Iria

The latest research report from Susquehanna Financial Group analysts Jason Kraft and Chris Kwak suggests that both Sony and Microsoft will soon be taking the ax to the list prices of their current generation consoles. They note that Sony has kept the price of the PS2 constant at US$150 for the last 21 months. With the launch of the PS3 slated for some time later this year and Microsoft's new Xbox 360 already out, now is the obvious time to make such a move. The report draws a parallel with the situation in 1999, when Sony cut the price of its original PlayStation to US$99 almost a year before the release of its new console. With the PS3 now less than a year away, Kraft and Kwak are surprised not to have seen price cuts already—but word on the street is that they will be here soon.

"While it is not impossible that Sony's PS2 hardware price will remain at $150, we believe a very high probability exists that a price cut will occur in CY06 [Calendar Year 2006]. Last week, GameStop mentioned during its Holiday 2005 sales call that Sony may drop PS2's price 13% to $130 by E3 2006 (May 10-12). PS2 software sales have slumped recently and a hardware cut may attract the most value-conscious customers; history has also proven that Sony will cut console prices deep in a cycle. In addition, a price reduction may clear excess retail inventory prior to a North American PS3 launch."

Sony's not the only one expected to to play games with its pricing. Microsoft actually has more reason to do so that Sony, since its next-generation console has already been released and the company would no doubt like to move the remaining Xbox units in its warehouses. The new price point for the original Xbox is expected to drop to US$99, which would give Microsoft a price advantage over Sony on its older hardware, and the advantage of current availability on its new hardware.

"We also believe Microsoft will aggressively drop the Xbox price from $150 to $100. Such a move, in our opinion, would not harm potential Xbox 360 sales as that console's supply increases; anyone waiting for Xbox to drop to $100 or $130 is most likely not planning to spend $300-$400 for a next-gen console anyway. Slashing Xbox to $100 also helps Microsoft maintain or build unit market share for current-gen consoles."
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Read More / Source: Ars Technica