Analyst: PS2 Price Cut Coming Soon

April 12, 2006 | By: James Brightman

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Is the PlayStation 2 about to get its price slashed? According to one analyst the answer is yes. In fact, the PS2 may get a price drop in advance of E3. And it's also possible that Microsoft could cut the price of the Xbox soon after.

Colin Sebastian, Senior Research Analyst, Internet and Interactive Entertainment, at Lazard Capital Markets has sent out a memo stating that industry checks suggest that a price cut on Sony's PlayStation 2 console is likely to occur within the next few weeks.

Although some analysts have said a price cut to $99 for the aging console would be a possibility, Sebastian believes the cut would be a more moderate $20 drop.

"We now believe a price cut on Sony's PS2 is more than likely ahead of the E3 video game conference. Specifically, our industry checks indicate that Sony is planning to cut the PS2 price to $129 from the current $149 before the end of this month," he said.

Furthermore, Sebastian thinks that Microsoft could react to the Sony cut by slashing the price of its own current-gen console. "We believe Microsoft could follow suit with a similar price cut on the original Xbox; however, the impact of an Xbox cut would be limited due to declining supplies of the console," he noted.

As for the more tantalizing $99 price tag for PS2, Sebastian said, "$99 [is] probably still a year away. There is still a possibility that Sony will follow up with a price reduction on the PS2 to $99 this year, but it is more likely, in our opinion, that another price cut will be implemented in 2007."

Whether the PS2 is cut to $129 or $99, in general hardware price drops should help boost the market somewhat, which is especially needed given the rapid decline in current-gen software sales.

"...hardware price cuts can positively impact video game software sales through a boost in the hardware installed base as well as additional foot traffic in retail stores," Sebastian explained. "Hardware price cuts can boost seasonally slower game sales. In our opinion, hardware price cuts are necessary not only to drive demand at the end of a console cycle, but also to bring the current-generation consoles within reach of more value-oriented customers."

He then added, however, "On the flip side, hardware price cuts can also result in additional downward pressure on current generation software prices."