I don't follow financials closely, but MS has to perform for their shareholders. They give guidance/projections for their next quarter, so they can't just cut prices and absorb huge losses if they feel like it. I'm sure it is more important for them to try and hit the targets they've set.
Xbox 360 price drop to $299 confirmed, Pro phased out
- Thread starter Arwin
- Start date
My point is that shareholders may not agree with what gamers think is natural. MS is certainly making money, but maybe not as much money as they'd like to make, and that's an important detail. (Yes, Sony is worse off.) I think they're going to hold off price adjustments for when Natal comes out. Or maybe just take a hit on the camera peripheral itself by including it in all new 360s.
Edit: What Scott_Arm said.
It is. But cutting the price of the 360 by $100 is not going to have a big hit on MS' overall targets. It's a very, very, very small part of their overall bottom line. I still view the Xbox as a strategic initiative rather than a profit centre, and last I checked that was still their official line too. A price cut of $100 is, to be frank, not a big deal if they feel like their competitiveness is compromised. Shareholders would not be rioting in the streets, I can assure you. MS is capable of cutting the price financially, very much so. It also aligns with their goals of keeping a competitive placement in the "emerging" market of living room computing. The reason it's still $299 for the "real" SKUs of the Xbox is because they can. Sony's not going to outsell them now, they know it...so the profit is nice.
Nice story, but ultimately it is just your idea about what MS should do. They have shareholders and they are not in the business to lose money. They took a loss on the first Xbox, then on the RRoD, now they are in cruise control to stop bleeding. If they wanted to just get in the living room at any price, then why not just sell the thing for $50?
It's not black and white. Obviously profit is very desirable. It's about priorities.
#1 is strategic market placement, #2 is profit. It's about balancing the two. As long as the 360 outsells the PS3, MS won't be in a rush to cut the price.
It's not "just my story". The intent behind the Xbox is, quite frankly, very well known. It's been written about by many, it's been discussed ad naseum, and it really is quite obvious. The goal is to make as much money as possible while keeping Sony at bay. If Sony gets significant market traction at MS' expense at $299, you can bet they'd cut the price.
The PS3 is at 10 million in Europe after ~2 years.
The 360 is at 9 million in Europe after ~3.5 years.
The 360 is selling at roughly half the rate of the PS3 in Europe. And this is while the PS3 was about $100-200 more expensive.
The 360 really needs a price cut in Europe.
I don't think the price is the reason why people in Europe don't buy 360s as much as PS3s. From what I understand, MS needs to put more emphasis on better marketing and localization. There are better solutions to increasing your marketshare than slashing the prices til you bleed dry.
I'd also like some actual statistics behind those wild claims -- what's the CURRENT sell rate of the 360 and PS3 in Europe? You seem to use the latest public stats from this month for overall sold (10m vs 9m). But considering that the PS3 supposedly passed the 360 in Europe installbase in mid-2008, the fact that they're 10% different indicates they're more or less neck and neck in current sell rates.
According to MS last week, they're the only console in Europe showing sales increases year over year, so I don't think the situation is as dire as you make it seem.
I'd also like some actual statistics behind those wild claims -- what's the CURRENT sell rate of the 360 and PS3 in Europe? You seem to use the latest public stats from this month for overall sold (10m vs 9m). But considering that the PS3 supposedly passed the 360 in Europe installbase in mid-2008, the fact that they're 10% different indicates they're more or less neck and neck in current sell rates.
According to MS last week, they're the only console in Europe showing sales increases year over year, so I don't think the situation is as dire as you make it seem.
As E&D has lost ~$4billion since the xbox360 + is still losing money I think you can easily assume this will not happen. The same goes with sony + the ps3.
The xbox360 doesnt need a pricecut (sure its always nice) but it should be obvious that you can pick up a xbox360 for less money than a wii, yet the more expensive wii is greatly outselling it!
what the xbox360 needs is a reason to buy the machine, perhaps in the populaces mind natal will be the reason, who knows?
To be clear, MS has "only" (
) lost ~$3B in E&D since 2005, and they are not still losing money as they've turned profits the past two years.2005: $539M loss
2006: $1284M loss
2007: $1898 loss
2008: $497 profit
2009: $169 profit
About half of that was due to the RROD screwup.
