MS to lose $75 per X360
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Johnny Awesome
Veteran
Probably. The other thing is might have been misquoted in translation as he might have been talking about the R&D side of things. I'd like to see the original quote.
The cost to manufacture the first 3 million X360s is probably no more than $400 per unit IMO. I imagine that MS will keep the $300 price for two holidays at which point their costs should have dropped to $300 and they can probably keep the pace from there.
The cost to manufacture the first 3 million X360s is probably no more than $400 per unit IMO. I imagine that MS will keep the $300 price for two holidays at which point their costs should have dropped to $300 and they can probably keep the pace from there.
mckmas8808
Legend
I dont know Sean I think thats wishful thinking. I think MS would price themselves out of the market with that price. You can't just set any price that you want. If you do you will automaticlly lose.
Well, that rule would probably apply in most any other circumstance.
But when you have a company like Micorsoft and a guy like Bill Gates who has enough disposable income to do whatever he wants, with the main goal being not to turn a profit on hardware, but simply to get X360 into as many homes as possible..
If MS is willing to swallow another billion this generation, they could price the 360 @ $249 and sell about 10 million of them without losing much more than that.
Eventually the components and manufacturing will become cheaper & allow MS to lose less or even turn a small profit.
$249 would be a very attractive price point, and if your goal is simply to sell consoles, losses be damned, than pricing your console at $350+ makes no sense.
But when you have a company like Micorsoft and a guy like Bill Gates who has enough disposable income to do whatever he wants, with the main goal being not to turn a profit on hardware, but simply to get X360 into as many homes as possible..
If MS is willing to swallow another billion this generation, they could price the 360 @ $249 and sell about 10 million of them without losing much more than that.
Eventually the components and manufacturing will become cheaper & allow MS to lose less or even turn a small profit.
$249 would be a very attractive price point, and if your goal is simply to sell consoles, losses be damned, than pricing your console at $350+ makes no sense.
I've always expected a $299 launch price, no matter what actual cost to MS was. They can't afford a bad launch. This will be as big as the w95 launch for them. 299 is the magic number. 249 makes it sound cheap and not truly next gen, 349 -399 will give too many people second thoughts. (me included)
I don't see the $299 gertting you the HD though. I think that the HD will be sold at a loss packaged with Live kits. Current Live members will get a large discount also. (just a guess)
I wouldn't be surprised to see them taking a page out of Nintendo's book with pricing. PS3 launches, Halo3 ships and the price drops to $249. Mark my words 360 will always be atleast $50 cheaper. We should also see a 360 redesign around 2008.
I also don't expect $60 games to remain around very long. I think competition will bring them down to $55-$50 once we get into the next gen era. If $60 sticks it will be a launch price and you'll see games drop to $50 with 2-4 weeks after being released.
I don't see the $299 gertting you the HD though. I think that the HD will be sold at a loss packaged with Live kits. Current Live members will get a large discount also. (just a guess)
I wouldn't be surprised to see them taking a page out of Nintendo's book with pricing. PS3 launches, Halo3 ships and the price drops to $249. Mark my words 360 will always be atleast $50 cheaper. We should also see a 360 redesign around 2008.
I also don't expect $60 games to remain around very long. I think competition will bring them down to $55-$50 once we get into the next gen era. If $60 sticks it will be a launch price and you'll see games drop to $50 with 2-4 weeks after being released.
I don't think people will percieve the X360 as 'cheap' if it comes to market at $249.
Not once they see the performance, and because it will be all over the media that MS is selling these at a loss.
It may even turn some buyers on to know that MS is not turning a profit.
I guess we will see soon enough.
The HDD is standard with the 360. The developers are programming the games using that feature. Plus, most of the Live interface along with all of the other features (Llamaware Neon, etc.) are probably written to the HDD.
Not once they see the performance, and because it will be all over the media that MS is selling these at a loss.
It may even turn some buyers on to know that MS is not turning a profit.
I guess we will see soon enough.
The HDD is standard with the 360. The developers are programming the games using that feature. Plus, most of the Live interface along with all of the other features (Llamaware Neon, etc.) are probably written to the HDD.
