Xbox 360 price drop to $299 confirmed, Pro phased out

[JCarty]

Both of these claims are from the exact same sentence of yours. That's quite a spectacular achievement and I don't think there's anything left to be said about it.

I don't think they are contradicatory at all.*

You have and unknown negative number(Xbox generated losses). You add to it an unknown positive number(Profitable parts of E&D). Does the negative number get more negative or less negative?

Zune, WinMo 'well known money pit'? I'm nt sure I share your interpretation of 'well known'*

*Mod edits to remove impoliteness. Actually opinion may (well!) be distorted from the intended, but the edits are for illustrative purpose to show how to conduct a civilised discussion.

 

[AzBat]

Can we get back to the standard intelligent Beyond3D discussion that I've come to expect these last 7 years or so? I think I've dropped a few IQ points just reading this thread. Thanks so much!

Tommy McClain

 

[Laa-Yosh]

Seconded, although only true for the last page or so...

 

[zed]

lost ~$3B in E&D since 2005

The xbox360's development didnt start in 2005 but in 2003

PS: I think you are MASSIVELY overestimating how much software MS sells on the Mac. Office 2008 for Mac sales are not that spectacular

true, I believe a MS spokesman said

EDD revenue decreased primarily due to decreased sales of application software for Apple’s Macintosh computers

One thing Ive never understood about the zune

its very similar to an ipod (like model) must cost the same to make, + it sells to the customer at about the same price
Now apple makes billions with the ipod yet ppl claim the zune loses 10s/100s millions each quarter, basic logic test (*)

(*)since there are less than 3million zunes in total, the only way for this to make sense is if they cost more than the xbox360 to be made!!

 

[JCarty]

Back when the Xbox was killed off and the billions in losses had racked up, the main excuse was that Microsoft was hamstrung by its contracts with suppliers. And that Microsoft would be able to compete with Sony on manufacturing costs with the Xbox 360.

Those claims were obviously nothing but wishful thinking.

A year extra time on the market for manufacturing cost reductions.
A DVD drive instead of a Blu-Ray drive
No WiFi
No Bluetooth
No expensive internal power supply and cooling solution
Cheaper system components - no XDR ram

It's no wonder Microsoft isn't coming out with new console hardware and instead is instead going to try recycling the 360 hardware as a Wii type device with motion controls.

Microsoft has gotten an eight year lesson from Sony on the vital importance of internal manufacturing capabilities in the console market.

 

[Laa-Yosh]

Okay, now it's getting ridiculous.

 

[RobertR1]

Okay, now it's getting ridiculous.

The consequence of B3D being popular on other boards "experts" flooding in.

 

[RancidLunchmeat]

Seriously, there's a reason why some forums have a delay between registration date and access to posting.

 

[Asher]

One thing Ive never understood about the zune

its very similar to an ipod (like model) must cost the same to make, + it sells to the customer at about the same price
Now apple makes billions with the ipod yet ppl claim the zune loses 10s/100s millions each quarter, basic logic test (*)

(*)since there are less than 3million zunes in total, the only way for this to make sense is if they cost more than the xbox360 to be made!!

It's not in the hardware cost (though the Zune HD must cost a lot to make...), it's the overall cost. The resources to R&D the Zune, to market the thing, etc are sunk costs that are never recovered since the sales are so very low and margins so very thin.

 

[betan]

The consequence of B3D being popular on other boards "experts" flooding in.

as if we don't have enough of those already you say?

 

[obonicus]

2005: $539M loss
2006: $1284M loss
2007: $1898 loss
2008: $497 profit
2009: $169 profit

Just a remark, here. You said earlier that $100 dollar price-cut won't hurt Microsoft. And truly, it wouldn't turn them from profitable to unprofitable. But let's consider the very conservative (okay, low-balling) situation in which Microsoft sells only 5 million consoles in a year after the price-cut (with no accompanying cost-cutting form-factor reduction, as I've already conceded that that'd change things). That's 500 million less in revenue for E&D. It might even be enough to push E&D all the way back into the red for 2009.

And, responding to Dr. Evil as well, it's true that Gates owns a ton of stock, but that doesn't mean that outside shareholders aren't expecting their investment to perform to expectations. It's a fantasy to suppose that MS will throw as money as it takes at the problem, that they could cut the price at any moment. 'Bigger strategy' or no 'bigger strategy'. And I think the price-change strategy for the new Elite SKU is evidence of that.

