Console Wars: Nintendo Faces Tough Battle as Sony and Microsoft Cuts Prices

Strategic Insights -

The video game industry is heating up with Sony and Microsoft's large cuts to the price of their PlayStation 3 and Xbox 360 consoles, which could challenge Nintendo's dominance in the market. The Japanese company's innovatively successful Wii console, launched in 2006, has been a runaway success, selling over 50 million units worldwide, but its sales have slowed down this year due to the lack of major releases. The price cuts by Sony and Microsoft have created a challenging situation for Nintendo, which has so far maintained its price for the Wii at $249.

Key Takeaways:

  • The price cuts by Sony and Microsoft have improved their competitive position relative to Nintendo, but at the cost of continued losses on each machine sold.
  • The gap between the PS3 and Microsoft's cheapest Xbox 360 has narrowed by $100, making Sony price competitive for the first time since 2006.
  • Nintendo attributes its slower sales of the Wii to the later release of major software titles, but expects this to change with recent releases such as Wii Sports Resort and upcoming games like Wii Fit Plus and New Super Mario Brothers Wii.
  • The number of major game releases this Christmas has been reduced, with several big-name titles, including Bioshock 2, Bayonetta, and Splinter Cell: Conviction, being postponed to 2010.
  • The recession and reduced game releases may limit the effectiveness of the price cuts in boosting hardware sales this Christmas.

Statistics:

  • Over 50 million Wii consoles have been sold worldwide.
  • The Xbox 360 has sold over 30 million units worldwide.
  • The PlayStation 3 has sold over 20 million units worldwide.
  • Sony has cut the price of its PS3 "Slim" from $399 to $299 in the US.
  • Microsoft has held the price of its cheapest Xbox 360 Arcade at $199 and cut the price of its Elite model to $299.

Sources:

  • Robin Harding in Tokyo, Electronic equipment News analysis
  • www.ft.com/techblog