360 price cut to boost sales 20 per cent — Pachter

Following Microsoft's decision to drop the price of the Xbox 360 in Europe, analyst Michael Pachter has told GamesIndustry.biz that he expects sales to increase by around 20 per cent over the coming months.

However, in the long term, he doesn't see it making a larger impact to Microsoft's standing in the region, as Sony is also likely to cut the price of the PlayStation 3 at some point later this year.

"Price elasticity of demand is an economic concept that says demand goes up as price comes down. I would imagine that demand will increase by 20 per cent or so, and we'll see sales increase by this amount over the next few months," offered Pachter.

"If the price cut were in a vacuum, I suppose it would make a difference, but it's likely Sony will match the cut sometime later this year," he said.

He also echoed comments made to GamesIndustry.biz by The simExchange's Jesse Divnich, that the timing of Microsoft's price cut is partly due to the failure of the HD-DVD format, and consumer perception that the PlayStation 3 now seems a better value machine with its integrated Blu-ray technology.

"I'm sure it is more than coincidence that Microsoft cut price just after Sony won the Blu-ray/HD-DVD battle," he said.

"Sony definitely gained in the eyes of consumers, who suddenly see the premium for the PlayStation 3 as having some value, and I think Microsoft decided to widen the gap between the two consoles."