Xbox 360 Warranty Extension at the Expense of a Price Drop?

With news today of Microsoft's admission of widespread defects acknowledgement of an "unacceptable number of repairs" for the Xbox 360, current 360 owners can finally rest assured knowing that if (when?) their 360 sees red, the problem will be rectified. This news may also be the spurt of confidence that many waiting buyers needed who have refused to purchase the system due to the hardware problems.

Upon hearing the PS3 $100 price drop rumor, many wishful gamers are predicting a counter-price drop by Microsoft to maintain the apparent price advantage the 360 has over the PS3. But are they being realistic?

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Bill Gates4003d ago (Edited 4003d ago )

Not only is the Xbox 360 warranty extension at the expense of a price drop, but it's also at the expense of XBL.

Mean while Sony focuses on matching XBL feature for feature FOR FREE.
Haste is not always a good thing M$. Maybe if Bill Gates (oops that's me) had received his college degree sooner all this mess would not have happened.....HAHAHHAHAHHAHA

That picture says 1,000 words. I like it. It's funny like me :)

the_round_peg4003d ago (Edited 4003d ago )

MSFT earns about $36.63 billion in profit last year. It has $25.48 billion CASH on hand at anytime after paying out $33 billion in dividends. Microsoft's debt = $0.

(Let's compared those key stats to SNE's = Sony's. Sony earns $15.86 billion in profit last year. It has only $4.30 billion in cash. On other other hand, Sony has $8.96 billions of DEBTS.)

Microsoft can afford to take the $1 billion financial hit for Xbox 360... AND a price cut at the same time.

In fact, I expect yesterday's apology and announcement of the 3-year warranty extension and repair/shipping reimbursement to be a PRECURSOR and CUSHION for a price cut that's about to be announced.

the_round_peg4003d ago (Edited 4003d ago )

Microsoft to cut price of core to $250 or below to match Wii's. Here's why:

1. If you have been following the news, Microsoft has just refocused its Xbox 360 strategy to compete with Wii. MS originally intended to compete with Sony (PS3) and did not expect Wii to succeed over PS3. Now, the market situation has changed. MS no longer sees Sony as the biggest threat. Nintendo is the target for MS.

Microsoft will cut its 360's price to match Wii's

2. Microsoft has hinted that it will cut its price to $199 this year. That is the price to beat Wii (and *kill* PS3.)

3. Microsoft can afford a price cut. The last time I checked, Microsoft was earning about $80 on each Xbox 360 sold. Microsoft's strategy is to LOSE money to gain market shares. So, cutting price to $199 is really in line with Microsoft's market strategy.

4. Wii is about to catch up with Microsoft in total unit sold. If Microsoft continues to do nothing about Wii, Xbox 360 will lose its leading position to Wii.

5. A price cut hurts TWO competitors at one time: Sony and Nintendo. Sony can afford NO MORE than $100 price cut. So, Microsoft will cut the price by at least $100 before this shopping season, because Sony will not be able to response. A price cut will hurt Sony the most and basically take Sony out of the race.

6. If Microsoft announced a drastic price cut, customers who have just recently bought Xbox 360 will get upset. That's why Microsoft has just announced it'd extend warranty to 3 years and reimburse all repair and shipping fees: the purpose is to placate those customers so they won't get too pissed when Microsoft announce a deep price cut. A price cut -- a deep one -- is coming.

7. Of course, Microsoft's renewed commitment to customer service and fix the problem, combined with a deep price cut, is the best way to boost sales. If Microsoft times and combines the two moves, it will cement its market position.

Captain Tuttle4003d ago (Edited 4003d ago )

You're part of the reason I keep coming back here. You guys crack me up!

witchking4003d ago

No one likes to lose $1b. No one.

actionjackson4003d ago (Edited 4003d ago )

At face value, I would agree with you. But from a financial standpoint, it respectfully can't be justified. First and foremost, microsoft is not a debt free company. If they were, they wouldn't be traded on the stock market. All those billions would continually add up in Bill Gates pocket, which is not happening. Second, MS own's other major corporations, which are in lots of debt (+ lawsuits). SEC filings don't always show the truth, becuase debt is recycled into operating costs for the following year.

