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Sony PS3 Price Drops May Have Kickstarted Overall Console Sales

According to analyst firm iSuppli, Sony's Playstation 3 sales were so strong during the last week in November that they could help lift the entire console market back to year-over-year growth.

Earlier in the fall, Sony finally got around to becoming price competitive with the Microsoft (MSFT) Xbox 360 and Nintendo Wii. And the move's wisdom seemed borne out in last quarter's numbers, with PS3 unit sales up by a third. However, even in October, that wasn't necessary enough to fix the company's problem, if you look at unit sales through the third quarter (which wouldn't include the latest reports). At that point, the trend line was still down (note that the chart is in Sony fisca lquarters, not calendar quarters):

According to iSuppli quoting Sony, during the week of November 29, the company sold 400,000 PS3 units in the United States alone. That was good news for the market segment as a whole:

Global video game console shipments are set to rise to 24.6 million units in the fourth quarter of 2009, up 5.2 percent from 23.4 million during the same period in 2008, iSuppli said. This follows declines of 2.1 percent in the first quarter, 35.7 percent in the second quarter and 10.9 percent in the third quarter.
It's an improvement, but if you look at the overall number, it may not be enough of one. Consoles are still feeling the effects of a stagnant economy. If the vendors perceive that price cuts were the stimulation, it could lead to something more of a price war. Frankly, I suspect that if that were going to happen, it would have by now, as the vendors have to give their distribution and retail chains enough time to react.

But there's another factor, and this is the one making a view of the implications of Sony's actions difficult. How low can they sell before, even with royalty revenue from games, the units are unprofitable? In the case of Sony, they may have still been even before the price cut. The company has been willing to lose money for market share, but there's another competitor: the iPhone. According to data from Apple (via AppleInsider), three of the top games purchased from the app store are The Oregon Trail, The Sims 3, and Madden NFL 10. Although that would seem to suggest a purchase to run a title that someone has already purchased, but perhaps not. Perhaps the iTouch and iPhone are becoming more serious gaming choices than most people realize.

Image courtesy Sony.

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