Xbox 360: Focus shifts from Japan to Europe?

[Shifty Geezer]

Okay, this thread could easily become yet another 'total market overview thread' which seeing as we have a dozen at least of those, doesn't seem very worthwhile to me

There are some facts that I'm sure we can all agree with.

1) 'Cost is King' - that's true, in that no matter how much content you've got, if you're priced too high you won't sell. However, it's not a valid assertion on its own, as no matter how cheap your product, if it hasn't got/doesn't do what people want, it won't sell.

2) 'Content is King' - that's true, in that no matter how cheap you are, if you haven't got or don't do what people want, they won't buy your product. However, it's not a valid assertion on its own, as no matter how much content you've got, if you're too expensive people just won't buy.

Thus you cannot win the majority of any market without both (and a good measure of marketing). We all know and accept this. We all know PS3 is too pricey. The question here is what are MS planning to do? Have they got the content already that all they need is to lower the price and get a mass of sales? Are they in a position that no matter how low their price goes, they won't get much improvement in sales? Last gen the content and price of XB wasn't good enough to win over much of the EU market. This time around they have the advantage of being much cheaper than PS3, but do they have enough in the content situation?

My real question here is, if focus is shifting, what exactly is going to be done different? Price drops are inevitable. A drop in price doesn't signify a change in focus, and if all MS are relying on is being cheaper than PS3 and having a few adverts, IMO that's not any attempt to target and win over the EU. If they actually want to win over opinion, they need to do something a lot more impressive than undercut their rival but £100 (a gap that'll, eventually, always be narrowing).

 

[assen]

But that's kinda the point.
According to that chart, not a single permament 3rd party exclusive made the top 23, not to mention that 16 titles in the top 23 are full multiplatform releases - even though we are talking about the platform which had by far the largest amount of 3rd party exclusive content.

So much for the popular theory that it's exclusives that decide the battle, eh? Where did it ever come from? The vocal minority of Ico/SotC/Okami lovers who want to feel important?

 

[scooby_dooby]

My real question here is, if focus is shifting, what exactly is going to be done different? Price drops are inevitable. A drop in price doesn't signify a change in focus, and if all MS are relying on is being cheaper than PS3 and having a few adverts, IMO that's not any attempt to target and win over the EU. If they actually want to win over opinion, they need to do something a lot more impressive than undercut their rival but £100 (a gap that'll, eventually, always be narrowing).

Well, I think you're underestimating the effect a lower price, combined with strong marketing can have. I think MS does have the library to capture europe for sure, and their only challenge is letting people see that, that's where the advertising comes in.

Also, I think when you look at the largest franchise in EU, by far, it's GTA. That's coming this spring, and MS should still have a very big price advantage this spring.

With a concentrated marketing effort from now until then, and a signficant price drop, I think they can probably reach that tipping point in consumer perception in mainstream europe, using GTA as the catalyst.

 

[iXaarii]

We all agree price is important... so I'd like to ask a question that has been bugging me for a long time: everywhere I see technology there's always a 1$=1euro... so a 400$ console becomes 400e... do you ever see this changing? Couple that with more frequent price drops in US and with the fact that while Europe does have some quite rich countries it also has contries in which 500e might be a whole salary. And despite that you have 500$ ps3 and in europe you've got 600e "value added" console... often pushing titles you don't care for at all (I'm a european and yet i quite dislike car and sports games... I'd hate having them pushed on me).
For a long time I've wondered why europe is always treated so bad with both hardware prices and content delivery... after looking around the web a while I concluded this must be because companies look at sales numbers and decide europe is 3rd place in money spent in games... however this is another chicken-egg situation: of course europeans have less interest when they get more expensive products and often later...
For this reason I've always kinda "hated" being an european... but now there's a ray of hope: with Sony no longer having a monopoly with MS pushing Xbox cheaper it encourages competition... but i'm wonderign: does europe stand a chance of ever improoving it's hardware/software suport? I mean there's quite a bit of difference between a 600$ and 600e price... and that difference would be "price drop" for europe that might make it a bigger market... but will it happen? I've heard it justified in the past that it's because europe has more expenses to produce... but why? and if so european salaries are bigger, and if that's true it should be a higher profit area so both sony & ms should be pushing hard to conquer the area because of higher profit per sale... but i don't really see that happening... wondering if you cna give me some clues as to these things...

