Analyst predictions have begun to hint at a possible price drop of $20 for the PlayStation 2 in the coming weeks, bringing the console from $149 to $129 in the North American market. This isn't the first time such rumors have surfaced, but having both E3 and the November launch of the PlayStation 3 on the horizon gives extra credence to the possibility of a drop in price for Sony's current console.
"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," wrote Colin Sebastian, senior research analyst for Lazard Capital Markets in a recent memo - though other analysts seem to disagree on the precise timing of this move.
If proven true, it seems very possible that Microsoft will follow suit with a similar drop in price for the Xbox, though to what degree is guesswork at best. The company seems to have become increasingly disinterested in the original Xbox since the November 2005 launch of the Xbox 360, and some theorize that an even more drastic price cut, to $99 for example, could be in the cards. But with production of the first Xbox essentially ceased, and a switch in GPU manufacturer from the Xbox to Xbox 360 making simultaneous production less likely, it may be that Microsoft will continue to de-emphasize the first Xbox by simply not varying the price at all.
"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," continued Sebastian.
The price reduction could be just what the industry needs, according to a recent report
regarding an alarming decline in current generation software sales. A report issued by Wedbush Morgan Securities analyst Michael Pachter predicted declines of current generation software sales expected to remain at around $130 – 150 million monthly through 2006.
That said, a cut in current generation hardware prices could encourage added consumer spending on related software while they wait for the launch or added availability of next-generation platforms. “It appears that 2006 is following a similar pattern to 2000, when the last console transition began," said Pachter in the recent report, "Consumers have slowed purchases of current generation console software while waiting for the opportunity to purchase an incredible next-generation console, the Xbox 360, and its associated software.”