Xbox 360 Arcade selling for £130!

[mrstickball]

Million said:

mrstickball said:

Not really. The X360 can go lower if it wants.

Playstation fans can't decry the Xbox 360 as technically inferior due to the lack of built-in HDD, wifi, Blu-Ray, and other amenities, then start to argue that the Xbox 360's price changes are desperation. Microsoft took the cheapest route for building a system: It first showed with the slapdash unreliable X360 that came on the market first, and also the fact that the technical aspects lacked a lot of expensive components.

The X360 is as low as it *can* get now, but in a year, more revisions will take place, and they can drop the Arcade to $169 or even $149.

You see, part of Microsoft's strategy is to maintain a price advantage against it's rivals - Not only was it the first console on the market, but it's also had a years' start with model revisions that can drive costs down. This will help Microsoft to maintain flexibility to re-do prices when they are required.

It's not desperation, it's not stupidity. It's a cold, calculated move by MS to get as much marketshare in underpreforming markets as possible. The MS machine has the ability to re-price the machine due to the deep cost cutting strategies they've employed on the X360 that just weren't there on the Xbox.

 

WOW that was alot of garbage , Microsoft strategy is marketshare as opposed to profitability ? what exactly do Microsoft gain from aggresive price cutting if it's not profits ?

How do you know that Microsoft are even making a profit of the Arcade ?

If you feel I'm wrong, provide a rebuttal rather than claiming what I say is 'garbage'

Let me turn your question around, and ask the same thing: What did Sony gain by cutting the prices on the PS3 last year? It obviously killed their profitability by lowering the price on a device they didn't make money on in the first place.

As for Arcade profitability. We haven't seen any hard-fact statements since iSuppli deemed that the Arcade was being made for around $280, plus cost on the new free memory card plus games packed in with each Arcade.

If you follow Moore's Law for gaming systems (as you should), then the Arcade should be getting produced for around a cost of $140 USD + 512MB Card and Games (lets factor in a high estimate of $155). So $155 + Misc expenses such as shipping, and other costs. So from my perspective, it's hard to see how the Arcade isn't breaking even, or making Microsoft a little profit too.

Feel free, million, to provide a viable rebuttal. Either your going to make 1 of 2 arguments:

1) The Arcade isn't being made that cheap due to Moore's law being wrong (this would then inferr that the PS3 is definately not profiting at the $400 price point, either).

2) There are some sort of random, wierd occurances that have hindered the X360 from being made that cheaply. If so, I'd love to hear your arguments.

Now, as for your question of proftability vs. marketshare --- They can go hand in hand. Sony (I believe) cut the prices to gain marketshare at the cost of profits. Why would they do that? They knew that adding in more marketshare would get them into better graces with software manufacturers that may have fallen out of favor due to the poor preformance of the PS3.

Furthermore, if you have a large hardware base, you can argue that you'll make the profits back due to licensing fees on 3rd party games, as well as increased sales from first party games - at $10 per 3rd party game, and roughly $40 from each 1st party game, it's understandable that Sony felt that by lowering the price, it could attempt to break even at a later date due to recouping costs with new 1st party initiatives such as LBP, GT5, KZ2, and Resistance 2 - All big games that should sell well on the PS3's that cost Sony money on every console sold.

Likewise, Microsoft has a viable product that is most likely making a small profit. However, Microsoft knows that they can also make money back from 3rd party games ($7 a title), and $40 for most first party games. They most likely feel that if they can sell an extra 1,000,000 systems by dropping the European price by 5-10%, they can re-coup lost income rather quickly.

And to conclude: prices drop because companies want to make their products competitive. As long as you don't have a money pit like the Xbox was (due to poor choices when it came to designing the system by using off-the-shelf parts), you can drop the price most of the time and maintain reasonable profuts - provided your console isn't a big loss leader.