Pachter, Pidgeon talk PSP price cut

Following the news that Sony is to cut the price of PSP in Europe, analysts have told GamesIndustry.biz that they don't see the handheld as being in direct competition with the Nintendo DS.

"I don't think Sony will "beat" the DS, nor do I think that they aspire to do so. Nintendo has something different to offer with its touch screen and deep library of first party titles, and Sony is not in a position to compete with that offering," said Wedbush Morgan's Michael Pachter.

"Rather, the DS is like a souped-up GBA, while the PSP is like a miniature PS2. Games for the two devices are different, and the gaming experience is quite different. I think that the only people who care about the DS-PSP sales battle are the media."

Pachter's comments were echoed by IDC's Billy Pidgeon, who told GI.biz, "I don't see the PSP as competing with the DS so much as bringing in the core console demographic to handhelds, and the PSP has convergent value as a multimedia player that appeals to that group.

"Still, the DS Lite's value pricing will cause retailers to keep pushing Sony to bring PSP price down further, and strong DS hardware and software sales will reduce shelf space for PSP at retail," he added.

As announced yesterday, SCEE has cut the price of PSP to GBP 130 / EUR 170. Earlier this month, SCEA cut the US price of PSP by USD 30.

"The price reduction will be good for retailers as PSP were not moving quickly enough at USD 199," observed Pidgeon.

According to Pachter, there is likely to be more than one factor involved in Sony's decision to slash the price.

"I truly believe that Sony manages pricing based upon two things - cost of production and sales volumes. They will continue to lower price as they gain economies of scale, but it's not likely that the company will price below its marginal cost of production to move a few more units," he said.

"In the case of the PS2, they are making a profit because demand is still strong at the current price point. In the case of the PSP, their manufacturing costs have probably dropped to below the USD 169 level. With VAT and other incremental costs, they are pricing close to parity in the US, UK and Europe."

Pachter pointed out that Sony has the dominant share of US software sales, securing around 40 per cent of the market during March across all three of the company's platforms.

"Yes, it's true that the PS3 is behind, but I believe that Sony will persevere once it begins to market the device and once the game lineup catches up," he continued.

"That should begin to happen at holiday, and if HD monitor adoption picks up, I think that Blu-ray will become a factor in the battle."

According to Pidgeon, the move to cut the price of PSP won't necessarily boost sales of Sony's next-gen console. "Stronger PSP sales will help Sony move PS3's down the line," he offered, "But I think a larger installed base of PS3 will have a more important impact on increasing PSP penetration."