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PS3 price cut won't improve 'stagnant' sales - Bank of America

An expected price cut of Sony's PlayStation 3 will not help improve sales described as 'stagnant' by Bank of America analyst Michael L. Savner.

Bank of America analyst Michael L. Savner has warned that a PlayStation 3 price cut may not be enough to boost "stagnant sales" of the console.

Savner also said that a sales shift away from PS3 and Xbox 360 and towards the Wii could be detrimental to third-party publishers.

"Despite growing anticipation that a USD 100 price cut for the PS3 is imminent this summer or early fall, we do not believe such a move would meaningfully improve stagnant PS3 sales," said Savner, speaking to Game Daily.

"We are growing more concerned that a share shift away from Sony and Microsoft to Nintendo's Wii platform is incrementally negative of all third-party publishers."

For Savner, a USD 50 price cut on the PS3 would be "meaningless" - and even a USD 100 drop would still leave consumers facing the cost of buying peripherals and games. Sony's console would continue to cost between 20 - 25 per cent more than Xbox 360, and there is still a possibility Microsoft could cut the price of its machine.

These factors, combined with the issue of a lack of exclusive PS3 titles, have led Savner to conclude that Sony should introduce a price cut of USD 200 - but he said that such a significant reduction is unlikely to to happen in the near future.

"While Sony could cut the price by USD 150-200, we view that as less likely given that it is already losing approximately USD 200 per console based on our estimates," he commented. "Bottom line, we don't expect Sony to make up meaningful ground against the Wii this year."

Although publishers are currently riding on the success of Nintendo's home console, Savner is concerned that they will be trading wholesale profits on PS3 and Xbox 360 titles for the lower profits associated with Wii products.

"Viewed at a macro level, the share shift currently taking place where the Wii, and even PS2, are the share takers, our concern is that if software sales also begin to skew along those lines that publishers will be trading higher wholesale revenue for lower wholesale revenue," he said.

"This is coming at a time when publishers are continuing to increase R&D spending for the more expensive platforms."

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