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PS3 Price Cut Boosts Sales

24 Jul, 2007 By: John Gaudiosi

Sony PS3 sales have more than doubled since the price cut.

The PS3 price cut seems to be working.

PS3 sales have increased by more than 135% at Sony's top five retailers since the new $500 price was announced July 9, according to Sony. During this same two-week period, total PlayStation hardware sales have increased 161%, software by 15% and peripherals by 60%.

“The new price on the 60 GB PS3, coupled with our very strong software showing from E3, is certainly paying dividends in terms of impressive sales across the board at retail,” said Jack Tretton, president and CEO, Sony Computer Entertainment America. “This jump in sales bodes very well for us heading into the fall as we launch an impressive arsenal of hardware and software, leading off with the new 80 GB PS3 in August.”

Even before the price cut, Sony products had gathered steam.

Sony had success with all three of its platforms in June, according to data from The NPD data. The PlayStation brand continued to exhibit solid growth with a 21% increase in total retail dollars generated year-over-year in North America to $393 million. PS3 sales were up 21% in June, compared to May's figures. PSP sales increased 31% in June, compared to the same month the year before, and PS2 sales remained strong with unit sales of 270,763 for the month.

The video game industry has continued its record pace through June and throughout the first half of 2007, according to NPD data. June sales of game hardware, software and accessories accounted for more than $1.1 billion, which is 31% higher than last June's sales. For the first six months of 2007, total game sales are already at $6.1 billion, up 43% over the same period last year.

“The industry should realize revenues north of $15 billion in the U.S. once total sales are in for the year [in my opinion],” said Anita Frazier, video game analyst, The NPD Group.

In addition to the PS3 price cut, game sales have been driven by the popularity of Nintendo's Wii and DS. Total console hardware sales for June were $268 million, which was up 69% over last June's total. For the first half of 2007, console sales increased a whopping 98%, to $1.7 billion.

Home consoles topped the June sales charts with Wii selling 381,800 units, despite continued production problems that can't keep up with demand; Xbox 360 moving 198,400 units; and PS3 topping 98,500 units. For the first half of 2007, Nintendo represents nearly 70% of industry growth in the United States and Canada combined. Nintendo remained the top video game publisher in North America for all of 2007.

Through June, U.S. cumulative hardware sales for Xbox 360 were 5.8 million units, Wii 3.2 million units and PS3 1.5 million units. The U.S. hardware installed base currently stands at 30 million next generation consoles (including handhelds) as of the end of February (up from 21 million at year-end 2006).

While portable game hardware was down 6%, Nintendo DS sold a healthy 561,900 units, compared to the PSP's 290,100 units.

To date, Microsoft has sold 160,000 Xbox 360 HD DVD drives in the United States.

Software sales were up 22% in June, totaling $543 million. For the first half of 2007, game sales were up 24%, to $2.9 billion. June console games were up 28%, to $393.9 million, and portable software grew 10%, to $149.1 million. Through the first six months of 2007, portable games sales were up 35%, to $802.8 million, compared to console software's 21% growth on sales of $2.1 billion.

“It's somewhat akin to a ‘perfect storm' in the industry this year,” Frazier said. “Audience expansion does seem to be a significant factor as we have seen more non-traditional content realizing sales success. The console transition is now in full swing and the higher retail prices associated with newer hardware are contributing to dollar sales growth for the industry.”

Ben Schachter, video game analyst for UBS, said the strength of first-party software continues to be the key take-away from the June NPD data. Nintendo and Microsoft titles continue to command an increasing percentage of software sales.

“Amongst third-party publishers in our coverage universe, Activition continues to be the stand-out performer, with 15.2% of total software sales,” Schachter said. “Activision's sales were led by Guitar Hero 2, which was a top 10 title on both the PS2 (197,000 units) and Xbox 360 (177,000 units). These two ‘Guitar Hero' titles accounted for approximately 6% of total industry software dollars, a slight decline from 7% last month, but still very strong.”

Activision also capitalized on the success of Transformers, which has sold 389,000 units across seven platforms in just its first 12 days. The publisher, which took the top seed away from Electronic Arts, also had decent sales for Spider-Man 3 (219,000 units across seven platforms) and Shrek the Third (141,000 units across six platforms). Activision has shipped 4 million Spider-Man 3 games and 2 million Shrek the Third games to date.

While Electronic Arts sales were up 24% from May, they were down 33% compared to last June. Harry Potter and the Order of the Phoenix did not get off to a quick start in the United States, with sales of just over 100,000 units, but it had strong sales overseas. THQ's sales were up 65% from May but down 52% from last June. Ratatouille got off to a slow start, with sales of only 111,000 across seven platforms. These games will get another boost this holiday with the anticipated DVD releases of the movies.

“Over the balance of the year, we expect Spider-Man 3, Shrek the Third, Ratatouille, Transformers, and Harry Potter and the Order of the Phoenix to sell more units on the PS2 than on any other,” said Michael Pachter, video game analyst, Wedbush Morgan Securities.

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