Not sure on Sony's numbers. I'll do some digging. Only thing I've found so far is a Forbes article from June 2008 indicating Sony lost $3.3B between launch and June 2008 alone, specifically on the PS3.
Edit: In the first year on the market alone, Sony's games division lost $2B USD. That's including strong sales, at the time, of the PS2 and its software which undoubtedly help offset PS3 losses.
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The "better value for the same price" thinking is worthless and stupid*, detached from actual console usage for the particular customer. To me, Blu-ray is absolutely worthless - even if I did buy movies to own them, which I don't, Blu-ray discs are absurdly expensive here, and nobody rents them. The same way as Netflix is worthless to me, as it's not available here; and the same way as most Sony exclusive titles are irrelevant to me.
For most of us here, the two consoles aren't fully replaceable alternatives to each other, from which to pick the better bang for the buck, but completely separate products.
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* - unfortunately, most consumers are worthless and stupid too, judging by the people who choose DVD brand to match the TV brand and both - to match the furniture color
For most of us here, the two consoles aren't fully replaceable alternatives to each other, from which to pick the better bang for the buck, but completely separate products.
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* - unfortunately, most consumers are worthless and stupid too, judging by the people who choose DVD brand to match the TV brand and both - to match the furniture color
I think he means generalizing best value is stupid, for the exact reason you stated - tastes differ.
DuckThor Evil
Legend
Before I get some credible information about those numbers I'm not buying them at a face value. I believe that 10 million for Sony in Europe means all the Pal territories, whereas the MS number is only for Europe, but I'm not 100 % sure about that.
PS3 has definitely sold faster in Europe, but since the mid part of 2008 PS3 has not outsold X360 in Europe, at least I'm under that impression, at any case the sales ratios are very close.
The lower priced Slim definitely helps Sony a lot though no question about that, but MS is doing quite good in Europe this gen. You have to remember that PS 2 outsold Xbox 1 probably something like 8:1 in Europe. Some people say history doesn't matter and bring up the Wii as evidence, but I think history is very important. Sony managed to create so strong brand that they could and can charge more. Today the value proposition is imo very real, but at launch and before the first price cut it wasn't, yet they were able to hang on and sold worldwide pretty neck and neck with the X360.
The approximate way to do this is via segmenting (Lumping people into similar profiles, demographics, behaviours, etc.).
DuckThor Evil
Legend
Microsoft stock ownership is very fragmented though and Bill Gates still owns twice as much of the company than the second biggest owner. Most of the owners are institutions that have 3 % or less of the stocks and such entities probably have a very passive relationship to the company.
To be clear, MS has "only" (
2005: $539M loss
2006: $1284M loss
2007: $1898 loss
2008: $497 profit
2009: $169 profit
About half of that was due to the RROD screwup.
Oh please.
That is how much they've lost when you add in all the other profitable parts of E&D like the Mac software unit, WinMo, etc.
Microsoft was so embarrassed/concerned by the scale of the Xbox team's losses that they stuck the profitable Mac software team in E&D to help hide the losses.
Only Microsoft knows the exact breakdown of the internal numbers for the division, but whatever they are, the actual Xbox losses generated are significantly higher.
Ballmer's new money pit are the Online/Search guys and main focus now and most likely are the reason Microsoft is unable/unwilling to cut the price of the 360 and generate even more losses.
Ok, the Zune...
Since when was WinMo profitable? It's been a moneyhole for years (disclaimer: I'm a mobile developer currently). Especially in recent years, they've massively expanded their development team size and costs while revenues are rapidly declining.
E&D is full of at least 3 well-known money pits at the moment: Xbox, Zune, and Windows Mobile. If anything, the Xbox is probably helping significantly pulling up the bottom line in that division while the Zune and Windows Mobile teams suck up tremendous budget dollars and don't bring in significant revenue.
Both of these claims are from the exact same sentence of yours. That's quite a spectacular achievement and I don't think there's anything left to be said about it.
PS: I think you are MASSIVELY overestimating how much software MS sells on the Mac. Office 2008 for Mac sales are not that spectacular, and certainly are not worth half a billion dollars a year or more...the rest of their MBU doesn't actually sell any software, it's a sunk cost unit which actually detracts from profitability numbers (Windows Messenger, Silverlight for Mac, Remote Desktop client, etc)
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