DailyTech - No Xbox 360 Price Cut in Sight

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Gadgets No Xbox 360 Price Cut in Sight
Marcus Yam (Blog) - October 31, 2006 10:41 AM

22 comment(s) - last by ATC.. on Oct 31 at 10:26 PM

Microsoft sets the record straight, again

One of the more popular reoccurring rumors of late concerns the possibility of an Xbox 360 price drop. The door for such rumors were reopened following the announcement of Microsoft financials which revealed that the Entertainment and Devices Division was losing less money than expected. This spurred questions as to whether or not Microsoft would further its loss on each console sold by cutting the price on its Xbox 360 console.

According to a Seattle P-I story, a Microsoft spokesman did the usual parrot act last week and said that the company has "no plans to adjust the price of the Xbox 360 this year."

With the Microsoft's console priced a comfortable $100 below its prime competitor Sony's machine, there is little reason to adjust pricing.

Microsoft still loses money on every console sold. However, manufacturing costs for the machine are falling faster than expected, thus improving financial outlook.

"We are seeing lower cost-per-console. We're coming down the manufacturing cost line, and in fact we're doing better than what we had hoped for," said Microsoft CFO Chris Liddell.

Microsoft's entertainment and Devices Division posted a 70 percent increase in revenues; though the division still had a loss of $96 million, down from $173 million from the same quarter a year earlier.

Robbie Bach, president of Microsoft's Entertainment and Devices Division, projects that the Xbox business will become profitable in 2008 fiscal year.

To date, Microsoft has sold six million Xbox 360s worldwide since launch. Even with the appearance of competition, Microsoft is anticipating a considerable holiday season where Xbox 360 will reach an installed base of 10 million.

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An Alternative 360 Holiday Strategy

By UserDoesNotExist on 10/31/2006 11:36:32 AM , Rating: 4

The big news here isn't that there will be no 360 price cut. Microsoft has repeatedly stated that there will be no 360 price cut, and given the fact that their competitor Sony is going to be largely nonexistant over the holiday season for the average consumer, there's no real reason for them to provide a price cut for the console, especially if Gears of War is the smash hit (and mover of consoles) MS is hoping it will be. The HD-DVD addon, however, is another thing. I could see a $400 Bundle with a base XBox 360, a wired controller, HD AV cables, a HD-DVD drive, and a Windows Media Player remote (the smaller one that came with the first-run 360 Premium packages, not the larger and more expensive one) selling like hotcakes, their "HD Movie Bundle" if you will. This would do massive damage (sorry, I couldn't resist) to the PS3, whose main draw to the average consumer is Blu-ray movie playback. Even though they might take more of a loss with this bundle (I'm not sure about the cost of manufacturing the HD-DVD drive,) it would be in the long run a good strategic move for MS since they've thrown themselves squarely in the HD-DVD camp and thus have a vested finacial interest in seeing HD-DVD succeed. What's more, this would be a great way to advertise Vista with the 360's built-in Media Center extender. This, quite frankly, would be the 360's best offensive against the PS3 and Blu-ray for the hearts and minds of the average consumer.

What could Sony do? Well, after the whole Christmas frenzy breaks down and PS3's are in stock at most stores, they need to do a better job showing why their console is worth the $100 to $200 more than the XBox 360 Premium. Their offensive attacks against the 360 have largely failed to stick (remember the infamous "price chart" that Sony had floating around the Internet?) If they just continue their "It has the Cell processor!" advertising campaign, they are going to lose. Period. Outside of us Internet nerds who post to obscure Internet hardware sites, that means nothing. Consumers need to know, when I go to buy a next-gen video console, why is this one so much better that it costs $100 to $200 more? "It has Cell!" is not the answer, since the consumer knows how to see through hype. Sony's marketing needs tangible evidence why the PS3 makes the 360's graphics and gameplay look like an Atari. Even then, there will be a lot of people (myself included) who are holding out for the price drop. Sony hasn't lost, but they do have an uphill battle. Outside of Japan. In Japan, they've already won.

The big news is that the X-Box franchise is expected to be profitable in 2008. I've been worried for a while about the state of gaming right now, where it seems that everyone but Nintendo and the game publishers are taking a loss. Yes, yes, I know that breaking into a new market takes a sizable investment, but you have to eventually start making a profit. This can't continue forever, and apparantly it won't. Huzzah.

RE: An Alternative 360 Holiday Strategy

By FITCamaro on 10/31/2006 11:58:37 AM , Rating: 3

Actually the "It has Cell" logic is going to work more on the average consumer than a tech savy person. The Cell really is nothing special and has no real advantage over the Xbox 360 CPU. Both are based around the same poor IBM PowerPC core. Both machines are going to be fully capable of the same level of graphics. It's just how well the developers utilize the resources they have. A tech person would realize this. The average consumer response is "shiny".

