First Xbox 360 Price Cut Expected in 2006

[A-Team]

Software giant plans to go lower at least once a year following first drop.

Two SKUs drove the Xbox community to an all-time low as far as criticism and naysaying are concerned. Going against their "original plan" to launch their next-generation with a standard HDD by offering a HDD-less Core System has certainly brought out the worst in a few folks out there, and with that I'd like to dedicate this post to everyone who refuses to pay $299 - much less $399 - for the Xbox 360.

An article on EuroGamer (http://eurogamer.net/article.php?article_id=60943) has a statement from Todd Holmdahl (Microsoft's Corporate Vice President of the Xbox Product Group) presumably "confirming" future plans to drop the price of the Xbox 360 on a yearly basis, which is about to make perfect sense to everyone reading this. Read on here... (http://www.filerush.com/forums/viewtopic.php?t=3749)

Maybe my original idea was getting lost in translation, thus the reason why I've chosen to edit my little remark. The thing is, Todd is openly stating that they have plenty of room to cut their prices if and when they need to because they expect manufactoring costs to decrease each year.

No one is taking the quote out of perspective. Todd said what he said because he too took microeconomics and macroeconomics in college. He realizes that demand will eventually drop and is making it clear that the company is ready to take action by cutting prices because they have the ability to do so.

[Major Dan]

I guess this really doesn't surprise me. It makes a lot of sense for MS to do this. Although I hadn't realized that the price cuts were planned out so far in advanced and as part of the development strategy. It seems MS has really thought this out. I will still buy mine right away, I can't help myself. Gotta have them all, gotta!

[sTubbs]

That settles it then. I was already going to wait until this generation truly started to die off [which looks to be Summer of next year] and with the first talk of price cuts I will definitely be doing just that. I assume that this will come sometime just before the ps3 launch as everyone has been suspecting for quite some time. If MS cuts the premium package by a hundred dollars at that time then I will certainly jump on board. I just have to wonder how many people will do the same at me and whether or not it will have considerable effects on launch sales.

[Mr_Snuffle]

Poor forgotten Australia...

[Magnanimous Gnome]

I read this article when it was on CNN earlier, and I didn't get that they were talking about price cuts at all. In context Todd was talking about how they could manufacture the Xbox cheaper and cheaper every year, something they couldn't really do with the original Xbox because of the nature of its components.

Of course cheaper manufacturing will lead to price cuts, but that still doesn't seem to be what he was talking about here specifically.

They also say in that article that they want the Xbox 360 to have a six-seven year lifespan before the next system. I find that hard to believe since the Xbox barely lasted four years.

[Paranoia]

No suprise there.

[Xerxes]

I don't need no MS employee issuing out shenanigans. I'm hoping around e3 or when the ps3 starts knocking on door, we can get a price break. I don't see no reason to be first out the gate this time. Gears of War isn't a launch title. MS can pump perfect dark all they won't, it's not the flagship. Oblivion is more flagship the pdz.

[The Iron Weasel]

When Halo 3 hits they'll drop the price, sure its been said a million times but you gotta keep this fresh in your minds people, cuz even if you hate Halo, their will more then likely be SOME title that you want, more then likely a Bioware game that is total rape-age.

[MStiles]

It has nothing to do with spreading rumors of price drops. This quote has been widely mis-interpreted and misreported by the gaming press that is too hot to report things without looking into them.

Todd Holmdahl is the VP in charge of the hardware design, testing, and manufacturing of Xbox 360. His quote to Reuters is *not* talking about droping the wholesale/retail price of the system. Read it carefully: he is talking about cost-reducing. Making the console easier to MANUFACTURE. Cost-reducing the system isn't something they could do so easily with the Xbox, it will be easier with the 360 since they own all the designs and farm out manufacturing themselves. Around once a year, a new version of Xbox 360 is produced - maybe using a different hard drive supplier, using different manufacturing processes for the chips, using a different RAM part number, stuff like that. It's cosmetically and functionally identical, and identical performance-wise, it just costs less to make.

Price drops for the console may coincide with these cost-reductions, but they don't always. Sometimes the manufacturer of a console (Sony, Nintendo, Sega, Microsoft, whoever) uses a cost reduction to get their cost closer to the price, taking less of a loss on the units. Sometimes they try to spur sales or head off competition by dropping the price of the console to consumer even with a cost-reduction on the back end.

