Xbox 360 Pro SKU EOL

[Carl B]

When you order cables in the order of several hundred thousands, the cost of some special adaptions to the factory equipment (fixed cost) gets very small in comparison to the cost of material and labour, so I expect the cost difference to standard cables to be pretty small.

The difference between paying ~$1/2 dollars for a cable vs making money off of cables turns a small cost into a decent spread though.

 

[Crossbar]

The difference between paying ~$1/2 dollars for a cable vs making money off of cables turns a small cost into a decent spread though.

True, I guess there a lot of people that wished the 360 had a standard optical audio output that could be used when the hdmi is connected to the TV. Those adapters will give MS a decent margin.

 

[Rangers]

Negligible but there. And if anything you're reinforcing my point, because rather than reducing the Pro by ~$50 or more... and taking a $50 hit on the spread between a 60GB and 120GB drive... they're reducing the Elite, kicking out the Pro, and instead for them the calculus becomes the costs of a drive vs no drive within that $100 spread. See what a material effect that has?

So to restate, yes - 60GB vs 120GB drive, marginal difference. 120GB drive vs no drive, substantial difference. They're not getting rid of the 'Pro' in my opinion, they're getting rid of the 'Elite' in the truest sense, re-naming the Pro, and making some minor and cosmetic changes to it. The $400 price point has been abandoned, but it's a line at $300 they wanted to hold, rather than let their more expensive SKUs cost-wise (and here I don't differentiate between Pro and Elite) slide below $300.

As for the cables... cables are cheap, but MS' included component cables were more expensive than most I would imagine due to their heft and proprietary interface. Now, not only have they gotten rid of that expense for themselves, they will make money off anyone who needs to purchase one, whether 1st party (nice profits there for sure), or even 3rd party due to licensing. There is essentially no 'generic' option for component cable since the interface is not an open standard.

The average selling price on 360 last we got it from the NPD at these price points was 270. My educated guess would be something like Arcade was 50% of sales, Pro 40%, and Elite 10%. Or you can figure Arcade and Pro sold roughly even making the average 250, and the Elite sales pushed the average a bit north to 270.

In this new scheme, I'd guess Elite/Arcade will sell about 50-50. I think Elite becomes a bit more marginally attractive than the old Pro/Elite combo, as it's now the only SKU if you want a HDD. In that case the ASP will be around 250. Meaning MS made a $20 price cut from their point of view. Which isn't bad. That is if they can hold off the PS3 slim enough to not require more cuts this year.

 

[dobwal]

The average selling price on 360 last we got it from the NPD at these price points was 270. My educated guess would be something like Arcade was 50% of sales, Pro 40%, and Elite 10%. Or you can figure Arcade and Pro sold roughly even making the average 250, and the Elite sales pushed the average a bit north to 270.

In this new scheme, I'd guess Elite/Arcade will sell about 50-50. I think Elite becomes a bit more marginally attractive than the old Pro/Elite combo, as it's now the only SKU if you want a HDD. In that case the ASP will be around 250. Meaning MS made a $20 price cut from their point of view. Which isn't bad. That is if they can hold off the PS3 slim enough to not require more cuts this year.

With the ASP at 270, a plausible scenario is the Pro makes up 50% of all sales while the arcade makes up 40% and the Elite 10%. Getting rid of the elite and coming out with a black Pro at 120Gb would probably push 60% of all sales at $299 which would give an ASP of $260.

 

[dobwal]

The difference between paying ~$1/2 dollars for a cable vs making money off of cables turns a small cost into a decent spread though.

I agree. If you remove the ~$1/$2 cost of the 10 million 360 shipped every year, you remove about ~10-20 million in costs a year. Furthermore, if 10-20% owners (who are basically new elite owners) of those 10 million 360 sold go on to buy a HD cable at 20-30 dollars a pop. You suddenly go from 10-20 million in costs to $10-20 million in cost savings and $20-$60 million in additional revenue. Thats a swing equivalent of 4-10 million games worth of licensing fees (at 8 dollars a pop) for MS a year.

 

[Carl B]

The ASP metric in this analysis is a useful one, and I think just as useful (and more nebulous) is the COGS metric (cost of goods sold). MS has given the consumer a price cut of sorts here, but while they reduced their ASP's, it is not the damage to the cost of goods sold relative to the revenues that a Pro at $250 would have caused them.

In my mind I feel as if the Arcade is a loss-leading product... regardless, when you have a $100 retail spread on ~$40 worth of inclusions (speaking here to the $300 pricepoint vs the Arcade), you are clawing back on losses and/or making money where you were losing it before. The previous Elite was obviously a fat-margin product for them, but better to lose it entirely than to take a massive margin hit on your most popular models.

 

[Squilliam]

The ASP metric in this analysis is a useful one, and I think just as useful (and more nebulous) is the COGS metric (cost of goods sold). MS has given the consumer a price cut of sorts here, but while they reduced their ASP's, it is not the damage to the cost of goods sold relative to the revenues that a Pro at $250 would have caused them.

In my mind I feel as if the Arcade is a loss-leading product... regardless, when you have a $100 retail spread on ~$40 worth of inclusions (speaking here to the $300 pricepoint vs the Arcade), you are clawing back on losses and/or making money where you were losing it before. The previous Elite was obviously a fat-margin product for them, but better to lose it entirely than to take a massive margin hit on your most popular models.

Depending on whether or not you take it at face value, I remember a comment they made late last year IIRC we are breaking even on the Arcade with accessories. I am not entirely sure what they mean by accessories, but there you have it.

 

[Carl B]

Depending on whether or not you take it at face value, I remember a comment they made late last year IIRC we are breaking even on the Arcade with accessories. I am not entirely sure what they mean by accessories, but there you have it.

If they mean when considering the sale of accessories to Arcade owners, then I wouldn't count that myself. If they mean something else though, well, it's not clear. Was that in one of their conference calls? I haven't listened to any of the MS calls in a while, but I'll dig that one up and give it a go if it gives any good insights.

 

[Squilliam]

If they mean when considering the sale of accessories to Arcade owners, then I wouldn't count that myself. If they mean something else though, well, it's not clear. Was that in one of their conference calls? I haven't listened to any of the MS calls in a while, but I'll dig that one up and give it a go if it gives any good insights.

It was a statement to the press (read internet press?) It was a while ago (2008) and thats pretty much the limit of the statement AFAIK.

 

[Silent_Buddha]

All things being equal that might be true, but things are not equal as I said. A $299 slim could easily double the sales of the $399 phat, holiday buying might be down 15% worst case.

For example:



http://online.wsj.com/article/SB125063872313441645.html

Doubling would be wildly optimistic even in the best of years. I still think they'll be lucky to hold steady compared to holiday 2008 while both Wii and X360 drop comapred to holiday 2008.

Regards,
SB