If either was capable of delivering better graphics, I'd go with the Xbox 360 because I think ATIs chip is superior to Nvidias. ATIs chip is essentially a X1900 series with unified shaders (which is why I still think the X1900 series was meant to be a DX10 part). Nvidias is a handicapped 7900 series (128bit instead 256bit memory interface).

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RE: An Alternative 360 Holiday Strategy

By Clienthes on 10/31/2006 1:06:17 PM , Rating: 4

It won't work on the tech savvy because they know better.

It won't work on the average person because their eyes glaze over.

It will work on the folks who think they're tech savvy. Which is about 80% of men. Including me.

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RE: An Alternative 360 Holiday Strategy

By Aikouka on 10/31/2006 12:35:16 PM , Rating: 2

There's just a couple things I'd like to comment on here.

HD Bundle
I think the idea of an HD Bundle may sell well, but I'm not sure if it'd be worth it to try to lose even more money on such a niche market. Especially since you're trying to cater to people who really want to watch movies and Microsoft doesn't make money off Warner Brothers selling a movie... they make money off stores buying their games (and in return, us buying them from the store so the store orders more).

It may be a nice idea on how to get the XBOX some more market penetration, but if you're trying to nab the crowd that really isn't interested in gaming as much as movies, you may end up having a negative effect.

Cell
Actually, I think with the recent dual-core hype, if you can say that cell has 8 cores (albeit one is disabled), you will get consumers to look at it with that gleem in their eye. People've always thought that bigger/more is better, which is why AMD switched their processor naming convention with the K8. They realized laymen saw their processors being compared to Intel processors with a 50-60% Mhz boost and consumers didn't know that there's a logical reason for it even if the Intel offerings were slower.

What Sony needs to not admit is the defficiency of cell processors over a standard core. The fact that cell processors lack any sort of branch prediction is definitely one thing they won't be shouting too loudly ;).

Land of the Rising Sun
I really don't think Sony has as strong of a hold on Japan as you expect. Yes, there may be national loyalty when it comes to products, but there is another Japanese console company called Nintendo. Sony grabbed the market easily with the PSX, because Nintendo's offering just couldn't match what Sony brought to the table. The Nintendo 64 had good 3rd party support, but the lack of storage space and higher manufacturing costs of cartridges turned the console into a relative failure. I'd know, I owned one and bought it the day it came out ;).

The Gamecube wasn't a horrible console, but it lacked a lot of 3rd party support. Also, for me... the Nintendo 64 left a bad taste in my mouth after I realized how much better the Playstation was. From what I believe, the Japanese may've noticed this just as well as we did and they stuck with the console that gave them what they wanted: the PS2. However, it looks like Nintedo's fixed the errors from their past two offerings as the Wii brings some good cards to the table and the expected library has a lot of 3rd party support. You may see Nintendo beating out Sony this round for once.

*Note: I gotta insert this for them people who get really angry... I am by no means a Nintendo fanboy or a Sony zealot or a Microsoft whatever*

Other
Companies will most likely take a loss on consoles for many generations to come as long as they keep trying to put relatively top-of-the-line components to offer high visuals. Well, unless they start selling consoles for $800 or so.

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RE: An Alternative 360 Holiday Strategy

By FITCamaro on 10/31/2006 4:35:43 PM , Rating: 2

But they'll knock the 360 processor for having the same poor branch prediction as their PowerPC core since they're identical. :)

And even if you (wrongly) refer to the SPEs of Cell as "cores", there's only 6 you can actually use. 1 is either dead or disabled as a backup, 1 is for the PS3 itself, and the other 6 can actually be used by games. I don't consider them cores. I consider them the same as SSE or MMX registers. They can't schedule tasks or do things on their own. They can only take a chunk of data and process it. The each core of the Xbox 360 CPU has a similar register on it.

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RE: An Alternative 360 Holiday Strategy

By Aikouka on 10/31/2006 7:04:48 PM , Rating: 2

Sorry, my wording wasn't great in that section... the XBOX 360 CPU has normal branch prediction. It's the general purpose cores in Cell (those 6 that you talked about) that have no branch prediction. The reason why people bashed Cell in the beginning is because Sony touted the cores as being able to offload tasks like Sound or AI. Problem is, AI is mostly branches....

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No surprise

By MooseMuffin on 10/31/2006 10:47:29 AM , Rating: 2

I don't think many really expected a price cut, but are we getting a holiday bundle of some sort?

RE: No surprise

By daftrok on 10/31/2006 10:49:56 AM , Rating: 2

I was at least hoping some rechargeable batteries with the USB plug charge to come with premium, or perhaps a couple games. Who knows? Maybe they'll surprise us.

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RE: No surprise

By Aikouka on 10/31/2006 11:04:48 AM , Rating: 2

I think that some stores already offer XBOX 360 bundles for the same price as the premium console (note that these bundles include the premium console). I believe I usually see Circuit City offering Project Gotham Racing 3 and something else with it. Unfortunately for me, I purchased my XBOX 360 a month too early to save $50 or so because of the bundle (especially since I bought mine at Circuit City :P).