[A-Team]

As quoted from Reuters (http://edition.cnn.com/2005/TECH/fun.games/09/19/microsoft.xbox.reut/):

Microsoft could cut consumer prices on that hard drive -- an area where prices have been dropping rapidly -- if Sony's PS3 price comes in lower than $400.
Simply put: Microsoft has enough leadway to cut prices and they'll do it if they think the PS3 is going to get in the way of their taking over the console market.

Edit: MStiles, I suppose you're talking about this quote:

"We will wind up cost-reducing the product every year," Todd Holmdahl, corporate vice president of the Xbox product group, said in a recent interview.
If so, then that should be enough of a hint to indicate that they'll drop prices. They may not do it as frequently as I and other sites have suggested, but they'll do it.

The fact of the matter is tiles, microeconomics isn't that much of a failure. If Company X can produce product Y cheaper, than they'll eventually lower the price. They might hold off on cutting down prices so they can rake in more cash, but eventually they'll have to lower the price - and I for one can see them doing it starting next Spring/Summer. The reason it works like this is because they have to keep QS = QD, or Quantity Supplied = Quantity Demanded. Demand will drop and, ceteris paribus, price will drop to stimulate sales so that QS = QD again.

Thus concludes today's lesson on microecon. Next up: macro!

[stmfuller]

that settles it...no XBOX 360 until at least next year.

[Verocity]

Hehe, even for reducing the cost to manufacture the 360, that's some pretty hopeful estimates at $100/year. Of course, this all depends on how many they sell, how many parts they purchase, how much more efficient they become in production, how much they spend on marketing, etc. God forbid some integral part of the Xbox goes *up* in price...

I assume this meeting took place before the interview:

Todd Holmdahl: Yea, were gonna drop the price on this thing by....
*throws dart*
100 bucks!
Gofer: Isn't that a little inaccurate?
Todd Holmdahl: Hrmm...you're right. Hand me my *magic* Eight Ball.

[The Iron Weasel]

I have a shiney new PC, i can wait till Gears Of War to get a 360.

[A-Team]

Hehe, even for reducing the cost to manufacture the 360, that's some pretty hopeful estimates at $100/year. Of course, this all depends on how many they sell, how many parts they purchase, how much more efficient they become in production, how much they spend on marketing, etc. God forbid some integral part of the Xbox goes *up* in price...

I picture this meeting take place before the interview:

Todd Holmdahl: Yea, were gonna drop the price on this thing by....
*throws dart*
100 bucks!
Gofer: Isn't that a little inaccurate?
Todd Holmdahl: Hrmm...you're right. Hand me my *magic* Eight Ball.
You didn't read the article right. Microsoft could potentially drop the Xbox 360 down $100 and still break even on sales vs. manufactoring costs. They are not suggesting that they'll drop the price $100 per year, and I doubt we'll see such a dramatic drop for at least 1.5 to 2 years, if then.

[gojira]

Yeah, as others said, the original article was talking about manufacturing costs, not retail. Way to read into an article what you wanted to hear.

I'm sure the price will come down sometime, but this doesn't confirm anything yet. Expect price drops when they are acutally annouced.

Now, will this admission hurt Microsoft sales, when people are now expecting an Xbox to cost less this time next year? Hmmm, an interesting conundrum ... ;)

[mkelehan]

This is one of those marketing situations where the company is trying to suit each and every prospective buyer possible so that they can keep them all hooked. Microsoft knows that they can't sell everyone on buying the $299 or $399 SKUs, so they get one of their officials to pass around "rumors" in hopes of getting everyone that didn't purchase an X360 in 2005 to purchase one in 2006.

Clever.
I don't follow. Rumors of a price cut will only hurt sales. No one will buy a system because they think the price will drop.

[Magnanimous Gnome]

It has nothing to do with spreading rumors of price drops. This quote has been widely mis-interpreted and misreported by the gaming press that is too hot to report things without looking into them.

