Microsoft slashes Xbox price
2007-08-07 11:07
Roger Cheng
New York - Hoping for a shot in the arm, Microsoft on Tuesday cut the price of its Xbox 360 videogame system.
The Redmond, Washington, software titan cut the price of its Xbox 360 system by $50 to $349. It also trimmed the price of its cheaper "core" package by $20 to $279, and its higher end "elite" package by $30 to $449. The difference in packages is decided by the size of the external hard drive and whether the controllers are wireless or not.
Speculation had mounted that Microsoft would offer the discounts following Sony's decision to cut the price of its Playstation 3 system by $100 to $499. Mixed reports came out of last month's video game industry trade show, E3, over Microsoft's position on pricing.
Microsoft, however, insists the price change has been in the works for months. "This has been our plan all along," said David Hufford, director of Xbox product management. "The first phase was capturing the core audience, which we've done successfully. Now as we enter our third holiday, we're aiming to expand audience."
Both the Xbox 360 and the Playstation 3 have lagged behind Nintendo's Wii console, which has been popular with a larger audience of casual gamers. In the recent months, the Wii has outsold its rivals combined.
Microsoft is hoping the price cut and its coming holiday line-up of videogame titles will recapture some of the lost buzz.
"This certainly rejuvenates or adds momentum to the Xbox 360 in the marketplace," said Van Baker, an analyst at Gartner Inc. "It should serve them well."
The system made the headlines for a different reason last month when Microsoft said it would take a $1.15bn charge to cover "an unacceptable" number of defects found in the Xbox 360.
"Hopefully, (the price cut) takes the focus away from (the) warranty issue and refocuses it on (the) platform," Baker said.
Videogame console makers typically cut prices as the product matures. Hufford noted that the Xbox 360 had gone 21 months - longer than any other console - before it got hit with discounts. Analysts note that the Wii, which retails for $250, will likely remain at the same price because of the high demand and continued supply constraints.
The console makers lose money with every system they sell, and make their money back through videogame sales. Hufford said the video game business has yet to turn a profit, but has a target of profitability by the end of the fiscal year ending June 2008.
Xbox 360 is poised to have a strong holiday season. "Halo 3," which more than any other factor is expected to drive Xbox 360 sales, is slated to hit the market on September 25.
"It's really setting the stage for a phenomenal holiday ahead," Hufford said.
The Xbox 360 and Playstation 3 suffered a blow last week when Take-Two Interactive Software said it was delaying its much-anticipated "Grand Theft Auto 4" title to next year from October. But analysts believe the schedule change hurts Playstation 3 more since it lacks a "Halo" to fall back on.
- Dow Jones