Price Drops in 2007?

[Rockster]

A few people I know have been on the fence about upgrading to a new console, waiting for prices to fall. Because it seems possible that the PS3 may remain supply constrained even into next holiday as they launch into new territories and try to catch demand. As a result and looking at historical trends, I now think that more mainstream price points won't be reached until 2008 and I doubt we'll get much if anything in the way of price drops next year. I do think Microsoft will be switching to a new revision of their console so they may use the following pricing model to get through the transition. I don't think Sony will do much of anything next year either. Nintendo may drop the Wii to $199. Thoughts?

Microsoft Mid/Late 2007 Price Guide
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$399 XBox 360 Premium 80GB New SKU (Slight redesign, Internal PSU, HDMI support, Quieter .65u XCPU)
$349 XBox 360 Premium 20GB Old SKU
$299 XBox 360 Core New SKU (Slight redesign, Internal PSU, HDMI support, Quieter .65u XCPU)
$249 XBox 360 Core Old SKU
$149 HD-DVD Addon Drive
$99 80GB Hard Drive
$69 20GB Hard Drive
$39 256MB Memory Card

 

[Rangers]

I doubt MS will further fragment the market with a 3rd SKU.

Edit: in fact the more I look at your price structure the more unlikely it looks. They would not keep 4 active SKU's, as well only two of those are viable. Nobody would buy an "old" core in lieu of the redesigned one you propose, and further people would default to the new 399 premium as well, so it'd essentially be no price drop at all.


Most people are expecting a 360 price drop in spring 2007. That is when they switch to 65nm, as well as being a slow demand time of year.

Sony I dont know, they need price drops badly. It's a good system, just for myself priced way too high to seriously consider. I dont think most people expect Sony to drop until fall 2007 at the earliest though.

Nintendo who knows. Unless sales are slower than expected (a very real possibility imo) they will probably never drop the price. OK just kidding I guess, they might have to drop to stay even with Xbox.
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[one]

$399 XBox 360 Premium 80GB New SKU (Slight redesign, Internal PSU, HDMI support, Quieter .65u XCPU)

I'm wondering about how the new model will be configured, does the move to 65nm significantly reduce the heat output? In Intel's Conroe case it was an architectural redesign too. Also, when will Xenos move to 65nm?

 

[London Geezer]

I'm wondering about how the new model will be configured, does the move to 65nm significantly reduce the heat output? In Intel's Conroe case it was an architectural redesign too. Also, when will Xenos move to 65nm?

Well in theory a smaller process means smaller chips and less electricity to make them run, meaning they generate less heat than bigger chips. If you add fish to that, it gets even better.

 

[quest55720]

I have thought for a while spring is when MS will price drop by 100 dollars. I think the timing will be perfect for MS this spring that is when sony should have its production problems fixed. Soon as there are PS3s on the shelves MS hits sony with a price drop. If sony can't afford to follow with a price cut of its own it would make for an interesting holiday season 2007 with MS having a 200 dollar price advantage. Also MS would also have a SKU at the magic 199 price point even if it is a stripped down system.

 

[22psi]

MS may wait until summer or so to drop the price (when GTA4 or Halo 3 hits?).

199 core system with GTA4 and/or Halo 3 is pretty compelling to the mass market.

 

[Rockster]

I doubt MS will further fragment the market with a 3rd SKU.

Edit: in fact the more I look at your price structure the more unlikely it looks. They would not keep 4 active SKU's, as well only two of those are viable. Nobody would buy an "old" core in lieu of the redesigned one you propose, and further people would default to the new 399 premium as well, so it'd essentially be no price drop at all.


Most people are expecting a 360 price drop in spring 2007. That is when they switch to 65nm, as well as being a slow demand time of year.

Sony I dont know, they need price drops badly. It's a good system, just for myself priced way too high to seriously consider. I dont think most people expect Sony to drop until fall 2007 at the earliest though.

Nintendo who knows. Unless sales are slower than expected (a very real possibility imo) they will probably never drop the price. OK just kidding I guess, they might have to drop to stay even with Xbox.

You don't think MS will release an HDMI capable 360? That simple fact alone will create the need for new SKU's. It's the same 2 models with the same 2 price points, just more refined units. I was simply showing a potential price drop on older models to move them out of the channel, and not that they would continue to be produced. Like I said, IMO they aren't going to feel any price pressure from Sony in 2007, and as such, they won't drop prices. Of course they could choose to do so, I just don't think they will. The new premium SKU with the HD-DVD player would still be cheaper than the $599 PS3 in my scenario, and it addresses the lack of HDMI, hard drive size, etc.