That assumes that this analyst is right about 360's manufacturing cost, which he's not IMO. Even if he was selling 10m consoles at that price would still mean a $1.25 billion loss within the first year before even taking marketing and other costs into account (though game sales may cover the majority of the other costs like advertising ect). No I think $299 is the cheapest we'll see 360 at launch.
jvd said:
Wow, you think they'll sell out at $400?
Did this happen for previous console launches that were priced around this? I don't remember.
Or are you thinking that gamers will pay more now due to inflation, perceived value, etc.?
How many do you think they'll sell at this price? 5 million?
They will sell out because of the time frame . Its the holidays here in the states . It will be the hot item of the season and they wont be able to supply enough units to keep up with demand . I think they can get 3-4 million systems out here in the usa by december 25th or so .
I think it will be
usa 3+ million
e.u 2+
japan 1+ (no real intrest in it )
I don't know , i remember the saturn and psone being hard to find at thier releases , I remember the nes launch and my father telling me he couldn't find one and was on busniess in canada and found a store with one unit left and they had those cabbage patch kids that my older sister was into and he ended up buying 6 of them and bringing them home for my cousins .
I think there are gamers who would pay 500$ for a x360 or a ps3 . I do believe its a smaller group than those who will pay 400$ and a smaller group than 300$ and so on . But i do think for launch and hte limited supply of consoles they will sell out at 400$ , so will sony if they price it at that .
Yea i think they can do that at 400$ world wide .
I stil lthink they will launch at 300$ but i think either of the companys launching at 400$ will be reasonable . Personaly
Pozer said:Whether they sellout or not somewhat depends on how many they'll be able to manufacture.
I'm curious to see how yeilds are gonna be on the cpu and gpu. I imagine that maybe the deciding factor of launch untis avail.
PS. Anyone know any online retailers that take preorders?
http://www.ebgames.com/ebx/ads/shops/xbox360/
www.gamestop.com will start taking them when they have an offical price
Teasy,
Marketing costs are a drop in the bucket compared to the hardware losses MS will endure.
MS giving away over 9000 X360s in their Dew/Pepsi campaign will only cost them ~3 million..
The point being that Microsoft is not going to justify selling the console at $300 rather than $250 to offset $50million in advertising costs when they are already looking at losing over a billion.
If the goal is to get the console in as many homes as possible (and it is) then pricing the console out of reach for a majority of homes is market suicide when you can afford to eat the loss up front and recoup your expenses later.
Marketing costs are a drop in the bucket compared to the hardware losses MS will endure.
MS giving away over 9000 X360s in their Dew/Pepsi campaign will only cost them ~3 million..
The point being that Microsoft is not going to justify selling the console at $300 rather than $250 to offset $50million in advertising costs when they are already looking at losing over a billion.
If the goal is to get the console in as many homes as possible (and it is) then pricing the console out of reach for a majority of homes is market suicide when you can afford to eat the loss up front and recoup your expenses later.
Sean the price really doesn't matter at launch. Ms will sell out regardless of price , 50$ isn't going to change that fact . They simply wont be able to supply enough to meet the holdiay demand so why not sell them at as much as they think they can get away with ?
Assuming that his is right and the console is 375$ why loose 150$ when they can loose only 75$ ? HTey know they are going to sell out of whatever they can make and they can take smaller losses on the hardware when they have nothing to go against . When the ps3 comes out and they need to adjust thier price then they can . If sony launches at 400$ they can stay at 300$ . If sony comes in at 300$ they can drop the price to what they think they need . By march or june of next year the cost of the x360 could have dropped and they can lower the price with out loosing as much money .
No company is stupid and the less money ms has to loose the faster they can make it back and become profitable . The faster they become profitable the faster they can spend money else where like securing exclusive tittles or swaying devs over from the other platforms
Assuming that his is right and the console is 375$ why loose 150$ when they can loose only 75$ ? HTey know they are going to sell out of whatever they can make and they can take smaller losses on the hardware when they have nothing to go against . When the ps3 comes out and they need to adjust thier price then they can . If sony launches at 400$ they can stay at 300$ . If sony comes in at 300$ they can drop the price to what they think they need . By march or june of next year the cost of the x360 could have dropped and they can lower the price with out loosing as much money .
