I dunno if it's ok to turn this thread into a price cut debate, but Johnny A and Mint, I totally disagree. The bottom line is looking at what 360 is and looking at history, a price cut is way overdue. I know everybody here knows the story but it's worth remembering Xbox 1 was at 199 just 5 months after it's introduction. 360 is now 27 months out and the "base" model is at 349. Next factor is look at what Sony has done, their machine has Blu Ray and is now just 399, only $50 more. Granted they are losing more money but, if MS cant do better than this it's a bit sad.
Also look at what 360 is, with no Blu Ray and no standard HDD there is nothing expensive in the machine. Too me what 360 actually is should probably be about 200 on the core model right now, 250 on the premium. Dont forget MS charges a mint on accesories like 49 wireless controllers, $180 hard drives, $100 wireless adapters which they sell tons of, etc. The whole point of expensive accessories imo is to get the base hardware into consumer hands cheaper, sort of trick them in a way. This isn't even mentioning the $50 a year for Live, which in 5 years is almost in essence adding $250 per live subscribed console to MS bottom line, that Sony isn't getting.
The "rumor", and an extremely lightly founded one, is that 360 might drop for GTA4, but since when has a console price drop ever been directly timed to a game? That is why I expect the announcment at GDC. The true goal would be a drop
in time for GTA4.
Sure they could absorb it, but remember that you have to think about the marginal gain of a decision, not just the outcome alone.
If they sell 2.5M with the price cut compared to 2M without it, then the software sales from those 500k extra units would have to cover the entire $125M loss in revenue. That's $250 per console, and you'd need a lot of games/accessories/downloads sold over their lifetime to get that much back to MS.
Price cuts are only worth it if they make a really big difference in sales.
By this logic we would never see price cuts. You have to cut the price sometime. The bottom line is what it costs MS to make a 360 versus the price. When that gets extremely solidly in the black, they'll need to cut to keep up with the competition. It isn't just games sold on those extra consoles, it's gaining a market position. It's a give away the razors to sell blades model. Really putting Sony down for the count by some degree, how much could that be worth down the line? Of course it's all a matter of degree for all sides. Really what you are not factoring in is competition. All business would operate the way you lay out, in order to maximize profits, except the fact of constant competition leads them to profit less than they ultimatly could, in order to profit some versus none in the face of competition.
And the cut isn't really needed yet in USA, but it is arguably pretty badly needed in Europe. David Reeves just
stated PS3 outsold 360 3-1 in Europe last week, has now passed 360 in install base in France, Germany, Spain, Italy, Switzerland, and others, and expects to overtake 360 in all EU comined by summer. Then you have Warner's Blu Ray defection and a lot of big PS3 titles coming, PS3 could build a lot of steam quickly. I think something is needed pretty bad there. And I dont think it's really feasable to have a price cut in only one territory, at least it's rarely done.
