Digitimes.com - 360 Rumour: $100 pricedrop imminent

[scooby_dooby]

Microsoft is planning to cut the retail price of its Xbox 360 Pro System from US$399 currently to US$299 in an attempt to compete with the PlayStation 3 (PS3), which will be launched by Sony in November of this year, according to Taiwan-based OEM component makers.

Microsoft Taiwan denied the report, asserting that it is misinformation.

Microsoft, to prepare for the price cut, has negotiated reduced production costs for the Xbox 360 with Taiwan-based manufacturing partners, stated the sources. The manufacturers estimate that the total production cost can be reduced by 15-20% due to diminishing costs for most components along with increasing production scales and decreasing defect rates, the sources pointed out.

Considering Sony will sell a 20GB HDD (hard disk drive) and 60GB HDD PS3, each with a built-in blue-laser Blu-ray Disc drive, for US$499 and US$599, respectively, Microsoft plans to maximize the price competitiveness of its Xbox 360 Pro System by dropping prices so that the model can be equipped with an external HD-DVD drive in the future for under US$399, the sources indicated.

http://www.digitimes.com/systems/a20060726A1001.html

 

[SugarCoat]

good, now make the shell black and i'll buy one.

 

[Inane_Dork]

Dropping price is not the answer. It's already cheaper than the PS3. They should be focusing on increasing the value of $399.

 

[Laa-Yosh]

Unlikely... We have the announced prices for the eastern european official launch and they're for november - and they're the same.

 

[msia2k75]

Unlikely... We have the announced prices for the eastern european official launch and they're for november - and they're the same.

Do you have an idea when Microsoft might consider a price drop though? Because I would be interested to get one at 299.

 

[J_Saint]

The story is from July 26th.

 

[Rangers]

Dropping price is not the answer. It's already cheaper than the PS3. They should be focusing on increasing the value of $399.

Bzzt, wrong answer.

In fact it pissed me off that microsoft seemingly kept throwing more crap into the 399 system (game bundles, free live cards, and whatnot). When people want a crapload of stuff for a lot of money they're just going to buy a PS3.

Of course, digitimes has been claiming this before and so far they've been wrong, so we'll see.

Also, the Core isn't mentioned here. There's no way they're discontinuing it so dont even bring that up. But I'm wondering if it will only drop to 249 or something.

If they could have the console to 199 this early, that'd be kind of insane.

Just tossing around the 15-20% cost reduction figure, I've seen manufactoring costs of 360 all over but I think one claimed $435 (Core unit?), 20% of that would be roughly $80 in cuts which would be about right for a $100 drop.
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Live sex webshows

 

[Geo]

The story is from July 26th.

Umm, yeah. Wtf? How "imminent" is a cut that hasn't appeared between July 26 and Sept 26?

Having said that, if you look at Takahashi's book he's pointing at Fall 2006 for the first cost savings redesign for XB360.

 

[Rangers]

Umm, yeah. Wtf? How "imminent" is a cut that hasn't appeared between July 26 and Sept 26?

Having said that, if you look at Takahashi's book he's pointing at Fall 2006 for the first cost savings redesign for XB360.

I'm betting the announcment may come at X06
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Live Sex

 

[Inane_Dork]

Bzzt, wrong answer.

In fact it pissed me off that microsoft seemingly kept throwing more crap into the 399 system (game bundles, free live cards, and whatnot). When people want a crapload of stuff for a lot of money they're just going to buy a PS3.

You've really no support to that at all. Increasing the value of $399 is not likely to warrant a jump to $499 or $599. Point is, they already have the price point won. A price drop would not do much because of that.

I think you underestimate the appeal of two free games when games on the shelves are $60.

 

[pc999]

I dont think they will drop the price till 07 at least for several reasons.

-they do have a price advantage over PS3 (at the very least for those that just want a cheap(er) console), so they will not face pressure from Sony (because of the price);
-there is not enought PS3 to make trouble to 360;
-they sale havent been dropping (naturally) by now;
- Wii does not have a big price advantage (over the core, and specially over the bundles);
-most Wii games and 360 games are really diferent (eg Exite Trucks/Forza, MP3/GoW...) so none will prefer one over the the other based on the price.

 

[SugarCoat]

You've really no support to that at all. Increasing the value of $399 is not likely to warrant a jump to $499 or $599. Point is, they already have the price point won. A price drop would not do much because of that.

I think you underestimate the appeal of two free games when games on the shelves are $60.

Look, its very simple. Cheaper price = more sales. And personally i dont find the bundled game options appealing at all. You want to appeal to me with a free game, let me choose. Consumers arent morons. If they dont want the game and the 30 day trial or what ever they're going to be pimping soon, then the silly thing is just as appealing as it was yesterday, last week, two months ago, last year. Get the point? I'd rather take a vanilla console for 300 and pay the cash for a game i want rather then pay 400 for the console and two coasters for drinking glasses.

