The scary thing is that everyone were laughing their asses off or at least shaking their heads when MS annouced their European prices. A 12 year old game kiddy could have told them that it wasnt going to work. Makes you wonder what kind of morons and imbeciles they've got working at their European division.
I can remember the reasons given by Boris Schneider-Johne, Microsofts's German PR dude, in some interview at Xbox launch:
1. They want the same margins as in the US.
Quite a joke considering the Japanese price and the huge difference to the US - the margins must have been significantly higher.
2. They are confident that retail competition will drive down prices.
Well, he was right on that one. Games retail for €60 in Germany now even though the wholesale price is much higher (€5+ depending on the game) than PS2 prices. So retailer sell at very low or non-existent margins and I doubt they like it. That's probably why you have absolutely no retail level advertizing of the Xbox and why the Xbox usually has the crappiest shelf space of all consoles.
3. They consider the Xbox worth the price.
I dunno. €479 is quite a lot for a console... just imagine for a second the Xbox were launched at $450 in the US. I doubt it would have done as well.
MS's only saving grace is the UK market. The Brits are pretty used to rip-off prices and 1:1 Dollar to Pound conversions, so Xbox did not do THAT badly there. But outside the UK, Microsoft's European adventure has been a huge desaster, probably equalling Japan.
I really don't get it. Everyone knew the Xbox would do crappy in Japan but it did have a decent chance in Europe and they totally blew it. If they priced the Xbox at Japanese level at release (~ €300!), Xbox would have been more successful. Instead, they decided to focus on the hopeless case Japan.