No company is stupid and the less money ms has to loose the faster they can make it back and become profitable . The faster they become profitable the faster they can spend money else where like securing exclusive tittles or swaying devs over from the other platforms
koldfuzion1
Newcomer
I sincerely doubt MS is willing to eat another billion this gen, I read a WSJ article a while back, and a head of the Xbox program (maybe Allard, can't remember) specifically noted that if Xbox doesn't turn a profit, his head is on the block and that he would be fired. These guys as far as I know are under pretty firm orders to stop the bleeding this go 'round. Their best chance to go for a higher price point do this is in the first six months when they own the market. I wouldn't be too shocked to see $399 but $359.99 to me seems about right, catchy, and more realistic out of the gate. And yes, reasonable given inflation and perceived value increases. I think my dad paid about $250-300 bucks for Atari in 1981. Suffice it to say, I think 360 has Atari beat. (Then again, I did love Missile Command).
When PS3 comes out I would expect the price of Xbox to then come down to $299 or less. M$ would still probably be taking a modest loss early on to ensure a large installed base, but I think they will do everything they can to minimize the bleeding ($375 cost sounds about right to me, maybe a little on the low side but not too far off). I don't think you will see M$ falling on their sword for the sake of gaining market share for very long. In all likelihood they'd be more happy with a 25-35% share and in the black than a 45-55% share and another few billion down a hole and have to explain to analysts on their quarterly conference call why they keep throwing shareholders' money down this xbox pit.
I agree with jvd that out of the gate the market can easily bear 350+ and I fully expect them to charge that at or near that price. Why wouldn't they? The relevant competition this fall is PS2 and Gamecube and Xbox, totally different consoles, and any serious gamer out there already owns one already if they want one, in other words, for six-eight glorious months they have a monopoly, I suggest that M$ should enjoy it while it lasts. 5 million units at 350 is probably pretty realistic. I don't expect them to do something stupid and rake people over the coals with a $499 price tag, but $359 seems eminently reasonable to me. $400 is doable too, but strikes me as unlikely.
When PS3 is out, the situation is completely different. Sony may have a bigger problem on its hands. I think Sony would very much like to charge $500 a pop, but with MS out there almost certainly under $400, it would be very tough to do. On PS3 release, I expect PS3 to come out at approx 350-400 at launch to nail the early adopters (emphasizing all that extra power), and drop down to 299 and go head to head with xbox before the holidays in 2006. This may force MS into further cuts, but as noted above, I expect both companies to try to maintain the highest prices as long as possible.
I don't, however, expect PS3's power advantage, real or perceived, giving Sony much pricing power in a head to head with 360. I would be surprised if Sony can command a significant premium over 360 for any significant period of time irrespective of power, exclusives or savvy marketing unless they asbolutely blow 360 away--as far as I can tell, that is not going to happen, even though I think PS3 is one powerful machine.
If any company is in trouble here, I suspect it's Sony-IMHO they are pretty concerned about the costs of this box, hence the ongoing HDD debate. Sony isn't interested in throwing 1 billion down a hole either, and if they have a $400-450 to produce box priced at $299, they are going to be in a world of hurt. I'm not sure where PS3 is coming out on the cost side, but based on xbdestroya's thread, I think the cost is going to be at a fairly significant premium to 360. Yes, software can make up for some losses, but a billion dollar hole is pretty hard to recoup with increased royalties on software. Yes, $59.00 is likely, but I also agree that price is going to hold up for major titles only, and not for very long either, especially as quality titles continue to roll out over time.
For all of Sony's Karate bravado, if in a head to head with 360 they come at the market with a $100 premium over 360 they may be in for a rude awakening. I'll gladly pay it, since I'm an idiot and have the cash, but many Dad's just looking for something under the tree will not, assuming 1) M$ convinces them that 360 is a proven system with 2) an adequate well supported software library that 3) won't suddenly die off like Dreamcast (which I think they have already succeeded at), IMHO Joe Dad is more likely to go for the 360. Sony has to be prepared to match M$ on price pretty early on, or they are probably going to bleed cash for quite a long while. That is not going to make Wall Street very happy, since they are already marching down the street with torches and pitch forks wondering what the hell Sony is doing to turnaround their low margin electronics businesses. M$ at least doesn't have THAT to worry about, relatively speaking (since I noted above, the xbox team is in the hot seat).
