News[As part of his monthly NPD U.S. physical retail video game sales analysis, Gamasutra analyst Matt Matthews looks at the effect August's PS3 price cut has had on sales of the console, and where it stands compared to rivals Xbox 360 and Wii.] On August 16, 2011 at Gamescom in Cologne, Germany, Sony issued a global price cut for its PlayStation 3 system, including a $50 price cut in the United States, almost exactly as we suggested last month. With the price of entry now at $250 for a 160GB PlayStation 3, many anticipated that the system would see a resurgence in sales throughout August, a surge that could continue throughout the remainder of 2011. It had been a full two years since Sony issued an actual price cut to its flagship console. With the introduction of the PS3 Slim model back in August 2009, the price of the system went from $400 to $300. As the company focused on profitability, it has stubbornly stuck to that price and one gets the impression that the current $50 cut was given only grudgingly. The reality is that the PS3 is the third-place console for this generation in the United States and will likely remain there for the rest of this hardware cycle. If Microsoft were to cease Xbox 360 sales today and PlayStation 3 sales were to continue at their current annual rate for two years (an unlikely occurrence in any case), Sony's platform would still not have caught up. Fortunately for Sony, it has reached enough of an installed base in the U.S. – 17.5 million systems by our estimates – that it cannot be ignored by publishers. Taken as a whole, the high-definition console space in the U.S. is split about 40/60 between Sony and Microsoft. The figure below shows the PlayStation 3 and Wii installed base sizes relative to the Xbox 360 installed base.
This shows just how far Sony has gotten behind its two rivals, the rapid growth and slowdown of the Wii, and the release of several key hardware models. It also shows the net effect of Sony's price cuts: far from helping Sony gain ground, they have merely slowed the rate at which the PS3's base has fallen behind.
Last month we said that the key questions were when Sony would cut its price and by how much. With those satisfactorily answered, we move now to how the price cut will accelerate sales, and for how long.
As to the former, we begin with the actual sales figures themselves. We estimate, based on comments made in Nintendo and Microsoft press releases, that the Sony PlayStation 3 sold between 215,000 and 220,000 units in the United States in August 2011. For the NPD Group, that four-week sales period included 12 days during which the PS3 was available at a reduced price.
The figure below shows the estimated average weekly sales rates for the PS3 for each month this year. The shadowed bars are the same figures but for 2010.
By this measure the price cut appears to have increased sales for the month by about 50 percent. However, the fact that the price cut was active for only 12 days means that the effect on the weekly rate was certainly quite a bit more pronounced.
If we assume that the rate from July (about 36,000 units per week) continued for the beginning of August, then Sony sold approximately 130,000 PS3 units after the price cut. That's approximately 78,000 units per week – or over twice the rate seen in July.
The actual change is likely somewhere between these extremes, and that's good news for the present, since 60,000 – 70,000 units per week outside of the holidays is a very solid rate of sales. In effect, the PS3 has been restored to the relatively strong sales it saw earlier this year.
How its price cut plays when the holidays arrive is another matter.
The $300 PS3 Slim was considered a good value by consumers in late 2009, but Microsoft has made a lot of progress tipping the value proposition in their favor. The Xbox 360 S Model and heavy Kinect promotion have combined with the platform's existing strengths (name brands like Halo and Xbox Live's feature set) to make its $200 entry-level price very popular with consumers.
In July, the PlayStation 3 sold for about $310 on average while the Xbox 360 sold for about $280. If consumers think that the Xbox 360 offers a better value, then the $50 PS3 price cut could bring the PS3's average price below that of the Xbox 360 without actually driving PS3 sales higher than Xbox 360 sales.
Except for Blu-ray playback and Sony-exclusive software, the Xbox 360 will likely look like a good alternative to the PS3 this holiday season. That will likely cap the rate of PS3 below what we saw in the last four months of 2009 (when the PS3 Slim did exceptionally well) and keep the PS3 below 5 million systems for the year. (Worldwide, Sony expects to sell 15 million PS3 systems between 1 April 2011 and 31 March 2012, a quantity equal to the previous fiscal year's sales.)
Truly, that 5 million will be their best calendar year ever in the U.S. but it will still likely put them behind both the Xbox 360 and the Wii for 2011.
[For more from Matthews on August U.S. declines in physical software sales, and how the 3DS price cut affected sales of the handheld, read the full Gamasutra feature.]
Analysis: How PS3's Price Cut May Stave Off Further Market Share Loss
Gamasutra analyst Matt Matthews examines how PS3's August price cut affected its sales, stating that the cut won't necessarily help PS3 gain ground, "merely slow the