Its not about competion, its about catering to a market, and a price drop does that. If another companies console was $900 you dont say "well they can just leave it at $400 forever cause its cheaper". Thats an incredibly obtuse and forgive me, stupid, way to look at it.

Historically all consoles have done very well in sales during the holidays after price drops REGARDLESS of what the competitions prices were.

 

[RobertR1]

A $100 price drop will not only be very stiff competition to the PS3 but also now will have Wii buyers considering dropping an extra $50 for quite an upgrade. I really don't see a downside, especially if it's been in their financial model from the beginning.

This Holiday season and perhaps even into next years isn't the time to maximize profits, it's all about having a massive install base.

 

[scooby_dooby]

Dropping price is not the answer. It's already cheaper than the PS3. They should be focusing on increasing the value of $399.

Totally disagree. $400 is much more expensive than $300, some people will only buy at that price, it also brings the core to the sweet spot for mainstream consumers which is $199. Everything is not relative to PS3.

They will sell more consoles at $300 than at $400, that's really the bottom line.

BTW: Sorry for posting an old article, I thought it was more recent, my bad.

 

[Powderkeg]

Totally disagree. $400 is much more expensive than $300, some people will only buy at that price, it also brings the core to the sweet spot for mainstream consumers which is $199. Everything is not relative to PS3.

They will sell more consoles at $300 than at $400, that's really the bottom line.

BTW: Sorry for posting an old article, I thought it was more recent, my bad.

But the question is, would the extra $100 per system loss be worth the difference in sales?

MS is going to outsell Sony this year. There should be no question about that. January 1, MS will have a larger lead over the PS3 than they do right now. As long as MS can continue that they have no reason at all to drop the price. Even if they are only selling relatively the same number of systems in the US and Europe as Sony is then dropping the price really wouldn't make sense in a long range business perspective.

Ultimately MS wants to make a profit. They would rather make a profit and end up in a strong #2 than they would taking big losses to get a weak #1. The question is would the increase in sales a $100 price drop would bring make the system more likely to reach that profitability goal than holding on to the same price as long as they possibly can without losing ground to Sony?

Personally I don't see a price drop happening before E3 2007.

 

[Nesh]

Dropping price is not the answer. It's already cheaper than the PS3. They should be focusing on increasing the value of $399.

I disagree. The price difference after the price drop will be even more tempting for the consumer to get a 360 who will see a $299 360 and a $499 PS3 in a store, especially with the new wave of impressive second gen 360 titles and few PS3 titles.

The price is huge and the product diversification PS3 is based on to attract consumers might be overshadowed by the bigger price difference combined with new 360 quality titles. Only if Sony manages to make the extra functions known and useful enough to the public plus get very soon after release lots of standing out unique AAA titles unmatched by the 360, MS will worry about adding more value to the $399. For now they have made a wise move. There arent much they can do to add more value than wait for new great tittles to get released anyways

 

[SugarCoat]

But the question is, would the extra $100 per system loss be worth the difference in sales?

MS is going to outsell Sony this year. There should be no question about that. January 1, MS will have a larger lead over the PS3 than they do right now. As long as MS can continue that they have no reason at all to drop the price. Even if they are only selling relatively the same number of systems in the US and Europe as Sony is then dropping the price really wouldn't make sense in a long range business perspective.

Ultimately MS wants to make a profit. They would rather make a profit and end up in a strong #2 than they would taking big losses to get a weak #1. The question is would the increase in sales a $100 price drop would bring make the system more likely to reach that profitability goal than holding on to the same price as long as they possibly can without losing ground to Sony?

Personally I don't see a price drop happening before E3 2007.

a $100 reduction 1 year from launch would cause them to take the same % loss per box that they were during launch day. If they dont reduce the cost they'll actually be breaking even if not a little over on them. This is due to projected yields/component costs.

 

[scooby_dooby]

But the question is, would the extra $100 per system loss be worth the difference in sales?

That is the question, or more specifically how many more units would they be able to sell between now and E3 2007 where they would presumably drop the price as expected. How much of a lead would that give them? And what kind of long-term impact would that have on the console race.

If you think it would have a longterm impact on the success of the console, than any money could easily be made back in spades the final years of console. How much would a 5% increase in market share mean in extra revenue ? Could a pricedrop now cause that sort of trickledown effect by 2010?

It depends how critical you think the next 6-12 months are for MS, I think they're pretty important. Sony will drop the price alot faster than people think imo, and MS really needs to build up that lead so it can withstand the inevitably huge 2007/2008 sales for PS3. Also, making the case to ALL 3rd party developers that 360 is the place to be is key, and MS will never have that chance like they do now and for the next 6-12 months.

 

[Cobra101]

Desperation makes for desperate actions.

Don't they have confidence in their console?

 

[scooby_dooby]

Desperation makes for desperate actions.

Don't they have confidence in their console?

Could be seen as going in for the kill....