So here is my purely speculative guesstimate:
Fall 2005
XBox 359.99
Spring 2006 Xbox $359.99
(Launch of PS3) PS3 $449.99
First sets of shipments sell out, PS3 drops to $399.99 (2-3 months post-release)
early Fall 2006 PS3 $349.99
early Fall 2006 Xbox $299.00
Christmas Day 2006 both systems: $299.00
Thereafter, M$ cuts before Sony from time to time and Sony matches.
Nintendo for what it's worth is priced more cheaply than both systems at all times, by at least $50.
When PS3 comes out I would expect the price of Xbox to then come down to $299 or less. M$ would still probably be taking a modest loss early on to ensure a large installed base, but I think they will do everything they can to minimize the bleeding ($375 cost sounds about right to me, maybe a little on the low side but not too far off). I don't think you will see M$ falling on their sword for the sake of gaining market share for very long. In all likelihood they'd be more happy with a 25-35% share and in the black than a 45-55% share and another few billion down a hole and have to explain to analysts on their quarterly conference call why they keep throwing shareholders' money down this xbox pit.
I agree with jvd that out of the gate the market can easily bear 350+ and I fully expect them to charge that at or near that price. Why wouldn't they? The relevant competition this fall is PS2 and Gamecube and Xbox, totally different consoles, and any serious gamer out there already owns one already if they want one, in other words, for six-eight glorious months they have a monopoly, I suggest that M$ should enjoy it while it lasts. 5 million units at 350 is probably pretty realistic. I don't expect them to do something stupid and rake people over the coals with a $499 price tag, but $359 seems eminently reasonable to me. $400 is doable too, but strikes me as unlikely.
When PS3 is out, the situation is completely different. Sony may have a bigger problem on its hands. I think Sony would very much like to charge $500 a pop, but with MS out there almost certainly under $400, it would be very tough to do. On PS3 release, I expect PS3 to come out at approx 350-400 at launch to nail the early adopters (emphasizing all that extra power), and drop down to 299 and go head to head with xbox before the holidays in 2006. This may force MS into further cuts, but as noted above, I expect both companies to try to maintain the highest prices as long as possible.
I don't, however, expect PS3's power advantage, real or perceived, giving Sony much pricing power in a head to head with 360. I would be surprised if Sony can command a significant premium over 360 for any significant period of time irrespective of power, exclusives or savvy marketing unless they asbolutely blow 360 away--as far as I can tell, that is not going to happen, even though I think PS3 is one powerful machine.
If any company is in trouble here, I suspect it's Sony-IMHO they are pretty concerned about the costs of this box, hence the ongoing HDD debate. Sony isn't interested in throwing 1 billion down a hole either, and if they have a $400-450 to produce box priced at $299, they are going to be in a world of hurt. I'm not sure where PS3 is coming out on the cost side, but based on xbdestroya's thread, I think the cost is going to be at a fairly significant premium to 360. Yes, software can make up for some losses, but a billion dollar hole is pretty hard to recoup with increased royalties on software. Yes, $59.00 is likely, but I also agree that price is going to hold up for major titles only, and not for very long either, especially as quality titles continue to roll out over time.
For all of Sony's Karate bravado, if in a head to head with 360 they come at the market with a $100 premium over 360 they may be in for a rude awakening. I'll gladly pay it, since I'm an idiot and have the cash, but many Dad's just looking for something under the tree will not, assuming 1) M$ convinces them that 360 is a proven system with 2) an adequate well supported software library that 3) won't suddenly die off like Dreamcast (which I think they have already succeeded at), IMHO Joe Dad is more likely to go for the 360. Sony has to be prepared to match M$ on price pretty early on, or they are probably going to bleed cash for quite a long while. That is not going to make Wall Street very happy, since they are already marching down the street with torches and pitch forks wondering what the hell Sony is doing to turnaround their low margin electronics businesses. M$ at least doesn't have THAT to worry about, relatively speaking (since I noted above, the xbox team is in the hot seat).
So here is my purely speculative guesstimate:
Fall 2005
XBox 359.99
Spring 2006 Xbox $359.99
(Launch of PS3) PS3 $449.99
First sets of shipments sell out, PS3 drops to $399.99 (2-3 months post-release)
early Fall 2006 PS3 $349.99
early Fall 2006 Xbox $299.00
Christmas Day 2006 both systems: $299.00
Thereafter, M$ cuts before Sony from time to time and Sony matches.