Todd Holmdahl is the VP in charge of the hardware design, testing, and manufacturing of Xbox 360. His quote to Reuters is *not* talking about droping the wholesale/retail price of the system. Read it carefully: he is talking about cost-reducing. Making the console easier to MANUFACTURE. Cost-reducing the system isn't something they could do so easily with the Xbox, it will be easier with the 360 since they own all the designs and farm out manufacturing themselves. Around once a year, a new version of Xbox 360 is produced - maybe using a different hard drive supplier, using different manufacturing processes for the chips, using a different RAM part number, stuff like that. It's cosmetically and functionally identical, and identical performance-wise, it just costs less to make.

Price drops for the console may coincide with these cost-reductions, but they don't always. Sometimes the manufacturer of a console (Sony, Nintendo, Sega, Microsoft, whoever) uses a cost reduction to get their cost closer to the price, taking less of a loss on the units. Sometimes they try to spur sales or head off competition by dropping the price of the console to consumer even with a cost-reduction on the back end.



Which is what I said in my post, only with fewer words. :p

[A-Team]

Yeah, as others said, the original article was talking about manufacturing costs, not retail. Way to read into an article what you wanted to hear.
I'm not sure about you or anyone else, but I took it from an economics perspective and went with the flow. What I said made sense and, if you'd take the time to read the entire thread before posting, you'd see what I mean. :eek:

I don't follow. Rumors of a price cut will only hurt sales. No one will buy a system because they think the price will drop.
Laws of supply and demand my friend, go read up on them. Microsoft will have complete next-gen market control until Nintendo and Sony are ready to launch, which gives gaming enthusiasts every reason to buy their consoles now. Just because you or someone else is too stingy to buy the console when it comes out (no offense to anyone that is of course), doesn't mean that your thoughts are shared by millions of American/European/Japanese citizens. We call that overgeneralization.

For example: new, popular games are bound to become "Player's Choice" titles sometime down the road. People who actually want the game aren't going to wait and will settle with the maximum MSRP.

It's the same case with the X360, but on a hardware level.

[Morrolan]

If I had to choose a side, at this point, I'd go with the 360 as the most likely to come out the victor. But even I will be waiting to buy my 360 AT LEAST until the PS3 is released. Half the 360 games I'm looking forward to won't be out until after then anyway.

It is my prediction that Oblivion won't be out until around the PS3 launch. This is based on my extensive knowlege of both tea leaves AND head-bumps.

[A-Team]

Alright folks, I edited the sly comment I made in my original post for clarity issues. You all seriously need to read toward the end of Page 1 if you want to understand what I'm trying to say.

Some of you were right in the sense that he didn't say they were cutting prices, but at the same... "confirming" was and still is in quotes for a reason. I made it perfectly clear post-quote that Microsoft has the power to cut their prices because they are selling above manufactoring cost.

[Babbster]

I read this article when it was on CNN earlier, and I didn't get that they were talking about price cuts at all. In context Todd was talking about how they could manufacture the Xbox cheaper and cheaper every year, something they couldn't really do with the original Xbox because of the nature of its components.

Of course cheaper manufacturing will lead to price cuts, but that still doesn't seem to be what he was talking about here specifically.

They also say in that article that they want the Xbox 360 to have a six-seven year lifespan before the next system. I find that hard to believe since the Xbox barely lasted four years.

Read your post again. You'll find the reason for your last paragraph in your first paragraph.

[Heretic Machine]

Awesome! Too bad I'll be buying a Revolution around that time, sorry Microsoft!

[Deadend]

It does make sense. The Full version of the 360 is also a smaller loss, as I figure the hard drive is $30 along with an extra $20 for the cables and wireless controller, but sold at $100 more, which means it's a smaller loss than the core... at least that is the way it seems.

But they still have the core system as eventully the HD will be the most expensive part of the system, just like the Xbox.

[A-Team]

Awesome! Too bad I'll be buying a Revolution around that time, sorry Microsoft!
My roomie is taking care of buying the Rev. All I need to do is buy a remote, er.. controller. ;p

[Dracula-X]

Personally, I'm probably going to hold off on the 360 as well, till the PS3 arrives perhaps. Not because of price however, Oblivion was the only title I was really looking forward to (maybe GOW) and the other titles do not interest me.