 

[Asher]

Just a remark, here. You said earlier that $100 dollar price-cut won't hurt Microsoft. And truly, it wouldn't turn them from profitable to unprofitable. But let's consider the very conservative (okay, low-balling) situation in which Microsoft sells only 5 million consoles in a year after the price-cut (with no accompanying cost-cutting form-factor reduction, as I've already conceded that that'd change things). That's 500 million less in revenue for E&D. It might even be enough to push E&D all the way back into the red for 2009.

But with more console sales come more game + peripheral sales as well, it's not a straight-up $500M charge. And let's be honest, they're already selling the Xbox 360 for $199. Just not all of them. The cost difference between the Arcade and the Elite is significantly less than $100.

 

[obonicus]

But with more console sales come more game + peripheral sales as well, it's not a straight-up $500M charge. And let's be honest, they're already selling the Xbox 360 for $199. Just not all of them. The cost difference between the Arcade and the Elite is significantly less than $100.

I was referring to an across-the-board 100 dollar price-cut, for both SKUs -- otherwise we have a $199 Elite vs. a $199 Arcade? And yeah, it is a straight 500 million difference, unless you're going to suppose that users who bought the console for $99 less are buying more games/peripherals than those who didn't. I was assuming a constant attach rate. Which is possible, of course, but I have no idea how to quantify.

 

[Acert93]

One thing Ive never understood about the zune

its very similar to an ipod (like model) must cost the same to make, + it sells to the customer at about the same price
Now apple makes billions with the ipod yet ppl claim the zune loses 10s/100s millions each quarter, basic logic test (*)

(*)since there are less than 3million zunes in total, the only way for this to make sense is if they cost more than the xbox360 to be made!!

You have the Zune marketplace (software and services, hardware and infrastructure, licensing, etc) that have a substantial startup and maintenence cost whether 1 Zune or 100M Zunes are sold. There are economies of scale and market penetration (e.g. Apple benefits signifiacntly from being able to charge an Apple tax for inferior hardware, e.g. my Sansa e250 a couple years ago had much better hardware than the same cost iPod) as well as licensing "iPod certified" accessories which net significant margins. It doesn't hurt that Apple is much more focused of a company on user interfaces and hardware of this nature whereas MS is strongly reliant on partners as this is not their native business.

A logical conclusion can be an incorrect conclusion when the assumptions are invalid or ignore relevant factors.

As per Zune, it has been a number of media outlets in the past which have commented on Zune costs. Who knows how accurate those are. What we know is that the Xbox has helped the EDD division reach a profit and that the RRoD was very costly... not to mention MS's investment in Live which is being leveraged in other ways outside the Xbox.

 

[Asher]

I was referring to an across-the-board 100 dollar price-cut, for both SKUs -- otherwise we have a $199 Elite vs. a $199 Arcade? And yeah, it is a straight 500 million difference, unless you're going to suppose that users who bought the console for $99 less are buying more games/peripherals than those who didn't. I was assuming a constant attach rate. Which is possible, of course, but I have no idea how to quantify.

I'm thinking the Arcade's going to vanish with the next real price cut. MS will make more money if people download more, so it's in their interest to give more storage out now. They can cut out the middleman like EB, eliminate used game sales, etc by emphasizing Games on Demand and other DLC and media. The cost between the two isn't that great anyway.

There's also a chance the Arcade hits $149 eventually but I think it's got a short shelflife at this point.

 

[2real4tv]

Okay, now it's getting ridiculous.

lol

Back on topic don't you guys love competition once we look past the fanboy glasses competition is good for all gamers and devs also.

 

[DuckThor Evil]

Back when the Xbox was killed off and the billions in losses had racked up, the main excuse was that Microsoft was hamstrung by its contracts with suppliers. And that Microsoft would be able to compete with Sony on manufacturing costs with the Xbox 360.

Those claims were obviously nothing but wishful thinking.

A year extra time on the market for manufacturing cost reductions.
A DVD drive instead of a Blu-Ray drive
No WiFi
No Bluetooth
No expensive internal power supply and cooling solution
Cheaper system components - no XDR ram

Microsoft has gotten an eight year lesson from Sony on the vital importance of internal manufacturing capabilities in the console market.

