The 360 price cut has been such an underachievement for MS is not even funny. They lowered the price before the end of last year and that way they managed to sell 10,737,206 units worldwide in 2008.
Note: the following analysis uses hypothetical figures in respect to the percentage of sales corresponding to each Xbox 360 SKU.
Looking at VGC registered numbers:
360 sales from January-September 4th 2008 (before price latest price-cut)
|
Console |
X360 |
|
Total |
4,616,468 |
During that period the 360 was priced ($280, $350, $450, for the 3 SKUs). I don't have official figures about which SKU sales the most, but I will hypothetically assign: 30%, 60% and 10% for Arcade, Pro and Elite SKUs, respectively. So from the beginning of the year until September 4th 2008 the different SKUs sold as follows:
Arcade : 1,384,940 units ( multiplied by $280) = US$ 387,783,200
Pro : 2,769,880 units (multiplied by $350) = US$ 969,458,000
Elite: 461,646 units (multiplied by $450) = US$ 207,740,700
Total sales Jan-Sept4th 2008 US$ 1,564,981,900
From Sept 4th to Dec 31 the Xbox 360 already enjoyed a considerable price cut to all its SKUs effective worldwide (now priced $200, $300, $400, for Arcade, Pro and Elite respectively)
Looking at VGC registered numbers for the period of Sept-Dec31st 2008
|
Console |
X360 |
|
Total |
6,120,738 |
As anyone can see, getting below the mass-market price on the 4th quarter of the year can take anyone out of the gutter, right?
If we still assume the sales are divided between SKUs as previously noted (30% Arcade, %60 Pro, 10% Elite), now he have:
Arcade: 1,836,221 units (multiplied by $200) = US$ 367,244,200
Pro: 3,672,442 units (multiplied by $300) = US$ 1,101,732,600
Elite: 612,073 units (multiplied by $400) = US$ 244,829,200
Total sales Sept-Dec31st 2008 = US$ 1,713,806,000
By now you should be able to appreciate that besides the huge difference in total units sold between the periods, the shorter and richer 4th quarter compared to whole 3 quarters which sold less units at a higher prices made just a little more money (around 150million ABOVE in sales).
Total sales for 2008: 10,737,206 units = US$ 3,278,787,900
Xbox 360 sales so far 2009
Looking at VGC data from January to June 20th worldwide:
|
Console |
X360 |
|
Total |
3,727,433 |
If we still assume the sales are divided between SKUs as previously noted (30% Arcade, %60 Pro, 10% Elite), now he have:
Arcade : 1,118,230 units (multiplied by $200) = US$ 223,646,000
Pro: 2,236,460 units (multiplied by $300) = US$ 670,938,000
Elite: 372,743 units (multiplied by $400) = US$ 149,097,200
Total sales January to June 20th 2009 = US$ 1,043,681,200
Half a year left to go including the high-selling Christmas season, can the Xbox 360 sales surpass the previous year sales by a significant amount that would result in a considerable larger installed base and bigger profits for Microsoft Gaming Division?
The 360 has half a year to match the total sales in US$ it made in 2008.
The Xbox needs around 7 million units sold WW and US$ 2,235,106,700 for the reminder of the year to do this, and it seems it will easily reach those figures. However, considering the 360 sold that much in 2008 with higher prices in all regions during the first three quarters of that year, how much money would the 360 have to make and how many units needs to sell to claim 2009 was a successful year? It is already the cheapest current-gen console in the market, and as the numbers clearly show it isn't selling but half as good as the next console in price (Wii, 7,119,189* units sold WW this year) and just barely outselling the higher-priced PS3 (without a price-cut since October 2007 and has sold 3,394,075* this year versus 3,727,433 for the 360). The aggressive price cut for the 4th quarter of 2008 was a desperate move by Microsoft facing the reality of being outsold and losing ground to the expensive PS3 until that point. It helped MS to save face for the year, but nothing more than a moral victory, as this year shows the undeniable truth the price-cut has done little more than help them stay afloat.
We don't know for sure how much MS is profiting for each X360 sold if at all, and how much the win on each SKU if at all. It's clear they've been winning less since September 4th 2008, and it's very unlikely we will see another price-cut for a long while. If you consider they have barely made 1 billion dollars in worldwide sales during the first half of this year, they'll be very hard-pressed to even consider cutting the price further as well as their earnings for the second half. Another $50 reduction across all SKUs would certainly boost the sales and help them stay in the fight for WW market share, but how about revenue? At the current prices they're looking at making around the same they did last year making more money per console sold during the first 3 quarters, a price-cut just before the 2009 holidays wouldn't drive sales as much to make up for the lesser profits they would be collecting. Shocking as it may seem, they could end the year selling for less dollars than last year even if they managed to sell above 11 million units worldwide.
Note that we don't know from any official source how many units each SKU is accounted for, but I've been more than generous assigning the Pro model (which sells for more money than the always mass-friendly Arcade) the 60% of sales. Since the beginning of this generation there have been talks and analysis about the $200 price point being the "sweet spot" for mass market adoption. Well, the 360 has reached that mark faster than any other current generation console and you can see the result so far. The overall boost is far from what is expected of a mass-market priced product, you could look into previous generations and compare the boost other (leading) consoles received when they reached the ideal $200 price tag, I won't do that here, but it won't come as a surprise the Xbox 360 is in a class of its own as an underachiever. Microsoft hands are tied for the remainder of the year, as far as pricing is concerned, and if the current $300 - $200 Xbox 360 can't be enticing enough to move the consumer to a purchase based on its value, there's little they could do with minor cuts for the holiday season. The truth is nobody is waiting for a 360 price-cut to get a hold of one, so MS will have to do better to show their gaming console is worth its value at the current price.
*WW sales VGC numbers.