Nintendo for what it's worth is priced more cheaply than both systems at all times, by at least $50.
Great points koldfuzion, I'm right there with ya. Microsoft is indeed in the situation where they expect XBox to start performing. Now, lucky for them I think it will in fact turn profitable this go around, but I wouldn't expect Allard and his crew to be playing any games in between now and then with the pricing. The plan will be appealing, but conservative and deliberate. I see $299 as a floor to initial pricing all the way up to something quasi-gimmicky like $360, as mentioned. Throughout development they've already tried to keep the costs reasonable, the components aren't prohibitively expensive, 65nm should arive shortly, and as we all know Microsoft has crammed a million and one ways into the 360 where they can generate additional revenue from the customer - illustrated perfectly by this whole 'faceplate' thing.
They will do everthing they can to turn profitable, and unless they for some reason come to the conclusion that every console sold turns into an incredible profit generator after the fact, one should expect fair pricing, but no firesales.
They will do everthing they can to turn profitable, and unless they for some reason come to the conclusion that every console sold turns into an incredible profit generator after the fact, one should expect fair pricing, but no firesales.
Sean*O
I wasn't really talking about offsetting anything, just the total cost of doing what your suggesting. Marketing was just one cost I mentioned to go on top of the cost of hardware. Also wether its only a drop in the ocean or not compared to hardware it all adds up. I don't think MS are prepared to lose well over $1 billion in 360's first 6-12 months on the market. That would mean yet another generation of losses.
Just FYI to be exact it would be $500 million not 50 million (the difference between selling 10 million at $250 instead of $300).
I wasn't really talking about offsetting anything, just the total cost of doing what your suggesting. Marketing was just one cost I mentioned to go on top of the cost of hardware. Also wether its only a drop in the ocean or not compared to hardware it all adds up. I don't think MS are prepared to lose well over $1 billion in 360's first 6-12 months on the market. That would mean yet another generation of losses.
Just FYI to be exact it would be $500 million not 50 million (the difference between selling 10 million at $250 instead of $300).
[source: http://www.sci-tech-today.com/news/...t-the-Games/story.xhtml?story_id=11300CM6RHJE ]
(I first found about that interview from here: http://www.rage3d.com/board/showthread.php?t=33816573 )
if its 75$ loss
Ms would most likely need each person to buy
a controller
a memory card
and 2-3 games to break even on the system .
I think thats certianly doable . Much easier than having to find a way to make back 125+ per system .
I think with bluray sony is going to allways try and stay above ms's price . They are going to try to get a premium on that function of the system over the x360 .
How much is another story but if supplys are really limited i can see it hitting in japan first at 500$ price tag and mabye hitting here at 400$ vs a 300 x360 over here . And lets face it all 3 systems will sell out or come very very close to selling out at the 400 or less price point in the states .
Even the ns5 if it comes with free nes , super nes , n64 games
So i can really see
2005
x360 -300-400
2006
ps3 400 +
x360 300
ns5 200$
2007
ps3 300 -350
x360 250-300
ns5 200
2008
ps3 250-300
x360 200
ns5 150
2009
ps3 200-250
x360 100-150$
ns5 sub 100$ mabye pack in
ms starts rumblings about the xbox 3
Ms would most likely need each person to buy
a controller
a memory card
and 2-3 games to break even on the system .
I think thats certianly doable . Much easier than having to find a way to make back 125+ per system .
I think with bluray sony is going to allways try and stay above ms's price . They are going to try to get a premium on that function of the system over the x360 .
How much is another story but if supplys are really limited i can see it hitting in japan first at 500$ price tag and mabye hitting here at 400$ vs a 300 x360 over here . And lets face it all 3 systems will sell out or come very very close to selling out at the 400 or less price point in the states .
Even the ns5 if it comes with free nes , super nes , n64 games
So i can really see
2005
x360 -300-400
2006
ps3 400 +
x360 300
ns5 200$
2007
ps3 300 -350
x360 250-300
ns5 200
2008
ps3 250-300
x360 200
ns5 150
2009
ps3 200-250
x360 100-150$
ns5 sub 100$ mabye pack in
ms starts rumblings about the xbox 3