You seem to have forgotten that the X360 has in fact been sold at a much lower price point than the competition up until this latest Sony price cut and they still have the Arcade unit out, which has a significantly lower price point, even if at some markets its value is questionable. You just chose this exact moment (favorable to Sony) to draw the "final conclusions". The cost structure of 360 vs PS3 is certainly better for MS than what it was last gen with Xbox1 vs PS2. You seem to be willing to bend the truth quite a lot to support your argument.

And, responding to Dr. Evil as well, it's true that Gates owns a ton of stock, but that doesn't mean that outside shareholders aren't expecting their investment to perform to expectations. It's a fantasy to suppose that MS will throw as money as it takes at the problem, that they could cut the price at any moment. 'Bigger strategy' or no 'bigger strategy'. And I think the price-change strategy for the new Elite SKU is evidence of that.

All I was saying that the ownership structure is such that the owners are unlikely to interfere aggressively on how the company is run.

Their pricing strategy does seem to imply that they are getting more careful about their margins, but the Pros still in the channel, it's a bit premature to know for sure what's going to happen. It's also possible that MS feels that they don't have to run away from the PS3 anymore after seeing that their sale numbers have done pretty well against Sony.

 

[Tchock]

I wonder if the initial marketshare surge has now become less irrelevant relative to mindshare and margins. I mean, 30mil with at least +15-20mil till end of lifetime (and in the case where Natal will be integrated into the console obviously will give *way* more momentum to the 360 than just +15m till EOL- IMHO) with widespread developer love and care, and you're (MS) not happy?

I believe that a moderate approach this year would help MS more in this case, as it would definitely help out in the case that 360+Natal (strong believer of convergence in 1 case for both) @ a speculated $250 would put them back into a loss-lead situation.

Cutting crazy now wouldn't bring much more momentum compared to if you'd do it next year, where you could poise it against the Wii at a $0 surcharge (unless Ninty finally cuts the price) and, yeah. Basically.

60/120 GB HDDs shouldn't really differ much in BOM costs (except in the retail channel for the loyal, unhacking sheep) perhaps due to the nature of them behind the mainstream storage curve. The Elite @ 300 might reduce ASPs and culmulative margins, but I strongly suspect that it'll at least maintain/increase margins over the previous Pro 60GB as a $300 model (does black paint cost more? )

The Arcade price markup in UK <- wait wat. So it's relevant enough in that segment of the market for MS to raise its price so it wouldn't loss-lead?

Or is this all just padding for the Zune HD, which might suck more cash down the wormhole but finally has a chance of moderate success?

 

[Gubbi]

MS needs to release a much much bigger HD. I've 15 GB free on my elite with two thirds of my games installed.

For the online services they are pitching I need more capacity.

Cheers

 

[Rangers]

Just a remark, here. You said earlier that $100 dollar price-cut won't hurt Microsoft. And truly, it wouldn't turn them from profitable to unprofitable. But let's consider the very conservative (okay, low-balling) situation in which Microsoft sells only 5 million consoles in a year after the price-cut (with no accompanying cost-cutting form-factor reduction, as I've already conceded that that'd change things). That's 500 million less in revenue for E&D. It might even be enough to push E&D all the way back into the red for 2009.

And, responding to Dr. Evil as well, it's true that Gates owns a ton of stock, but that doesn't mean that outside shareholders aren't expecting their investment to perform to expectations. It's a fantasy to suppose that MS will throw as money as it takes at the problem, that they could cut the price at any moment. 'Bigger strategy' or no 'bigger strategy'. And I think the price-change strategy for the new Elite SKU is evidence of that.

I disagree..in the past, MS has shown a willingness to lose money hand over fist, when needed. The best example of that is the original Xbox, and it's cut to 199 just a few months after launch. Again with 360, I have to wonder when they feel it's "needed". Would it be so awful so sell par or a bit less than the competition for a while? Sony just got through a year of doing that.

I also never understood how the "shareholders" thing always comes up on the internet in regards to MS, but never Sony. How does that work? Shouldn't "shareholders" even be pressuring Sony to leave the business altogether if thats the case?