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.