Although I do agree, those would be great items to pair with the premium console! But so far, my battery life has been fairly good. Let's just hope I don't jinx it ;).

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RE: No surprise

By tuteja1986 on 10/31/2006 11:23:10 AM , Rating: 2

They don't need a price cut ;( ... in japan the sales are up dramatically because of Blue dragon and in Christmas Gears of War , Blue dragon and ( Fifa /Pro evo soccer next gen exclusive for 1 year) will make sure it sells well in all territory. Then next early Q1/Q2 2007 you have Mass effect , crack down ,Eternal Sonata , Lost planet, lost oddessey , Halo 3 to keep the sales up untill Q4 07. So i think you will not see a price drop for a long time.

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RE: No surprise

By FITCamaro on 10/31/2006 11:48:27 AM , Rating: 2

Yeah but a lot of the time those bundles are to get people in the stores to buy other things. They're offered through the store, not through Microsoft. Stores make hardly any money off consoles and games. So if they get people to buy the console and bundle a game with it, they hope people will come into the store and buy other things that they make larger margins off of such as accessories.

Selling something below the actual cost of it to get people into the store is actually illegal (at least it was in Florida), but its not really enforced since all the stores do it. New DVDs the first week are always sold a buck or two under cost to get people to come into the store and hopefully buy something else.

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RE: No surprise

By NuroMancer on 10/31/2006 11:28:21 AM , Rating: 2

Well the holiday bundle that I know of is the premium console + Tom Clancy's Extreame Warfare Game. No Live card, no points, just the console and a controller + above game.

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2 Cents, pence, centavos whatever....

By HakonPCA on 10/31/2006 11:21:31 AM , Rating: 2

I think we may see some good deals (read bundles) this holiday season. You can often get an Xbox premium at overstock or dell or other places for $350 or less.

Personally, I think that when (if) the die shrink happens next year end of H1-(ish) we will see prices drop on the existing stock of older machines, but it will allow microsoft to keep prices up a little longer on the newer machines, even though a die shrink will help cut manufacturing prices.

Then prices may drop AFTER Halo 3 comes out, because they know that tons of people who have been sitting on the fence will pay full price to play that game, after the first wave of that craziness dies down they may drop prices at least a little.

Here's hoping they drop, but that's just my guess.

RE: 2 Cents, pence, centavos whatever....

By radzer0 on 10/31/2006 11:32:51 AM , Rating: 2

Ive heard this from a microsoft rep (not in the gaming division, but in the windows division). Halo 3 is going to see a bundle next christmas With a special console color (no idea what color), Halo faceplate (not sure if its going to be placed like the remote in the launch 360's),3 months xbl gold and a copy of halo3 for $499

So it appears based on that internal rumor, pricecuts might not hit untill about 14months from now. After the Christmas 2007 rush of buyers after chirstmas.

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RE: 2 Cents, pence, centavos whatever....

By therealnickdanger on 10/31/2006 12:10:36 PM , Rating: 2

One of my initial complaints about the 360 was that it came in "iPod white" instead of "Xbox black". I want to paint mine black...

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RE: 2 Cents, pence, centavos whatever....

By Aikouka on 10/31/2006 12:18:20 PM , Rating: 2

Agreed, Mr. Danger, I prefer black consoles over white. I just find black to be a "sexier" color, which is why I prefer black cars over any other color. That's also why I sold my white DS Lite on eBay and purchased a new Onyx DS Lite.

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RE: 2 Cents, pence, centavos whatever....

By therealnickdanger on 10/31/2006 2:11:50 PM , Rating: 2

Black also matches EVERY other piece of A/V equipment ever constructed. I don't want my electronics sticking out, only the TV screen matters.... Going black is the one thing Sony is doing right with the PS3. LOL!

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Suprised?

By Warder45 on 10/31/2006 2:31:41 PM , Rating: 2

How many people honestly expect Microsoft to come out and say "yes, that rumor was correct we have a price cut coming next month."

Until Microsoft says they are cutting the price I don't think this needs to be in the news.

RE: Suprised?

By MooseMuffin on 10/31/2006 4:42:39 PM , Rating: 2

Very true. Any announcement of a price cut or bundle pack that doesn't begin immediately will effectively halt all sales until that cut/pack arrives. They aren't going to say anything until its ready to go.

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RE: Suprised?

By ATC on 10/31/2006 10:26:01 PM , Rating: 2

Completely agree. That's also true of the HD-DVD drive being built into the console. Until the day of release MSFT will continue to deny the rumours even though a number of Asian tech companies already leaked info on it.

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Do what I did

By AlexWade on 10/31/2006 12:45:01 PM , Rating: 3

EB Games is giving a $80 credit toward a 360 when you trade in your old XBox. This is win-win. You get rid of what will become a brick real soon and get a 360 at a discount. This deal expires November 5, so you might want to take advantage of it until you won't be able to get anything at all.