Everyone expects price drops as by-product of streamlined productions and lowered costs over time, but if people get it in their heads (whether accurate or not) that *** will strategize a significant price drop upon the PS3's release, they might waiver in their decision to buy one sooner. I'm already seeing notions of this all over the place so I don't think it's prudent to dismiss the idea that sales will be lost because of this (perhaps misinterpreted) admission.

[Magnanimous Gnome]

Read your post again. You'll find the reason for your last paragraph in your first paragraph.



Well fine Mr. Smartypants!

:o


Still, don't you think it is weird that they actually believe the system will last that long? What happens when the PS4 comes out in 2010 or so and is much more powerful than the 360? Is MS actually going to sit around for a few more years and not release anything?

[Eon]

I think I'll hold off on my next gen console purchase until the "rapage" period is over anyway. Until I bought an XBox on release and then saw the price drop almost a third within three months I hadn't realised quite how steep the retail drop off was.

This just gives me a sense of how long to hold off for.

[Babbster]

Still, don't you think it is weird that they actually believe the system will last that long? What happens when the PS4 comes out in 2010 or so and is much more powerful than the 360? Is MS actually going to sit around for a few more years and not release anything?

Sony has made similar noises over the past year. At least part of the reason they do it is to reassure developers that they're planning for a long life. The truth, though, is that all three console makers are probably already working on concepts for their respective followups to the 360, PS4 and Rev. In short, if all three companies plan to stay in the business, none of the three will wait longer than four years before at least having alpha kits ready to go.

Besides, saying that the X360 is set to last six years doesn't mean that a followup won't be out in four or five. It could simply mean that they plan on the 360 being commercially viable through 2011, which isn't unreasonable if the console is a success.

[Draft]

A-Team, I know you're Brandon Shipe, senior editor and reporter for File Rush News, but can you maybe cut back on the 9 paragraph news stories? This is the second one in the last few days.

[A-Team]

A-Team, I know you're Brandon Shipe, senior editor and reporter for File Rush News, but can you maybe cut back on the 9 paragraph news stories? This is the second one in the last few days.
If by nine you mean five and by two you mean one, no. What I can do is submit whatever it is with a link back to the full article if it'll help keep you from scrolling down a few extra lines.

Oh jeez, that's me? <looks at sig> Dude!

Edit: I cut the submission down to size. It's two paragraphs now instead of being the full article.

[Zeal]

This thread is nonsense. Microsoft is just saying "we can drop the price in the event the PS3 is cheaper than expected".

[RMan]

Yea, I think Zeal is right, no matter what their costs are, we know they'd be willing to take a hit to undercut the PS3 anyway. This is just to preempt that price cut so it doesn't look like a pure reaction to the PS3's price, but something they'd have done anyway.

[Xerxes]

PS3 won't be cheap by any means... But I think they'll drop the prices like Nintendo did. Not to keep up with competition, but to look that much more appetizing.

Let say you refuse to buy a Xbox 360, and when you finally go to pick up a ps3 on release date, MS throws you a "Hey, now it's $50-$100 cheaper."

Die hard sony folks may not think anything of it, but i bet ms is just thinking of even the couple million that can be swayed with a huge price difference.

[RMan]

Honestly, I think it's going to be much tougher for the PS3 if it has to go head to head with the Revolution, since the games really won't look that much different technically (much dependant on available killer games, of course). 360 has a great lead on both, which will be a great advantage, but the hardcore gamers that buy a 360 will very often get a Revolution since the PS3 likely won't be much different than what they've got. Considering the 360's early launch and the Revolutions rather strong promise, the PS3's got a real live chance to come in 3rd this time around (at the very least they're job looks MUCH harder than it did last year).

[XxSATANxX]

I've been using my xbox as a media center connected to my home theater. Recently I have been using it as a game machine since I'm working on BOOM CHAIR. I had very few games. Now I've been on a bit of spree catching up on all the games I missed. By spending no more than $9.99 I've picked an amazing amount of fun titles. I think my approach will be to upgrade my computer and WAIT on 360 until they drop to $199-$149
price range. Launch day is for suckers!

