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Xbox 360 Arcade Price Drop  (Source: VGChartz)
Microsoft price drop will make Xbox 360 Arcade cheapest next-gen console

The console wars are raging now as the PS3, Wii, and Xbox 360 fight for top spot in market share. One of the reasons the Nintendo Wii is so popular is its price tag. The Wii is currently the lowest cost next generation console available.

According to VGChartz, the Wii may not be the lowest priced console for long. According to an image acquired by VGChartz, the Xbox 360 Arcade console will get a price cut to $199.99 on September 7, 2008. The price cut would come only a few months after the 20GB Xbox 360 received a price cut to $299.99 and the 60GB Xbox 360 was announced.

Microsoft has said in the past that it knows the sweet spot for console sales is $199.99. VGChartz reports that when Microsoft dropped the price of the Xbox 360 in Europe to 199 Euro in February of this year, the console sold at significantly higher volumes than before the price cut was put into effect. VGChartz reports that it’s tracking information shows that the Xbox 360 sold 100% more units in the 6 months after the price cut than before.

The low price leaves many wondering if Microsoft can actually be profitable at a $199.99 price point. At launch the Xbox 360 cost about $525 to build and by November of 2006 the price according to iSuppli to build the Xbox 360 was about 40% less.

DailyTech reported in September 2007 that the Falcon CPU revision in the Xbox 360 made the CPU about 50% less to build. In May, DailyTech reported that the Jasper update would be on the market in August, which would coincide with a significant price drop for the Xbox 360 in early September. The cost to build the Xbox 360 Arcade could be reasonably expected to drop again with the Jasper update.

In short, Microsoft could well be profitable at the new $199.99 price point for the Xbox 360 Arcade. However, when first launched Microsoft was more than willing to take a loss on the console to get them into homes. Microsoft could be doing the same thing with the Arcade and selling it as a loss leader to increase its market share.

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Forgot a detail
By Elandyll on 8/4/2008 2:45:20 PM , Rating: 2
Just a (significant) detail that was omitted in the article, the $299 price for the 20Gb Xbox is not a new price, but a clearance price to get rid of that SKU until the new 60Gb SKU arrives, at the already existing price of $399.
As for a $199 Xbox Arcade, not only can you bet that -if- it is true MS is going to lose some major dough on that (at least $50 per unit, if not $100), but it will still be a cheap system without WiFi, Blu Ray or HDD, and without the great interactive elements that made the success of the Wii.
This being said, we'll see :)

RE: Forgot a detail
By Spivonious on 8/4/2008 2:51:08 PM , Rating: 2
The screenshot does say "Promo Price" so I think that the $199 will just be a short-term sale price until they clear out all Arcade systems. Then I think the 20GB systems will take over the Arcade's spot and the 60GB systems will be the $299 slot.

RE: Forgot a detail
By TheSpaniard on 8/4/2008 3:25:01 PM , Rating: 2
I thought they had already decided that the 20gb is the one destined for removal not the arcade model?

RE: Forgot a detail
By mmntech on 8/4/2008 3:40:35 PM , Rating: 2
It is. They 20gb is being replaced with a 60gb model, which will become the new Premium. It's currently selling at $299 in order to get rid of them. The Core was replaced by the Arcade last year. Really, the only difference between the 360 models now is storage.

The news of a $199 arcade doesn't surprise me. Microsoft has been facing stiff competition from Sony and especially Nintendo all year. The 360 is getting close to the point of market saturation, where everyone who wants one already has one. They're going to have to price it aggressively to topple the Wii juggernaut. I know MS says they aren't in competition with Nintendo but come on, of course they are. They're trying to use the Arcade to attract casual gamers, which is the Wii's core fanbase.

RE: Forgot a detail
By hrah20 on 8/5/2008 3:08:22 AM , Rating: 2
I think what microsoft should do to gain more marketshare is convince people that the rrod is in the past, I've seen many people put off buying an xbox360 for fear of getting a faulty console, that and lowering the HDD price would help a lot.

RE: Forgot a detail
By drothgery on 8/4/2008 3:36:42 PM , Rating: 2
The 60GB model is launching at $349 (where the 20GB was at until the closeout price). There are very strong rumors (which this report has the side effect of corroborating) that all the Xbox SKUs will get a price cut in September when the 20GBs run out, to

Arcade $199 (no HD, wired controller)
Pro $299 (60GB)
Elite $399 (120GB)

If it were up to me, they'd be bunched a bit tighter, more like

Arcade $229
Pro $299
Elite $349

RE: Forgot a detail
By StevoLincolnite on 8/4/2008 4:23:11 PM , Rating: 2
Not sure about other Areas but the Arcade comes with a Wireless Controller here in Australia, That was the model I grabbed as I had no need for the HDD. - And for only $388 a couple of months ago.

"I modded down, down, down, and the flames went higher." -- Sven Olsen
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