Console Wars: The Effect Of Price Cuts On The Xbox 360, Wii, and PS3

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While the Nintendo Wii continues to have a stranglehold on console sales, both worldwide and in the United States, the Xbox 360 and PS3 are battling it out for the the second place position for year-to-date sales. Just a little over two months ago, Sony announced that they would be slashing the price of their game console, the PS3, to $299. Microsoft quickly followed suit, and in just ten days dropped the price of their most expensive console, the Xbox 360 Elite, to $299. Nintendo, who has sold nearly double the number of consoles worldwide as these two, decided to lower the price of the Wii on September 27th to $199: this was the first time since its inception that the Wii has had a price cut. All three console manufacturers hoped that the decrease in price would help them to increase sales and finish the year on a strong note. The results have been mixed: while all three consoles have seen an increase in sales, the PS3 has seen astonishing growth in the US and abroad, and has wrestled the second-place position in worldwide YTD sales from the 360. As for the Xbox, even in its upgraded Elite form it has seen only minimal gains since the price drop.

Cumulative Year To Date Sales Worldwide

Cumulative Year To Date Sales Worldwide

Total Worldwide sales to date for the Wii are sitting just under 55 million consoles sold, while the Xbox 360 and PS3 are at 32.7M and 25.7M, respectively. The year-to-date worldwide sales are a bit different, with the Wii outselling both its competitors at 11M, and the PS3 and 360 at 6.6M and 5.9M. Where the sales figures get interesting are when we compare the number of pre-price-cut console sales, with that of sales post-price-cut.

Before Sony cut the price of the PS3, the Xbox 360 sold 4.53M units worldwide YTD, compared to Sony’s 4.12M YTD. Since then, the PS3 has outsold the 360 by 1.1M units (thanks to the PS3 Slim, most likely). What’s even more interesting, as you can see in the graph below, is that Sony’s biggest surge in sales happened two full weeks after Sony’s price reduction – right after the price reduction in the Xbox 360. The Wii also benefited from their small decrease in price as their sales went from hovering around 175K a week to over 350K the week after the price drop, to now what is nearly 400k a week. So why the marked difference in effectiveness between the three, and why did sales increase for the PS3 only after Xbox’s announcement?

Weekly Sales Worldwide (Sep-Oct)

Weekly Sales Worldwide (Sep-Oct)

The answer to the first part of the question is quite simple. The Nintendo Wii has outsold the other two consoles since its debut. It appeals to a broader user base, and the recent price break made it that much more accessible to those who don’t have a console. More importantly, its broad user base is different than that of the 360 and PS3′s. Although the Nintendo Wii is not as advanced as the other two consoles, (on a specs basis) its motion sensor technology coupled with the success of titles such as Wii Fit brand the Wii as not only a video game console, but a fitness and lifestyle enhancer. This difference, along with the decrease in price, is why the Wii is again outselling both of its competitors.

The difference in the effectiveness of price-cuts for the PS3 and the 360 is a bit more complicated. These devices, for the most part, appeal to the same demographic: those who buy a console primarily as a gaming platform. However, the biggest difference between the two consoles is that the PS3 features a Blu-Ray player. It seems that the PS3′s price cut, making it the same price as the 360 Elite, caused consumers to flock to the system which will let them play their precious Blu-ray discs.

The surge in sales for the PS3 didn’t happen until after the Xbox’s price announcement for a simple reason: Microsoft had been saying that a price drop was imminent and consumers were waiting to compare the two deals. Unfortunately for Microsoft, by gradually phasing out the traditional Xbox Pro model and only leaving their bare-bones Arcade model (it doesn’t have a built-in harddrive) and their higher priced Elite, the PS3 became a more enticing deal for many consumers. Had Microsoft cut the price of their Elite to below that of the PS3, or better yet, priced the Xbox 360 Pro at $199 (the price of the Arcade SKU) instead of phasing it out, then they might have seen the same growth in sales that the PS3 has, and could possibly have taken some sales away from the Nintendo Wii.

While all three makers have seen a higher demand for consoles since the price drops, the PS3 is the clear-cut winner thus far. They have surpassed the 360 in worldwide YTD sales, and if they have a strong end of the year, could possibly take the number two spot in YTD sales in the US, where they have historically struggled.

Sales numbers and graphs were collected from VGChartz. For more information on how they gathered their sales figures, click here.

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