away with a price cut. But they are also under growing pressure from retailers to follow Microsoft’s lead to $199.99," Williams said.

The news of price cuts isn’t entirely surprising, however. But with both Microsoft and Nintendo also recently announcing strategies for online gameplay for their respective consoles, and all three companies seeking to make a big splash at next week’s Electronic Entertainment Expo, it seems that a console price war is in full effect.

Over-the-counter sales data indicates that sales have spiked during past hardware price reductions.

On May 16, 1996 when Sony dropped the price of the PlayStation from $299 to $199 sales jumped from 1.3 million units in April to 2.6 million units in May according to an Arcadia Investment chart of retail sales activity. Then on March 3, 1997, when Sony dropped the price again from $199 to $149, there was a two million-unit spike in system sales.

Source: GameSpy