OPINION: Xbox 360's Price Cut

At some point in the next 12 months, Microsoft will realign the Xbox 360 as an offering. This could be in the form of a price-cut, or of a bundle, or an upscaling of the machine; perhaps a larger hard drive. The company's solution could encompass a combination of all these.

Here's the upside. As Microsoft's Robbie Bach said in an article published here yesterday, manufacturing costs have come down sufficiently to make a price-cut a viable option from a purely practical consideration. Bach did not offer hard numbers but iSuppli estimates that the $399 version of Xbox 360 costs $323 to produce, leaving some potential margin for price-cutting.

When it launched, each machine cost Microsoft $525 to produce, so the cost of goods has come down by nearly 40%, and further savings are likely in the year ahead. Microsoft was caught out badly by its inability to easily swallow necessary price-cuts on the original Xbox, a problem which cost money as well as share. This time, it's been smarter.

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USMChardcharger4401d ago

with the 360's unexpected early cut in cost on making the console and also set to start making a profit already...they are in a good position to cut the cost at anytime.

i imagine they will hold off as long as it continues to sell well and the competition is still priced much higher...and why not? i don't blame them.

MicroGamer4401d ago

Why drop the price too soon? They will get the maximum amount of profit that they can at the current price points and then when Nintendo's and Sony's machines are in steady supply then they will consider cutting the prices.

PS360WII4401d ago

they should make a new sku. One that runs a little cooler and a lot less noisiey. I'd gladly buy another 360 if they did that. And no they don't need to lower the price they should ride the wave of profit seeing that the 360 sells rather nicely at the price they have for it already

Fat Onion4401d ago

A cooler less noisy version is coming out next year when the 360 swithces from 90nm to 65nm chips.

death monk4401d ago

correct, draws less power = less heat = not as much fan activity

Marriot VP4401d ago

best route for microsoft, which I think they'll most definately take, is to do the price drop early 2007. That way they make a heck of a lot of money for christmas and are totally set to drop the price big time to counter Wii and PS3 when their supply increases over demand.

Simple economics, and since most people are waiting for Halo 3, the price drop will convince people to "jump in" earlier which is very good for business.

TMoney4400d ago

A 360 price cut is inevitable. A price cut, combo deal, enhanced console (with much desired larger harddrive) or all of the above will occur in late 2007. By that time, the 360 will have over 15-20 million units sold and an impressive lineup of games including Mass Effect and Halo 3.

In late 2007, the PS3 will only have a year under its belt. A price cut would be next to impossible. By the time Sony offers a price cut on the PS3, MS will already be working on the next console and all the news and anticipation will be on it's development...thereby, once again, stealing Sony's thunder. The 360 has all the momentum. The PS3 will most likely fall a distant 2nd place or even 3rd place in the generation's console war.

And if the Blueray format goes the way of the Betamax,(and it will), it will be the one-two punch that will take years for Sony to recover.

Personally, I hope Sony and Nintendo stay competitive with MS since competition is always good for the consumer.