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Forums - Gaming - What Does a $199 Xbox Really Mean? Is this the Beginning or the End?

reask on 25 August 2008
mrstickball said:
I think the answer lies in between a few statements by various sites and business-oriented sites.

1) The move isn't a move of desperation from Microsoft. The Xbox 360, for the Premium bundle, has come down a mere $50 ($399>$349) since it debuted, and the Arcade has come down $20, but included more items in the bundle. Microsoft has been far more aggressive in Europe (where it slashed prices by a similar amount in February), and Japan (which dropped it's price quite some time ago).

2) Microsoft will not lose money on dropping the price. The console is hitting the 3 year mark very soon in terms of production. You would have to be very dense to think that Microsoft hasn't lowered the cost of production from $513 per Premium to lower than $299 in 3 years, and similar margins on the Arcade. As I've stated before, when we broke the price cut story, Microsoft is most likely making Arcades for $143-179 per unit + shipping and misc. fees.

3) Microsoft will not phase out the Arcade with it's larger-than-the-rest price cut on the Arcade. They have been stating for the past year that they know the sweet spot starts at $199 for a console...I think Shane Kim was quoted as saying "70% of a console's sales are at, or below the $199 price point, and we know that". Microsoft needs a product at $199 to boost sales in it's casual/core division...And it's very unlikely that the Pro/Premium will sell at that price for another year or two.

4) As for the effect on the market. That's a tough one to call. In Europe, a similarly-styled price drop has boosted the X360's sales to 100% YOY versus last year - which proved the aggressive price drop worked for Microsoft. I think in the United States, Microsoft will see major gains against the PS3 and Wii. I don't think it'll actually hurt either console, but this move will lead the way to see Microsoft have it's biggest year yet, beating it's 3.2 million cume from September to December in North America, which it sold last year.

I think you have summed up disolitudes analysis.

 

It is on the market nearly 3 years so making it easier for price cut.

 

199 was the threshold that sold most consoles last gen if you check out this thread I done according to M S.

 

360 Selling Like Hot cakes In Europe ClaimsX Box Exec

money is a major factor in peoples minds at this time imo.

 



 

 

 

 

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JGarret on 25 August 2008

Happy, remember a thread I made, a few days ago, about whether or not the 360 would finish in 2nd place in worldwide install base?

You said you expected the 360 to finish in the 40/45 million range and the PS3 in the 60/70 million.....do you still hold that prediction?

If so, what are you taking into account when you expect the PS3 to outsell the 360 by 15/20 million units?



Gotcha on 25 August 2008
Grampy said:
dbot said:

SOME EXPERT GAMING SITES: The $199 Arcade is being sold at a loss ($239 to build) because it is going to be discontinued in response from game designers who don’t like being limited with the lack of a hard drive and a higher rate of customer dissatisfaction.

 

 Can you provide a link to the $239 to build article?

I think the $199 arcade will hurt the PS2 the most.  It may force Sony to drop it to $99.  I don't think it will impact the Wii at all.  It should help Microsoft move some more 360's, but if it doesn't work they are in trouble.

I'm giving you a link to a site that claims an even higher cost but has a much more thorough and thoughtful discussion on the topic. It's a very good read IMO.

http://gamer.blorge.com/2008/08/03/proof-of-xbox-360-arcade-price-drop-to-199-being-discontinued/

 ( I can dig up the other again if you need but I went through about nine google pages.)

Their source is a 2006 article so I don't think that proves anything.

In my opinion the price drop will give a big increase in sales this fall, Wii won't notice the effect at all, but it will hurt PS3 sales a bit. In Europe the effect of the price drop has been much more important than some of you think, doubling sales YOY. Even in my country, Spain (you know, Sonyland xD), there were Arcade shortages and the install base is growing at a good pace since the price was dropped.

 

 



Grampy on 25 August 2008

@ Gotcha
I realized theirs was an older cost estimate which is why I used a lower one from a newer source although I felt the article was a well thought out one. In truth actual costs are a closely guarded secret and we won't probably know.

