This columnist didn’t do his homework

CNN’s Chris Morris says, from another analyst, the PSP will have a price drop very soon. Why does he say this? Because…

PSP sales have been solid so far, with 20 million units shipped worldwide (with over 8 million of those to the U.S.). That’s essentially a tie with the Nintendo DS, which has sold over 21 million units – but the numbers don’t tell the whole story. 

While the DS has been on the upswing, thanks to commercially and critically successful games such as “Brain Age” (which has sold more than 4 million copies worldwide), “Nintendogs” and “New Super Mario Brothers,” the PSP has not had a game truly capture the gaming world’s attention since the release of “Grand Theft Auto: Liberty City Stories” (published by Take Two Interactive (Charts)) last October. 

Maybe Chris ought to ask, “How is the hardware selling if the software isn’t?” From last month’s NPD numbers, GTA: LCS sold the same amount as Mario Kart: DS which is revealing how much disappointment the portable GTA has been. The game sells but not quite as retailers had hoped.

The answer is in those shipment numbers. While Sony has shipped many PSPs to retailers, even at the same level as DS, the retailer sales numbers points a different picture which is why Chris can, stunningly, say that the PSP has lost is momentum while saying its shipment numbers are even with the DS. Chris ought to put two and two together to figure out why Sony won’t do a price cut.

If Sony did a price cut of the PSP, Sony would lose much of that money of all those PSPs that have been sent. So what I suspect Sony will do instead is to raise the value of the PSP by focusing more on the non-gaming functions as well as the PS1 game downloads to it. I think Chris is taking the word of this ‘analyst’ too closely.

How did this analyst get to his ‘conclusion?’ It is probably because he is busy playing armchair CEO. He gets the sales numbers as do we all and can clearly see a stall within the PSP. He then says, “Price drop imminent!” Sony has, after all, shown that it will do a price drop especially on a system like the PS2 if it goes below 200,000 sales in a NPD month. Also, Sony wants money. Is the PSP still profitable after a $50 price cut? Probably not, which is further reason why it won’t be cut.

Nintendo got burnt by shipping too many Gamecubes and, since has been very conservative with their shipments. The DS is facing the issue of severe worldwide shortages this Christmas if Nintendo cannot ramp production. Japan is mainly to blame. Looking through the charts and numbers of Japanese sales is like having people chant ‘DS! DS! DS!’ all the time as this ytmd shows. System shortages. Cartridge shortages. Shortages every week in the summer months for goodness sakes.

There will some big news this week and next concerning the system launches.

Meanwhile, EA says that it plans for level console field. EA is the biggest game publisher so their word counts for something. Does EA really believe the console market will remain even three way? …Of course not. This ‘level console field’ EA plans for is EA actually saying, “We don’t know what the hell is going to happen this console generation!!!! So we will support all the consoles evenly!”

Other third party publishers have echoed similar statements. Capcom has decided the handhelds are their more attractive option since the console market is “in chaos.”

To those who are younger, you might not appreciate the unstable nature of the console market. Atari was once the fastest growing U.S. company with such a meteoric rise…and went bankrupt within a year. Nintendo entered the crashed market and revived it (which you can handily read about in most business books today). Sega arose out of nowhere. Sony, also, came from nowhere. Everyone predicted the DS to flop. I’ve never seen a more competitive, immature, momentum based industry that is as unstable [risky] (and profitable) as the console game industry. Out of the many companies that have entered the market, the only company to survive unscathed since the 1980s was Nintendo, since the 1990s is Sony. There is such a high failure rate (did you know only 4% of video games ever make money?). Anyone going into the console market has to be downright insane.

I agree with Chris Kohler (from wired magazine) when he says we might lose another big member of the games industry fairly soon (my guess would be Microsoft if it fails to generate money from the Xbox 360). The major investors, such as those who helped create Tivo and Xfire, say that the games industry is sick and it is going to rapidly change. E3 died for this reason.