$50 price cuts for PS3 and Xbox 360? GameStop believes it will happen this year. The retailer also thinks the industry will see double digit growth "well into the future."

Posted by James Brightman on Tuesday, March 18, 2008
GameStop Expecting Price Drops on PS3 & 360, Continued Wii Shortages

In the conference call (webcast available here) that followed today's fourth-quarter and full-year fiscal results from GameStop executives from the leading video game retailer were asked about console shortages, pricing and more.

"We, like most in the industry, expect strong hardware sales to continue with total units sold exceeding last year's peek, due to continued demand and selective price cuts," said Dan DeMatteo, GameStop COO. "While some shortages still exist, supplies have continuously improved, but we still don't know when supply will meet demand for the Nintendo Wii as they continue to sell out as soon as they hit the shelves."

Regarding the Wii in particular, GameStop guessed that Wii shortages will persist for at least another six months. Xbox 360 and DS have received further allocations, while there doesn't appear to be a supply problem for the PS3. Interestingly, the one platform GameStop is anticipating some supply issues with is the PSP.

As for price cuts, CFO David Carlson noted earlier in the call that GameStop believes both the Xbox 360 and PS3 will each get $50 price cuts at some point this year. They did not get that information from the manufacturers, however; it's merely the retailer's educated guess.

DeMatteo also commented on a topic that many analysts have discussed lately: the effect (or lack thereof) of a recession on the game industry and retailers like GameStop. "...we can't find evidence of the economy affecting our business. In fact, like we did after 9/11, we are seeing comp[arable] store growth as consumers travel less and stay at home more, as well as trade in more games on new game purchases," he said.

He also noted that console cycle sales models of the past no longer apply to the fast growing and evolving video game industry today. "We believe that the cycles of the past whereby video game sales increase in the introductory years of new platforms and then level off are no longer going to continue," DeMatteo said. "Gaming has now reached mass appeal and the industry is investing like never before in game development. Therefore, the data suggests that video game sales will continue to grow double digit rates well into the future."

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