Analysts: They Are Never Happy

All year we have been hearing from analysts, including TSA’s favourite Michael Pachter, that what the console business needs is price cuts.  Now those price cuts are imminent though another analyst has stated that they will not be enough to bolster declining console sales.

Back in January Pachter was predicting the PS3 would see a $100 drop in April and that the 360 Premium would receive a $50 cut in June.  He also went against the consensus opinion at the time when he said “we think that concerns about weakening consumer demand for videogames are overblown”.

A little over half a year later and following this week’s release of pretty stark NPD numbers for July, the fifth month in a row that the console business has taken a beating in America, it does not look like those concerns were “overblown” after all.

Next week during GDC Europe/Gamescom we are expecting to learn on Tuesday that the PS3 Slim is definitely real and will bring with it a $100 price cut.  Knowing Microsoft they will likely announce that the 360 Pro/Premium is no more and that the Elite is dropping to the Pro’s price point, $299/£169, either on Monday or within an hour or two of Sony’s Slim announcement to spoil Sony’s party.

At least one analyst, Doug Creutz of the Cowen Group, no longer believes that the price cuts will be enough to revive the fortunes of the console makers while the world’s economies bounce along what is hopefully the bottom of the current recession.

Creutz says that “we are concerned that, given pressures on the consumer, price cuts may not have the stimulative impact to hardware and software sales that they have had in the past”.  He might just be right too.

Not only are gamers and prospective gamers having to be a great deal more careful where and when they spend their hard-earned cash but a large number of the big software titles that drive sales during the so-called Golden Quarter have slipped out of 2009 and into early 2010.

The publicly admitted reasons for all those slips are to give the games a little more polish or to avoid, what was once, a crowded pre-Holiday release window.  While those reasons may well hold for some of the delayed games, buried in financial results and conference call transcripts another reason has often appeared; publishers do not want to release their big titles when the market is at a low point for fear of suffering lower sales and even more rapid price erosion than their games normally experience.

Finally to have one last cheap dig at Pachter for getting a guess wildly wrong and to lend further credence to Creutz’s view let us look at what they predicted for July’s NPD software sales.  Creutz’s estimate for the decline in July’s NPD software sales was 23% whereas Pachter estimated it would be 16%.  In reality the numbers showed a fall of 26%.

The evidence strongly suggests that it will not be a happy holiday season for the console business.

Source: Edge Online