 

[Rangers]

You don't think MS will release an HDMI capable 360? That simple fact alone will create the need for new SKU's. It's the same 2 models with the same 2 price points, just more refined units. I was simply showing a potential price drop on older models to move them out of the channel, and not that they would continue to be produced. Like I said, IMO they aren't going to feel any price pressure from Sony in 2007, and as such, they won't drop prices. Of course they could choose to do so, I just don't think they will. The new premium SKU with the HD-DVD player would still be cheaper than the $599 PS3 in my scenario, and it addresses the lack of HDMI, hard drive size, etc.

So then when the old systems are moved through the channel, you are left with no price drop.

They can fix the HDMI issue without any major changes or new SKU. They can add it to the mainboard whenever they want. If they do it'll be quietly. The problem is retrofitting all the old ones already out there....

I cant speak for ms but trying to compete with PS3 in features is always a losing game imo. As such I think any new SKU's that are "more premium than premium" are a very bad idea. Ask Sony about the PSX in Japan..that $700 PS2, and how well that went over..

The changes you mention (Quiter, internal PSU) are nothing to prevent a pricedrop, and will naturally happen anyway independant of pricing changes. The only thing that affects price their is the move to a 80 GB, and so I dont see that happening..
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[AlNom]

Hm... if they keep the 20GB Premium around, and then introduce an 80GB add-on, I'd almost be inclined to just get the Core + 80GB drive + component cable or VGA cable.

Well in theory a smaller process means smaller chips and less electricity to make them run, meaning they generate less heat than bigger chips. If you add fish to that, it gets even better.

I'm wondering about how the new model will be configured, does the move to 65nm significantly reduce the heat output? In Intel's Conroe case it was an architectural redesign too. Also, when will Xenos move to 65nm?

Yes. From 90nm to 65nm, you'll get around half the power consumption. (i.e. significant!)

 

[Powderkeg]

I have thought for a while spring is when MS will price drop by 100 dollars. I think the timing will be perfect for MS this spring that is when sony should have its production problems fixed. Soon as there are PS3s on the shelves MS hits sony with a price drop. If sony can't afford to follow with a price cut of its own it would make for an interesting holiday season 2007 with MS having a 200 dollar price advantage. Also MS would also have a SKU at the magic 199 price point even if it is a stripped down system.

I expect a price drop around E3, but no way are they going to drop the price by $100 with it only being on the shelf for a year and a half.

 

[Rockster]

So then when the old systems are moved through the channel, you are left with no price drop.

exactly!

They can fix the HDMI issue without any major changes or new SKU. They can add it to the mainboard whenever they want. If they do it'll be quietly. The problem is retrofitting all the old ones already out there....

You can't retrofit the old ones. Why would they do it quitely? Surely HDMI has been requested enough for MS to make sure everyone knows that they now support it. If they are going to update the motherboard with a new video output chip, and add and HDMI port, they might as well wait for the .65u CPU's as well. That's why it think the unit will be slightly redesigned, so that the consumer can easily distinguish between the old and new models.

I cant speak for ms but trying to compete with PS3 in features is always a losing game imo. As such I think any new SKU's that are "more premium than premium" are a very bad idea. Ask Sony about the PSX in Japan..that $700 PS2, and how well that went over..

Makes no sense and are two different things.

The changes you mention (Quiter, internal PSU) are nothing to prevent a pricedrop, and will naturally happen anyway independant of pricing changes. The only thing that affects price their is the move to a 80 GB, and so I dont see that happening..

Hm... if they keep the 20GB Premium around, and then introduce an 80GB add-on, I'd almost be inclined to just get the Core + 80GB drive + component cable or VGA cable.

Which is why I think the new premium has to be 80GB to prevent such scenarios. It also gives the illusion of a price drop because you are getting more for the same amount of money.

 

[London Geezer]

You can't retrofit the old ones. Why would they do it quitely?

MS secret services sneaking into our houses while we're sleeping, sticking an HDMI port on our 360's??