 

[AlphaWolf]

We all agree price is important... so I'd like to ask a question that has been bugging me for a long time: everywhere I see technology there's always a 1$=1euro... so a 400$ console becomes 400e... do you ever see this changing? Couple that with more frequent price drops in US and with the fact that while Europe does have some quite rich countries it also has contries in which 500e might be a whole salary. And despite that you have 500$ ps3 and in europe you've got 600e "value added" console... often pushing titles you don't care for at all (I'm a european and yet i quite dislike car and sports games... I'd hate having them pushed on me).
For a long time I've wondered why europe is always treated so bad with both hardware prices and content delivery... after looking around the web a while I concluded this must be because companies look at sales numbers and decide europe is 3rd place in money spent in games... however this is another chicken-egg situation: of course europeans have less interest when they get more expensive products and often later...
For this reason I've always kinda "hated" being an european... but now there's a ray of hope: with Sony no longer having a monopoly with MS pushing Xbox cheaper it encourages competition... but i'm wonderign: does europe stand a chance of ever improoving it's hardware/software suport? I mean there's quite a bit of difference between a 600$ and 600e price... and that difference would be "price drop" for europe that might make it a bigger market... but will it happen? I've heard it justified in the past that it's because europe has more expenses to produce... but why? and if so european salaries are bigger, and if that's true it should be a higher profit area so both sony & ms should be pushing hard to conquer the area because of higher profit per sale... but i don't really see that happening... wondering if you cna give me some clues as to these things...

There is an extra cost for doing business in europe (various laws etc) and isn't there is a VAT included in the price in most European countries?

If you want price parity with the US, I suggest you speak with your government.

 

[nelg]

My real question here is, if focus is shifting, what exactly is going to be done different? Price drops are inevitable. A drop in price doesn't signify a change in focus, and if all MS are relying on is being cheaper than PS3 and having a few adverts, IMO that's not any attempt to target and win over the EU. If they actually want to win over opinion, they need to do something a lot more impressive than undercut their rival but £100 (a gap that'll, eventually, always be narrowing).

I think that focus is shifting. I would think that it is fair comment to say that the Xbox brand is in higher regard than the past generation. Momentum is going up for the Xbox brand while at the same time going down for the PlayStation brand. From a public, media and develper point of view. Regardless of which platform one chooses, they will find comfort that both platforms will have sufficient and varied enough libraries to satisfy. So while declining price may be a reality for both consoles, for one whom may have been sitting on the fence, it may now be easier to entice towards getting the console that meets his/her price point first.

 

[Arwin]

It's also very important to stress that we are talking a lower price of entry point. The actual price/value is a different question. This doesn't mean that a lower price of entry point isn't a valid strategy, mind. It can definitely work.

 

[Laa-Yosh]

Then again the dollar is at an all-time low against the euro, so the difference is even bigger nowadays. But it will only end up in the hardware vendors' pockets...

 

