Bach Makes Ready for Price War

Robbie Bach, president of Entertainment and Devices at Microsoft, believes a future hardware price battle will decide the outcome of Xbox 360's struggle with PlayStation 3.

In an interview with San Joe Mercury News, he said that the company is seeking to bring down Xbox 360's costs in preparation for a price initiative that he believes Sony will be unable to follow.

Responding to a question on the hardware wars, he said, "You have look at the economics. You have to ask the question, over the life cycle, who has the cost advantage? Who can price most effectively? Who can reach the price points quicker? That has a huge impact on what gets driven."

He added, "Because we were out there first, we have a bigger installed base of consoles. We can drive down the manufacturing curve sooner and faster. And because we designed a box that was fundamentally easier to manage on costs, we're going to have that advantage."

Asked about engineering work going into a new Xbox, he said, "Right now we are thinking about how to cost reduce the Xbox 360. That seems to be the first order of business."

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Captain Tuttle4347d ago

are ALWAYS a good thing for consumers. It's why I want to see all three console makers do well. Competition spurs innovation and cheaper prices. The question is which company can weather the storm the longest.

calderra4347d ago

360 - Has already cut manufacturing costs, may already be making a profit per console. The console opened that less than $100 loss, and probably less than $50.

PS3 - Costs $200 more, and that $200 difference is mimicked by a nearly $200 loss per system.

Wii - Costs even less, and was making a profit at laucnh.

What price war? Looks like there are two clear winners and one clear loser to me.

MicroGamer4347d ago (Edited 4347d ago )

Has already cut costs 40% since launch day and Nintendo is making a profit on each Wii sold. Both are in a much better position to reach the price points that drive additional sales. The components in the PS3 are just too expensive for Sony to contemplate any price cuts for at least 18 months. They made a small concession on price in Japan, but only after a meeting with several of their major developers who expressed concerns about there not being enough consoles on the ground for their games to be profitable. I would imagine quite a few hints or even outright threats were made by the devs to take their games elsewhere or else Sony would never have agreed to take an even bigger loss than they already were on the hardware. As long as supplies of both Wii and PS3 remain dependent on the latest shipment coming in rather than units stored in domestic warehouses, there won't be a price war. MS can continue to charge a premium price simply because there are no other alternatives. As soon as Nintendo and Sony begin to build stockpiles, then you are going to see it start to get ugly.

Captain Tuttle4347d ago (Edited 4347d ago )

I think MS is going to try to capture the casual gamer market that Nintendo is aiming for. They're not going to cut the price because of the PS3, they're going to do it because of the Wii.

MicroGamer4347d ago

The lower starting price of the Wii, has to be a matter of concern for both Sony and Microsoft. They are going to grab a lot of sales, but the 360 core is currently only $50 higher than Wii and it is a much more powerful system, even without the hard drive or the XBox Live goodies. Like Sony, though, Nintendo's supply chain currently stretches all the way back to Japan. A disruption in production or delivery now would be devastating for either of them. Once they establish a stockpile of units in all major markets, though, the situation changes and Microsoft will no longer be able to take advantage of supply shortages to drive sales. That is when the price wars will really start. A $50 price drop on 360 Core will force Nintendo into making a similar price drop, possibly before they are ready to, and a $100 price drop on 360 Premium is going to be a really hard pill for Sony to swallow. So MS is really ideally positioned in the mid range in terms of pricing to compete effectively with both Nintendo and Sony.

JustCallMeDaddy4347d ago

What i think is that ms doesn't have to worry about sony because sony is digging its own tomb, just think about it, sony losing around $250 per console, ms and sony MAKING money for every console they sell. The "War" won't be between Sony, Microsoft and Nintendo, but maybe between Microsoft and Nintendo.

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