Are High Prices For Next-Gen Gaming Consoles Propping Up The Market For Old Machines?

from the the-smurfs-game-never-cost-this-much dept

The talk of the video game industry at the moment is the imminent launch of Nintendo's next-generation Wii console and Sony's long-awaited (and oft-delayed) PlayStation 3. But despite all the hype, recent earnings reports reiterate that it's older consoles that generate all the money in the games business, with analysts surprised by the strength of sales of games for the six-year-old PS2 and the two-year-old Nintendo DS. This is to be expected, on one hand, since there are so many of the older machines in circulation: more than 106 million PS2s have been sold, and though Microsoft is thrilled with Xbox 360 sales, only 6 million of the console have been sold since its launch a year ago. What makes the strength of PS2 game sales so surprising is that as the release of a next-generation system gets closer, many gamers tend to hold off on purchases, wanting instead to spend their money on new systems and games. Game publishers also tend to slow down releases, working to create games for the launch of the newer platforms. However, price sensitivity seems like it is playing a big role here. For instance, Sony recently cut the suggested price of the PS2 down to $129, whereas the Xbox 360 starts at $300 (with no price cuts forthcoming), and the PS3 will start at $500 -- not to mention games for the newer consoles typically run about $60. That might be acceptable to video game companies' core demographic, but as a wider range of people get interested in gaming and are looking for games that aren't necessarily based on ultra-realistic graphics and surround sound, it seems unlikely that they'll jump in at the high end of the market, and flock instead to cheaper systems with cheaper games. This means the supposedly old and busted likes of the PS2 -- which is currently outselling the Xbox 360, incidentally -- and other older machines could have some life left in them yet.

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  1. icon
    The Dukeman (profile), 31 Oct 2006 @ 11:05am

    Price is still King.

    What the newest generation of console, be they already born (XBOX 360) or in gestation (Wii, PS3), bring to the party is compatibility. The point could be made that what these consoles really are is a standardized version of what the high end PC gamers have been building for years, without the compatibility issues. You could call it a hybrid of game console and high end game PC. As I see it, the high end gamers are the only real market for these so-called consoles, especially with their prices. Or maybe those that want to be high end PC gamers who almost, but can't quite afford the hardware. Either way, the market is very limited compared to the multitude of household console gamers around the world.

    The PS2 can be purchased all day long new or refurbished for under $100, and can be repaired with a new drive for $60 (retail) or less. It will continue to lead a healthy life for years to come. The useful life of a game console is over 20 years, and depends mostly on the availability of compatible software and parts (the same goes for cars: parts and compatible fuel). I'm sure if anyone has an old Atari game system in storage somewhere, they could plug it in and it would function just fine. The current generation consoles have now reached a new market: those who couldn't afford to be console gamers at the retail prices. And there are many, many, of those people. Just as many middle class people become poor as become wealthy in todays economy.

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