[iXaarii]

but should a console manufacturer badly want to conquer the market in europe could he go down to the american price in $ thus effecting a price drop while not lowering his earning less than in the US? I've heard a lot about VAT and I don't know how it is in the US... checked wikipedia and what i understood that you still have customer tax, just that it's not listed in the price and added at checkout... so does that mean that if a console is 600$ in the US, 600e in europe, does it mean that actually somebody buying it in the US would still pay 600$+us tax=600e? If not ... I still don't get it. Why wouldn't one of the big companies eventually do it? have the same price all across the board, i mean. One could argue shipping, but I'm guessing that manufacturing is done in Asia anyway so shipping might be similar to US/europe...
What I'm trying to understand is: is there a solid economic reason to europe being treated like this or is it just an oportunity for producers that they take because europeans don't have a better choice (like say a european console manufacturer)?
I've heard a lot that it's justified by taxes... but does that mean there's more taxing in europe than US? and if so would that mean that all that extra money goes to improoving standards of livign in europe? And if all this is true what happens as internet purchases become more and more available at least for digital products? I don't think they could enforce region say if you bought a game through online delivery... and doesn't this contradict the whole "it's europe's extra taxes"?
Another reason I've heard on the subject is because they have to pay european staff and more taxes go into that: but i'm wondering if there's really that much staff involved in the distribution of an already produced hardware?
PS: I may sound all demanding... I'm not. yes, i'd like things to be different, but obviously I can't do anything about it so I'd just like to understand the whole thing and try to figure out there is a hope of things changing with time.

 

[AlphaWolf]

but should a console manufacturer badly want to conquer the market in europe could he go down to the american price in $ thus effecting a price drop while not lowering his earning less than in the US? I've heard a lot about VAT and I don't know how it is in the US... checked wikipedia and what i understood that you still have customer tax, just that it's not listed in the price and added at checkout... so does that mean that if a console is 600$ in the US, 600e in europe, does it mean that actually somebody buying it in the US would still pay 600$+us tax=600e?

Well it won't equal out to 600euros, I think the highest retail tax in NA is 15%, most tend to be quite a bit lower.

If not ... I still don't get it. Why wouldn't one of the big companies eventually do it? have the same price all across the board, i mean. One could argue shipping, but I'm guessing that manufacturing is done in Asia anyway so shipping might be similar to US/europe...

It's not just shipping. There's a number of legal issues involved with selling products in Europe. See Microsoft's current vista issue which will cost them more than $600 million.

What I'm trying to understand is: is there a solid economic reason to europe being treated like this or is it just an oportunity for producers that they take because europeans don't have a better choice (like say a european console manufacturer)?

Its a bit of both I'm sure, but I doubt MS, Sony and Nintendo are making significantly more per unit in Europe.

I've heard a lot that it's justified by taxes... but does that mean there's more taxing in europe than US? and if so would that mean that all that extra money goes to improoving standards of livign in europe? And if all this is true what happens as internet purchases become more and more available at least for digital products? I don't think they could enforce region say if you bought a game through online delivery... and doesn't this contradict the whole "it's europe's extra taxes"?

Part of it is extra taxes at retail, in the US and Canada consumers most places will pay a bit more (up to 15%) than the listed price at the till, where in Europe the VAT tends to be added right on to the price (up to 25%? unsure about that number)

Another reason I've heard on the subject is because they have to pay european staff and more taxes go into that: but i'm wondering if there's really that much staff involved in the distribution of an already produced hardware?
PS: I may sound all demanding... I'm not. yes, i'd like things to be different, but obviously I can't do anything about it so I'd just like to understand the whole thing and try to figure out there is a hope of things changing with time.

I'm uncertain but it wouldn't surprise me that European labor is more expensive as they tend to have more built in benefits, holidays and days off and similar to higher wages. For all I know there is more profit built in for retailers in Europe, but I doubt the console manufacturers are making significantly more per unit sold there.

I don't think the European market is so appealing that they want to sell at a greater loss than they do in NA. The US and Japanese markets are much more appealing. Microsoft's shift to Europe is essentially an admission of defeat in Japan. (something I think we could have told them years ago... but whatever)

 

[joker454]

I don't think the European market is so appealing that they want to sell at a greater loss than they do in NA. The US and Japanese markets are much more appealing.

Is this still the case? I thought the European market was more important than Japan now, so basically US > Europe > Japan (as far as a video game market goes). You still have to court Japan, but thats mostly just to get Japanese developer support since Japanese games are very popular in the US and elsewhere. Game sales in Japan is actually a secondary goal to that.

