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PS3, Xbox 360 consoles haven't saturated the U.S. yet, argues Pachter

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Posted by: Matt Liebl

Every year we hear the same thing, and that is that the U.S. has reached its console saturation for the PlayStation 3 and Xbox 360.  Recent sales data from the NPD Group showed an overall 8% decrease in sales in the United States for 2011 compared to the previous year.  In December 2011 industry sales plummeted 21% from December 2010, despite big price cuts and amazing deals with console bundles.  Software sales didn't fare much better, dropping 14% from the previous year to $2.08 billion.

The general consensus was that it was a tough year for the video game industry, at least in the United States - and many believe it won't get much better thanks to the possibility of market saturation.  For those who failed economics, here's a quick explanation.  Market saturation is when a product becomes so well-distributed within a market that the majority of the households in that market already own one. Further growth of sales for that product usually depends on population growth or a gain in market share. 

Many seem to believe this is the case with the current-gen of consoles in the United States.  Almost every household these days has one, two, or maybe all three of the current gen of consoles - resulting in a lack of hardware sales.  While that very well could be the case, video game analyst Michael Pachter thinks otherwise.

"I think maybe for Wii," Pachter responded when asked if the U.S. was nearing console saturation.  "PS3/Xbox 360 still priced too high for saturation."

While current-gen system, Wii-excluded, are still priced relatively high for how long they've been on the market, this past holiday season saw prices drop to all-time lows for console bundles.  Consumers could snag an Xbox 360 4GB bundle for as little as $199, with the Kinect selling for a ridiculously affordable $99.  So what can you blame the lack of sales on?

Maybe many households already have consoles.  After all the Xbox 360 has been out for over 6 years, with the PS3 turning 6 this year.  Odds are those who wanted a console probably have one by now. 

Microsoft revealed that 66 million Xbox 360 consoles have been sold along with 18 million Kinect peripherals.  I think it's safe to say that after 6 years, those who were waiting have waited long enough - and I doubt a price drop would convince them to finally take that step if they haven't already.

So yes, every day kids turn older and reach that age where they want their first console, but it's not happening at a pace quick enough to compete with the previous year's sales.  My personal prediction is that next year we'll see even lower console sales from the Xbox 360, PS3, and Wii - and I don't think a price drop will save it. 

Tags: Xbox 360, PS3

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