Industry analyst Michael Pachter says console manufacturers have made a "strategic error" by refusing to lower the prices of their hardware, which has resulted in slumping hardware and software sales across all three platforms.
Pachter blamed "consumer fatigue" over the refusal of Microsoft, Sony and Nintendo to drop the prices of their consoles for the fourth consecutive month of declining sales in the U.S. He predicted that U.S. videogame sales in June will reach $670 million, a 23 percent drop from June 2008, with Xbox 360 software sales down nine percent, PlayStation 3 software down 14 percent and Wii software sales down 24 percent.
"We believe that the manufacturers have made a strategic error by maintaining pricing for too long," Pachter said. "We think that the negative software trend is less attributable to a weak software line-up, and can only conclude that until consumers are sufficiently interested in buying consoles, it will be difficult for publishers alone to drive sales higher each month."
Console sales are suffering as well, with combined sales of the Xbox 360, PlayStation 3 and Wii down a full 43 percent over the previous year. But that could translate into good news for gamers, as Pachter said he believes the falling numbers will force manufacturers to cut prices relatively soon.
"We think that the console manufacturers will therefore be forced to consider a price cut before year-end, with Sony cutting the PS3's price by October 1. Further, we do not think that Nintendo's hardware forecast figures are achievable without a price cut, and we expect one around the same time as the PS3 price cut," Pachter said.
"It is likely both manufacturers will cut by USD 50, with Sony making up any lack of increased demand with a software bundle," he continued. "We expect Microsoft to follow suit, giving us confidence that US software sales will grow later in the year, notwithstanding negative sales in the early part of the year."