At least that's what I figured Microsoft was doing all along. The US market posed the least worry for them, so they aggressively 'attempt' to win the Japanese market. I put 'attempt' in quotes because again I figure that they realize they would never really sell games there, but they just want to get Japanese studio support. Now that they have done a reasonably good job of that they can shift their attention to Europe, which is really the second biggest market now, and they are now armed with both US and Japanese developer support.

 

[AlphaWolf]

Is this still the case? I thought the European market was more important than Japan now, so basically US > Europe > Japan (as far as a video game market goes). You still have to court Japan, but thats mostly just to get Japanese developer support since Japanese games are very popular in the US and elsewhere. Game sales in Japan is actually a secondary goal to that.

At least that's what I figured Microsoft was doing all along. The US market posed the least worry for them, so they aggressively 'attempt' to win the Japanese market. I put 'attempt' in quotes because again I figure that they realize they would never really sell games there, but they just want to get Japanese studio support. Now that they have done a reasonably good job of that they can shift their attention to Europe, which is really the second biggest market now, and they are now armed with both US and Japanese developer support.

Part of it is the developer support from Japan, but part of it is that Japan is willing to spend a large amount of money on consoles. I'm not sure of the per capita numbers but I wouldn't be surprised if europe was a distant third (behind Japan and the US) when it comes to per capita sales. Also Japan is pretty much uniform in how you would target it with an advertising campaign and what games you would target the populace with, I'm not so sure the same is true of europe.

 

[Shifty Geezer]

Part of it is the developer support from Japan, but part of it is that Japan is willing to spend a large amount of money on consoles.

Is that still true though? The fact PS3 has it's lowest price over in Japan, that suggests otherwise - it's the Europeans willing to spend more on their consoles.

 

[StefanS]

Is that still true though? The fact PS3 has it's lowest price over in Japan, that suggests otherwise - it's the Europeans willing to spend more on their consoles.

If he's still talking about per capita, it's definitely true. However, I think that view is tad too simplistic, after all Europe's a huge single market, if we neglect some VAT fluctuations.
Getting a good installed base in Europe is definitely worth a lot. Part of the wider support MS gets from Japanese devs (I am not talking about those funded by MS directly) is due to their head start concerning installed base (Capcom, Namco, etc.) and thus prospective sales. I remember Keiji Inafune saying that was the major decisive factor for Dead Rising on X360. What MS needs to attract more buyers is more support from publishers, more support from publishers will only materialise after more installed base.
That's why I think MS made a significant blunder by not lowering price earlier and doing more marketing in Europe. Instead they chose to try to sell a bundle of extremely low priced bundles in Japan. But a large installed base in Japan is less and less important for the major Japanese developers / publishers. What we've seeing this gen a good lot of them are trying to expand their sales in markets outside of Japan, the prime example being Capcom. Now, for the small Japanese dev houses a domestic base is still very important, but it's the big titles from the major houses that have significant sales in the US or Europe. The bigger your global sales numbers the bigger the support. Accordingly, I believe that MS should have used a more aggressive pricing.

 

[groper]

Here are some interesting numbers who can help us figure out few things.

The GDP(PPP)per capita* of US for 2007 is 45.175$.
The GDP(PPP)per capita for EU(27 countries) is 28.213$.
The average price of a new released game in US is 60$.
For EU is about 65 euros ( 91$).
That means that the Average EU citizen pays 31$ more to purchase a new-released game, despite the fact that his purchasing power is from lower to substantially lower than the one of US citizen.

The real problem for xbox360, in order to become casual in EU, is not its hardware price (right now is appealing for many millions of EU consumers) but the software prices.
Also this is why piracy is so important for the commercial succes of a console in Europe.



