Analyst: Microsoft Could Use Price as a Weapon

[Lord N]

Bodhesatva said:

You're missing the point, Alby Wolf: I don't believe anyone is arguing that the 360 is the only console that benefits from cost reductions or software sales. They all will, eventually.

But for Microsoft, those cost reductions are already here. They are already making a profit on the hardware itself, and thus can afford to drop the price without dipping significantly into losses. For Sony, profitability has not yet been achieved on hardware (last estimate given was at the end of FY 08, ending March 31. Sony estimated ~130 dollars lost per console produced).

When Sony achieves profitability -- and they will, because, as you said, all consoles see cost reductions -- then they will be ready to discuss price cuts. But they are not there yet. Microsoft is. So at this exact moment in time, Microsoft can afford to cut prices, while Sony cannot.

 

We don't even know that MS is making a profit on the hardware considering that there are many other products in their E&G division, not just the 360.

I'd be willing to bet that MS might even still be losing money on the hardware considering that even with 360 games, Xbox Live, 360 accessories, Games For Windows, mice, keyboards, game controllers, mobile software, and the Zune, its music store, and all the accessories, their quarterly profit was all of $89 million. Something must have been dragging their profits down, and I can't imagine what it was...........