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Xbox 360 Prices Slashed

xbox price cutsFor the die-hard fanatic with tunnel vision for a new consumer product, price may have little meaning.  The hardcore gamer with a passion for Halo is going to find a way to pay whatever price it takes.  For the average consumer, the mainstream, soccer moms in suburbia, pass-time gen-x gamers, the value proposition is different.  To warrant a purchase, a product needs to be well designed (playable) and well priced.

In an early move apparently designed to gear up for holiday sales, Microsoft aimed for the sweet-spot of that consumer value equation with price cuts for all of their Xbox 360 consoles in the U.S.

Effective tomorrow, September 5th, the entry level “Arcade” edition will drop from $280 o $199.  The 60GB Pro and the 120 GB Elite will each trim $50 off their stickers to $299 and $399 respectively.

xbox modelsWhile there are notable differences between each product (click the inset graphic for detail), and vast differences between rival consoles on the market (Wii and PS3), all of which negate the value of pure price comparisons, the cuts will still make the starting Xbox 360 the cheapest priced of all current generation consoles (the Wii, in second, is priced at $249).

The price cut appears to be aimed, in no small part, at capturing market-share from Sony, which according to NPD sales tallies, has been showing some momentum.   The price cut also appears to have been carefully timed to push interest that could support the releases of several major new titles including Rock Band 2 (Sept 14th), Guitar Hero World Tour (October 26th), Midnight Club: LA (October 7th) and several EA Sports Titles: NHL 2009 on Sept 9,  NBA Live 09 featuring Digital DNA on Oct 7th and FIFA ’09 (October 14th).

In July, according to retail sales data released by NPD, Nintendo sold 555k Wii’s in the U.S. Sony’placed second in console sales with 225K PS3 sales.  The Xbox 360 finished third with 204k.  In June, Nintendo sold 667K Wii’s.  Sony sold 406K PS3’s. Microsoft sold only 220k Xbox 360’s.

Sony’s CEO Howard Stringer recently said a price cut for the PS3 is unlikely before this holiday season.  Trading on that news and cutting prices now does appear to give Microsoft some level of advantage.

At about $200, the price is certainly compelling.  In fact, a number of people believe the retail entry part for wide spread console sales is a price below $200, and generally in the range of $150 to $200. 

Some evidence seems to support their view.   Last year, Matt Matthews did a report for Edge Online that quantitatively reviewed retail data for prior generation consoles.  The result seems to supports that “magic number” range.

Specifically, the Edge report found only 24% of PS2 consoles sold at $300.  The remaining 76% moved at a price below $200.  For the original Xbox, the result was similar.  The Xbox sold only 13% of its gross unit sales at $300.  42% were sold for $150 and when the unit price shrank from $180 to $150, sales jumped dramatically.

“Seem to support” is the key phrase in looking at these facts.  The Edge report is by no means a sure thing.  The article acknowledges the time the consoles were on the market can play a factor in skewing the sales differentiation.  In comparing today’s consoles, it’s also important to note that today’s improved feature sets add value that could slide the threshold price to a higher point, maybe $250? (the pre point of the Wii, coincidentally).

Still, "Magic Price" or not, many analysts believe the price cuts will help give Microsoft an advantage over Sony this year. Few think it will have any impact on Nintendo’s sales.

The first factual evidence showing the benefits of the price changes, if tangible, will be available for review in mid October when NPD releases their September gaming survey results.

Note- For comparative data, NPD’s data from each month for the past year, and 2007,  can be found by clicking the names of the month for the corresponding Metue NPD Recaps:
2008: •January  •FebruaryMarchAprilMayJuneJuly
2007: •February •March •April •May •June •July •August •September •OctoberNovember December

Related Articles from Metue
•Xbox Bargains: Microsoft Cuts Prices Internationally
EA & Take Two: Now They’re Talking.
Sony Offering New PS3 Configurations
Looking at Digital DNA: Gaming’s Future?
•Nintendo Ups Forecasts for Unit Sales
July NPD Sales: Video Games Still Selling
Changing Weather: the Concept and Future of Dynamic Gaming
Microsoft from the E3 Show
Gaming and Movie Convergence: a retrospective timeline


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