*Gross domestic product based on purchasing-power-parity per capita

 

[Shifty Geezer]

The GDP(PPP)per capita for EU(27 countries) is 28.213$.

that's mean average across all countries though. The market MS are really after at the moment doesn't include those of lower earnings. If you were to look at the GDP of the UK, France, Germany, Scandinavia, etc., you'll see income isn't really the issue (though of course these are mean averages too, and a highly imbalanced distribution of wealth, or high cost of living, affects available income for hobbies of the mainstream public).

Going forward, when these consoles are cheap and the Eastern European nations have grown their economies, the overall size of the market will be greater than Japan. Of course, at the same time the Asian market will (perhaps) have grown with China and India. Whatever happens, there must be long-term goals in consideration here. Japan's economy isn't going to grow much beyond what it can provide now, whereas Europe is bound to offer more...eventually!

 

[Cheezdoodles]

Here are some interesting numbers who can help us figure out few things.

The GDP(PPP)per capita* of US for 2007 is 45.175$.
The GDP(PPP)per capita for EU(27 countries) is 28.213$.
The average price of a new released game in US is 60$.
For EU is about 65 euros ( 91$).
That means that the Average EU citizen pays 31$ more to purchase a new-released game, despite the fact that his purchasing power is from lower to substantially lower than the one of US citizen.

The real problem for xbox360, in order to become casual in EU, is not its hardware price (right now is appealing for many millions of EU consumers) but the software prices.

Comparing those numbers directly may not be all that correct.

1. Us has a much worse spread in wealth than most euro countries.
2. There are quite a few euro countries there that are piss poor and i doubt anybody is interested in selling a console to.

that's mean average across all countries though. The market MS are really after at the moment doesn't include those of lower earnings. If you were to look at the GDP of the UK, France, Germany, Scandinavia, etc., you'll see income isn't really the issue (though of course these are mean averages too, and a highly imbalanced distribution of wealth, or high cost of living, affects available income for hobbies of the mainstream public).

The distrubution of wealth in most of those countries is far better than in the states. Scandinavia aspecially.

 

[Shifty Geezer]

The distrubution of wealth in most of those countries is far better than in the states. Scandinavia aspecially.

Sure. It's just an issue in considering buying power no matter what country you're talking about. It'd be better for economic analysis if 'average' earnings showed mode average tiers - how much money most people have - rather than a mean average.

 

[groper]

1. Us has a much worse spread in wealth than most euro countries.

Not really. The gap between rich and poor, is huge in every wealty capitalistic country.
The only real difference between some European countries and US is that their citizens enjoy more or higher social benefits.
In any case this is irrelevant when it comes to console sales because those who get the better from these benefits are poor/unemployed anyway and thus they are not prospective buyers of a next gen console (with or without the benefits).

2. There are quite a few euro countries there that are piss poor and i doubt anybody is interested in selling a console to.

Even if you left out these countries, nothing will change substantially from what i wrote in my last post.

 

[assen]

Comparing those numbers directly may not be all that correct.

1. Us has a much worse spread in wealth than most euro countries.
2. There are quite a few euro countries there that are piss poor and i doubt anybody is interested in selling a console to.

Well, those two things kinda cancel each other out, right?

The distrubution of wealth in most of those countries is far better than in the states. Scandinavia aspecially.

Please, try to speak about "even distribution of wealth" instead of "better distribution of wealth" - not everyone shares this egalitarian, left-wing view on economics. Many esteemed economists recognize exactly this inequality as the reason the US economy is more dynamic, and overall, growing faster.

The GDP per capita doesn't tell the whole story, because it's not what you produce for the economy that allows you to buy games, it's what you have in your pocket after the kind, benevolent state has paid them a visit - the so called disposable income. In terms of disposable income, I guess Europeans are even worse off than what the GDP figures point at. And especially Scandinavia - a good friend of mine recently moved to Oslo to take an interesting, high-profile software job, and while the proposed salary didn't sound to begin with even at the interview, a month or so after he moved in it, when he fully realized the cost of life, it looked outright horribe.