July 23, 2002 11:45 AM PDT
Price cuts boost game machine sales
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Sales of Microsoft's Xbox and competing video game consoles jumped substantially following price cuts in May, according to sales figures compiled by research firm NPD Funworld. Xbox sales increased 131 percent in the two months following the price cut, NPD analyst Richard Oh said, compared with a 114 percent jump in the same period for Sony's PlayStation 2 and a 68 percent increase for Nintendo's GameCube.
"All three got really healthy increases," he said, "especially considering that summertime is usually considered the slow season for the game industry."
Prices for each of the game machines were trimmed in May, shortly before the game industry's E3 trade show. Microsoft and Sony both marked down their consoles from $300 to $200, while the GameCube went from $200 to $149. Analysts predicted the cuts would help spread video games to a more mainstream consumer audience.
Microsoft last week reported that it had sold 3.9 million Xbox units worldwide during its 2002 fiscal year, which ended June 30, at the high end of lowered estimates the company gave after the console's disappointing debuts in Japan and Europe. Sales continue to be minimal in Japan, with the latest figures from research firm Dengeki showing year-to-date Xbox sales there at about 236,000, compared with 2.08 million PlayStation 2 units. The PlayStation 2, which launched a year before Xbox, has sold more than 30 million units worldwide.
A Sony executive said the company's internal figures show PlayStation 2 sales more than tripling since the price cut, with a weekly sell-through rate of 140,00 to 150,000 units now, compared with about 50,000 before the price cut. "Every trend to date seems to indicate we're on track to have another phenomenal year," said Jack Trenton, executive vice president with Sony Computer Entertainment America.
Schelley Olhava, an analyst for research firm IDC, said entering the market a full year ahead of its competitors has given Sony an unshakeable lead.
"The truth of the matter is Microsoft is never going to catch up with Sony, and they know that; they're never going to have the installed base Sony does," Olhava said. "The best Microsoft can do is keep pushing up the installed base to convince publishers to make more games for Xbox."
Xbox game sales have been unusually strong, however, with Microsoft tallying more than 20 million Xbox titles sold worldwide, an average of almost five games per console. Typical "attach rates" in the game industry are about three games per console in a system's first year.
Olhava said Microsoft needs more games that mimic the must-have appeal of "Halo," the million-selling action game that helped drive initial Xbox sales. "It's the game every gamer wants to play, and it's only for the Xbox," she said. "They need to come up with other titles like that that really capture the attention of gamers."
Microsoft also announced that it would expand Xbox sales into new regions, including Taiwan, Singapore, Hong Kong, South Korea, Mexico and New Zealand. Other game companies have steered clear of some of those areas due to piracy concerns--Hong Kong is the home base for the largest retailers of "mod chips," which allow consoles to play pirated games. But John O'Rourke, Microsoft's marketing director for Xbox, said the company expects success for the Xbox in those regions.
"We feel very confident in the anti-piracy features we've built into the Xbox," he said. "We think these can be great markets for us. Some of these areas are hotbeds for online gaming, so we see this as a great way to bring Xbox Live to a larger audience."