Seriously though, even the thought of "retrofitting" existing 360's to have an HDMI there is out of this world. If they didn't sort it out with the HDDVD player add-on, they'll never sort it out. The only way out will be a completely new SKU. Old 360's will be HDMI-less forever unless a miracle happens and somehow the Multi-AV port starts outputting digital signals.

 

[a688]

MS secret services sneaking into our houses while we're sleeping, sticking an HDMI port on our 360's??


Seriously though, even the thought of "retrofitting" existing 360's to have an HDMI there is out of this world. If they didn't sort it out with the HDDVD player add-on, they'll never sort it out. The only way out will be a completely new SKU. Old 360's will be HDMI-less forever unless a miracle happens and somehow the Multi-AV port starts outputting digital signals.

Why do you think so many launch consoles failed and the latest updated bricked some

 

[Sethamin]

Repeat after me everyone: price drops are used to stimulate demand. They are not used to put pressure on your opponent. They are not used as a strategic weapon. There is no "perfect timing" for a price drop. When console sales start to slow, you drop the price to stimulate demand. That's it. It's really one of the only ways to generate demand, besides releasing high-demand (preferably exclusive) content, and certainly the one console makers have the most control over.

I'll make a prediction for you: when sales start to significantly decline, then you'll see the 360 (or PS3 or Wii) drop the price. Not before. It doesn't even make sense to drop the price before then anyway, as they'd be losing the extra revenue and may not even have the production capacity to meet the increased demand.

 

[Shifty Geezer]

Repeat after me everyone: price drops are used to stimulate demand. They are not used to put pressure on your opponent. They are not used as a strategic weapon.

I disagree with that. Pricing between rivals is used as a 'weapon'. Some time back there was a 'beans war' in the supermarkets in the UK, where the price of Baked Beans were dropping and dropping. Probably had something to do with a price ranking based on measuring key items, and a low Beans price meant a notably better ranking, but I really don't know the cause.

Anyway, in business there have been situations where a company has dropped prices to force out a competitor and the like. That might not happen in the console space because of the nature of the market, and the fact XB360 is already a darned sight cheaper than PS3, so what's the point?! It is a definite possibility though.

 

[pipo]

My predictions: I expect a price drop for the Euro Xbox before the PS3 launch over here. The US price will probably follow that. Before the end of next year you will be able to buy a 360 for at least 50 euro/usd less than now.

I'm not sure there will be a brickless version though, a smaller brick for sure, but internal?

 

[AlNom]

I'm not sure there will be a brickless version though, a smaller brick for sure, but internal?

It'll likely be external still. I don't see the space available for anything more than they've already designed. Heatsinks won't be reduced in size that much if they bother, and the innards are already pretty packed.

 

[Brimstone]

In March is when I think the first XB360 price drop will happen. We don't know if the PS3 will launch in Europe in March, but it probably will, so having a price drop around that time will work out good.

Then towards the end of of 2007 Microsoft can judge if a second is needed for holiday 07.

 

[AlNom]

I'm not sure there will be a brickless version though, a smaller brick for sure, but internal?

It'll likely be external still. I don't see the space available for anything more than they've already designed ( and why would they do a redesign when they could just leave it external?) No reason to stuff in another source of heat inside the case too; heatsinks won't be reduced in size that much if they bother (it's only the CPU going from 90nm to 65nm in the timeframe), and the innards are already pretty packed.

 

[Sethamin]

Anyway, in business there have been situations where a company has dropped prices to force out a competitor and the like. That might not happen in the console space because of the nature of the market, and the fact XB360 is already a darned sight cheaper than PS3, so what's the point?! It is a definite possibility though.

Sorry, I should've been more clear. I am only talking about the console space. Price is definitely used as a strategic tool in other markets. However, the fact that console makers generally lose money on each unit means that they want to milk all possible revenue at each price point before moving to the next one down. In addition, there's generally not a lot of excess production capacity because it's expensive to maintain. Also, even if extra production capacity was there, there's a very deep, global supply chain, so you'd have extra capacity in that pipeline as well, which is also expensive.

Bottom line: console makers use pricing in order to extract all possible revenue and generate a very steady amount of demand. They don't lower the price just to look more attractive next to another console, unless they are sure they want to lose out on the extra revenue and equally sure they can handle the excess demand. Either way, it costs them a lot of money to do so and they do not do it lightly. I contend that they only do it in response to weakening demand for their product, not in reaction to competitors actions (except insofar as a competitors action might weaken demand for their own product).