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Forums - Microsoft - Xbox 360 price cut makes sense, says Pachter

vaio on 27 June 2008

Xbox 360 price cut makes sense, says Pachter

Responding to recent rumours of an impending Xbox 360 price cut prior to E3, Wedbush Morgan Securities analyst Michael Pachter says that, realistically, it makes a lot of sense.

"Microsoft has historically been a price taker - meaning that they typically wait for Sony to cut first," Pachter told GamesIndustry.biz.

"However, they haven't been in the position of having a cost advantage before, as they do now."

Pachter said that Sony's revelation that they lost USD 1 billion on PS3 last year suggests that they are still pricing around USD 100 below cost. Chairman Stringer's promise that they won't lose money this year makes a price cut for the PS3 all the more difficult.

"Putting Microsoft's cost advantage together with Sony's reticence to lose more money, it's easy to conclude that you will see Microsoft reverse course and be a price leader."

Pachter acknowledged that there are other factors at play - primarily the fact that the PS3 is outselling the 360 in Europe by a lot and in the US by a little. With the launch of Metal Gear Solid 4 helping Sony on the software side, Microsoft may feel it is time to differentiate the consoles based upon the price.

He noted that when the systems were priced at USD 200 apart, the Xbox 360 outsold the PS3 2 to 1. When the price gap narrowed, the systems pulled even.

Narrowing sales, exclusive PS3 content and the Blu-Ray victory over HD may be enough to push Microsoft into a cut now.

Pachter thinks it is hard to envision the core model priced below USD 249, nor the Elite below USD 349, but with the cheap cost of hard drives it is conceivable that the Elite may soon become the "standard" 360 SKU at USD 299 - allowing Microsoft to release a new SKU with an even larger hard drive.

Can Sony afford not to respond?

"Sony will have to respond if they see 360 sales increase significantly - say to over 300,000 a month in the US," Pachter said.

"I believe that every 360 sold is one less potential PS3 sold - and vice versa - and expect Sony to behave rationally."

Sony's response may not necessarily be a price drop, however, but could initially take the form of a bundle. Not only would a bundle be less of a loss for Sony, but it wouldn't make the company Chairman look as bad.

http://www.gamesindustry.biz/articles/xbox-360-price-cut-makes-sense-says-pachter



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Rock_on_2008 on 27 June 2008

Sony wants to win the console generation wars at all costs. Sony needs to cut the PS3 price to match the 360 price cut. Short term pain for long term gains. More market share will see increase profits and sales through increased software sales.



quaiky on 27 June 2008

i think sony will wait a bit to see how much ms gains from price cut, and in meantime try to push more mgs4 bundles with the 80gb on market as a first response.

the fact that these bundles sold like mad might be allready a good counter and enough to avoid loosing too much. best time for a ps price cut will be when the new models come out with the shrinked graphic chip which would probably help them reduce losses of a cut. (so sony will probably will try to wait as long as possible with it)



Fanatical111 on 27 June 2008

I have been saying all along that when MS decides to drop the price Sony is in big trouble.

Economically speaking, MS has had the position from day 1 but have not chosen to use it in its prime market as sales have been farily consistent. MS is dropping the price now to try to win the 3rd and 4th quarters of this year. If Sony decides to match them, they may be able to win the year in terms of console sales but will lose long term due to the hole that they continue to dig themselves.

Couple the price drop with Gears 2, Fable 2, Banjo 3 and other big announcements and Sony will find themselves in some big trouble. North America is the primary market for commerce and I fully expect and anticipate this price cut to be a critical factor for MS's success in 2008.



thekitchensink on 27 June 2008

The price drop would put them ahead of PS3 weekly in North America. By how much, I won't guess.



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papflesje on 27 June 2008

North America is the primary market for commerce and I fully expect and anticipate this price cut to be a critical factor for MS's success in 2008.


People keep saying that, but when it comes down to money, Europe is the biggest market, outselling even the American market.



Strategyking92 on 27 June 2008
papflesje said:
North America is the primary market for commerce and I fully expect and anticipate this price cut to be a critical factor for MS's success in 2008.


People keep saying that, but when it comes down to money, Europe is the biggest market, outselling even the American market.

Biggest market for REAL gaming.

 



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alucardremixed on 27 June 2008

Interesting, soon there's going to be two cheaper affordable consoles, and one expensive console, this will give consumers a choice between the wii and the 360 this holiday, both are going to be affordable. While The PS3 will remain the "VIP" high class expensive console. Won't surprise me if i see the Playstation being associated with rich people and hip hop music videos, on MTV cribs... With a huge gap in prices, some consumers will think "well if this is 300, and the other is 400, which is the better buy/best made/reliable?



leo-j on 27 June 2008
RolStoppable said:
Strategyking92 said:
papflesje said:
North America is the primary market for commerce and I fully expect and anticipate this price cut to be a critical factor for MS's success in 2008.


People keep saying that, but when it comes down to money, Europe is the biggest market, outselling even the American market.

Biggest market for REAL gaming.

 

If M-rated games and EA software is real gaming, then I am glad that I am a fake gamer.

Look at his signature, that explains everything.

 



 

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alucardremixed on 27 June 2008
Fanatical111 said:
I have been saying all along that when MS decides to drop the price Sony is in big trouble.

Economically speaking, MS has had the position from day 1 but have not chosen to use it in its prime market as sales have been farily consistent. MS is dropping the price now to try to win the 3rd and 4th quarters of this year. If Sony decides to match them, they may be able to win the year in terms of console sales but will lose long term due to the hole that they continue to dig themselves.

Couple the price drop with Gears 2, Fable 2, Banjo 3 and other big announcements and Sony will find themselves in some big trouble. North America is the primary market for commerce and I fully expect and anticipate this price cut to be a critical factor for MS's success in 2008.

 

 Sony has been doing well in the first half of 2008, better than 360, its end of june going to july, IMO xbox 360 will loose this year to ps3 sales world wide. (not overall, still second to wii) and sony closes the gap of world wide console sales between 360 and PS3. Sony also has a great lineup this fall, titles like complete online experiences like Socom Confrontation( huge amount of fans percentage from the PS2 120,000,000 install base will be buying this game, 32 players, clan and ladder support) and Resistance 2(60 player online matches and 8 player co-op). Not only will these games be on the market in time for the holiday, but also acess to the PSN to play them online is free, so that is something microsoft has to worry about, since they charge for their online playing functionality. Also, Sony is introducing "the official bluetooth for the Playstation 3," which will more than likely be bundled in with Socom, or future sku's ( http://blog.us.playstation.com ) Not to mention, the improved 65nm graphics chips that they will start rolling out in october, 2.4 update coming soon ( going to be somewhat on par with XBL ) and Home Integration makes the PS3 more appealing, and more of a competition than any Xbox 360 price cuts. So No, Sony is NOT in "Big Trouble"