Also, if MS competes with the Wii, it will be in big trouble. First, because everyone knows the Wii is short term, and will not survive selling like this in 3 years or so. Since all TV's (especially in the US) had to be digital by the end of next year (FCC mandate), the Wii will actually suffer due to the amazing capabilities of the 360 and PS3 on HD. Second, if Microsoft goes after the Wii, it may create the perception that it is an inexpensive product (to the masses, not avid gamers). The reason why most compain of the PS3's price is because it has become somewhat of an exclusive league to be in. $600 is high, but it creates the perception that you are buying an elite product. The 360 is high also, compared to past consoles, and it has created a perception that it is a valuable product. MS will not sacrifice that for a major price drop. Although I see your point, I don't think Nintendo is the problem for MS. It's the longivity, the future games, the future HD format, and the craftsmanship of the PS3 they should be fighting. And even though the price of the 360 is currently less than the PS3, in some circles, people are saying that the price should have been higher to make the product slightly more reliable. MS will lose big on this one. They are going to lose an estimaes $1 billion on warranty issues. So they are equal to Sony, since Sony may still be losing billions on the PS3.

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Odion4003d ago

Thanks for your points bill, allow me to counter them in a respectful manner.

1. MS prob knew about this warrenty thing for awhile and I am sure they already have planned out how to do both a price drop and this, MS has extremely deep pockets and they already said that way back that their willing to loose 11 billion so far their at 6

2. I respectfully disagree about about XBL, The PSN is still playing catch with putting basic features in like a universal friendslist, and invites to games. MS is beyond that and is ready to roll out IPTV, more cross platform gaming features, and additional content to their show and movie list.

I still say kudos to MS for taking the hit apologizing to the public, saying their wrong and fixing all of them

okcomputer4003d ago

You're right. If psn is planning to match live feature for feature they've got a LOOOOONG way to go. So far I've been really disappointed in the online aspect of the ps3. I expected a whole lot more. Sure its free but I wouldn't mind paying a small fee for better and more content across the board. Home seems like a really good step in the right direction but right now the comparison between live and psn isn't even close.

big_tim4003d ago

need to drop the price. The 360 will still be cheaper then the PS3 with the rumored $100 price drop.

If they dropped the price, it would definitely move more systems. Even without a price drop, the strong fall line-up will move more machines.

sjappie4003d ago (Edited 4003d ago )

1.1 billion is needed. If, in the worst case scenario,there are 2.5 million defective units, at $400 each, you could buy 2,5 million new premium 360's. Surely, it's not gonna cost them more than $400 to replace or repair a unit? I would say $200 seems more realistic. (just speculating)

Could this mean they're maybe expecting another 2.5 million to break the coming years, before they completely get rid of the faulty hardware?

ALI G4003d ago (Edited 4003d ago )

consideration that a console could get 3 red light not only one time but many-times over the period of 3 years from date of purchase. i remembers that the company that stop fixing the 3red light saying that it could coast them up to 200$ to fix it and they still will not be satisfied with the result .the article could be found at last week post.also the shipping 2 ways from the customer to the Xbox center than 2 ways shipping to the repair center every time a console get red light. the extra free games or Xbox live point they give when the customer not satisfied .....

DrWan4003d ago

It's not just the hardware buddy. the lab needs to be maintain, the warehouse, the ppl they have to hire. All these adds up, you have to pay these people even when less system breaks down in the winter, but u still need to keep them around in anticipation of summer heat and increase number of breakdowns.

More than the cost of the hardware, it's a mini business operation on its own.

sjappie4003d ago (Edited 4003d ago )

But I guess you guys are right, you made some good points there.

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