One thing I do know is that the poster giving a very optimistic $179 or $149 and thinking that meant a fat profit don't understand the retail business very well. I can tell you absolutely that if their cost is within $20 of retail they are losing serious bucks. Even at $149, the chances of any profit are still slim to none. Manufacturing costs are far from being the only expense of doing business, from warranty repairs, promotion, through shipping and the fact that both the wholesaler and retailer expect a decent profit as well.



xman on 25 August 2008
Grampy said:

What exactly will happen Sept. 7th (or whenever) the Xbox 360 Arcade drops to $199. Goggle something like “business report $199 Xbox and you’ll have a week’s worth of reading which is all over the map. I’m not linking them, they’re just too many, but here is a summary of what you’ll find.

 

MORE OR LESS NEUTRAL GAME SITES: The price will put real pressure of Sony who won’t be able to respond and may cut slightly into the Wii market. It will at least temporarily put Microsoft sales above Sony.

 

Xbox FANBOY SITES (MOTION CONTROL): The $199 Xbox Arcade will come bundled with a motion controller and a set of mini-games designed by Rare. It will wipe the Wii off the map by taking away its one advantage and adding HD and it will kill Sony by price.

 

SOME EXPERT GAMING SITES: The $199 Arcade is being sold at a loss ($239 to build) because it is going to be discontinued in response from game designers who don’t like being limited with the lack of a hard drive and a higher rate of customer dissatisfaction.

 

BUSINESS ORIENTED SITES:

Version 1. This will put Microsoft in the driver’s seat having both a performance and price advantage over the Wii and a significant price differential with the PS3. MS plans to be on top this generation and this is their ticket.

 

Version 2. This will hurt Sony significantly, especially at Christmas, when Mom sees the same games (mostly) on a less expensive console and has never even heard of or cares about Blu-Ray. It might cut into the Wii, especially if supplies are short but Nintendo can match or beat the price and still make a good profit.

 

Version 3. This is a desperation ploy by Microsoft who sees their HD market going more to the PS3, the Wii disappearing over the horizon and nothing to show restless stockholders but a disappearing cash reserve. If this doesn’t make a huge leap, MS will be out of the game for good.

 

THE GUNFIGHT AT THE OK CORRAL: Several sites see this as the final showdown between motion control and the “casual market” vs. the traditional model of hardcore/analog control. The hardcore have said from the beginning that price was the ONLY reason the Wii was selling so well. Wii fans claim that it’s all about the control and they wouldn’t take an HD console as a gift.

If the Xbox at $199 doesn’t take off like a rocket and sustain momentum to catch up and pass the Wii with HD and its game library to help, then it’s NOT about price and motion control is the future of gaming.

 

I’m pretty much a final showdown type myself. What’s your take?

Means more people can now afford to play and xbox 360 which is good for all

 



PS3, WII and 360 all great systems depends on what type of console player you are.

Currently playing Call of Duty Modern Warfare 2, Fallout 3, Halo ODST and Dragon Age Origins is next game

Xbox live:mywiferocks

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Jo21 on 25 August 2008

it will save them america or at least reach the middle section that was not able to buy a 360.
but once that market is saturated its over


199$ FOR a xbox360?

in europe and japan i think the fight is over though



talkingparrot on 25 August 2008

I think more people are waiting for a $299 PS3 than a $199 Xbox 360.



Console Agnostic since 2001.

Jackson50 on 25 August 2008
talkingparrot said:
I think more people are waiting for a $299 PS3 than a $199 Xbox 360.

 

I have a feeling they will be waiting for a long time. 



greenmedic88 on 25 August 2008

I can't see a $299 PS3 in the cards within a year. Not without a major hardware revision, or a decision to increase losses on each unit sold.

Some consumers seem to be under the assumption that it will happen this holiday season, despite the new SKUs, which are supposed to offer the perception of more value at the same price. 80GB for the price of 40GB, 160GB -limited- bundle with a bunch of extras for the same price as the former 80GB bundle.

I think that's the best Sony can offer for now. I'd be surprised to see even a smaller $50 price reduction this year, and that would only be if the 360 price cuts resulted in overwhelmingly positive sales.



steven787 on 25 August 2008

There's a big logical flaw in most of the arguments coming from both sides.

The sales and success of a console are independent of the other consoles.


The lowest selling one could still turn a great profit, and be considered a success by it manufacturer (see: Gamecube)

The 360 could end up 2nd or 3rd, but have a tremendous attach rate and have moderately profitable hardware and be considered a success to both the manufacturer and publishers.



I would cite regulation, but I know you will simply ignore it.