[Dracula-X]

Honestly, I think it's going to be much tougher for the PS3 if it has to go head to head with the Revolution, since the games really won't look that much different technically (much dependant on available killer games, of course). 360 has a great lead on both, which will be a great advantage, but the hardcore gamers that buy a 360 will very often get a Revolution since the PS3 likely won't be much different than what they've got. Considering the 360's early launch and the Revolutions rather strong promise, the PS3's got a real live chance to come in 3rd this time around (at the very least they're job looks MUCH harder than it did last year).
Wishful thinking?

[Phades]

Sounds to me like he's just saying costs will drop and you're taking this to mean there will be a price drop. Of course, you're probably right although I think the decision to make a price drop will be based more on a desire to increase sales than the fact that it costs less to make. If it's selling very well at its current price and suddenly they can make them cheaper, they'll keep the price where it's at and make more $$.

An eventual price drop on a console? Maybe even within a year of its launch!?!?!? AMAZING! That is, if that didn't pretty much always happen.

[Goronmon]

Wishful thinking?
Actually, I was leaning towards the same thing. As of now, the PS3 is, by far, the console I am least interested in.

[Roc Ingersol]

This thread is nonsense. Microsoft is just saying "we can drop the price in the event the PS3 is cheaper than expected".
Exactly. Which means that no matter what happens, MS can make the 360 $50 cheaper than the PS3 if they want. So Sony gains nothing by dropping their price further, meaning they'll launch at something like $350-400 (wherever they were going to be anyway) and MS will make sure 360 premium costs just as much as the PS3, and maybe bundle a game.

[RMan]

Wishful thinking?
Yes, but still has solid logic behind it. Previous to Nintendo's announcement the prevailing idea was that the 360's early launch would allow MS to grab enough market share to match Sony. Now it's fairly clear that Nintendo's system will grab way more market share than expected, and their launch will be much closer to Sony's, thus hurting them more. If they take an even remotely significant chunk from Sony then they'll kick them behind the 360. If they're able to get a bunch of non-traditional gamers to buy their system, then it's also very possible to outsell Sony in the long run. Keep in mind, it hasn't been that long since Nintendo saw the exact same reversal of fortune with the N64, it can assuredly happen in one generation, and anyone that says that Sony's current stranglehold is stronger than Nintendo's was following the SNES is at least 3 kinds of crazy.

[Xerxes]

Exactly. Which means that no matter what happens, MS can make the 360 $50 cheaper than the PS3 if they want. So Sony gains nothing by dropping their price further, meaning they'll launch at something like $350-400 (wherever they were going to be anyway) and MS will make sure 360 premium costs just as much as the PS3, and maybe bundle a game.


Ken said it's going to be expensive. And I've heard folks confirming $500. But you can't believe gamestop/ebgames folks for anything. They thought xbox 360s were going to be $300. Hell they were off by a $100. They meant the full version too not the "core ass" version. They didn't know it would be broken like that. What if the PS3 came out at $600. I mean I really doubt the xbox 360 has to worry about a pricing war with sony, unless sony is ready to lose a lot on each console sold. And I doubt they will want to compete with Nintendo. But like I said, if you drop the price $50 or $100 regardless when ps3 drop, you create another option in people's minds who were goign for ps3s. You given a even CHEAPER option for next gen games. Sony can undersell more than the put it out initailly for. That's like telling everyone all along it's $400(i feel this is sooooo unlikely) then when xbox 360 drops the price, sony can't just BAM $300 dollars over here too.

PS3 got to many first gen tech in it that's all new and expensive.

[Magnanimous Gnome]

Sony also kept saying that the PS2 was going to be very expensive, and it was $300 at launch. I expect something similar to happen here. Sony's silly if they think they can launch for more than $400 and actually sell a lot of units right away.

[mister_slim]

MS is just talking about reducing their costs. No way to tell how it will effect the consumer. Is Sony making money off PStwos now? Yeah. Is MS still losing money on each Xbox? Yeah. Are they still retailing for the same price? Yeah.
Sony has made similar noises over the past year. At least part of the reason they do it is to reassure developers that they're planning for a long life. The truth, though, is that all three console makers are probably already working on concepts for their respective followups to the 360, PS4 and Rev. In short, if all three companies plan to stay in the business, none of the three will wait longer than four years before at least having alpha kits ready to go.

Besides, saying that the X360 is set to last six years doesn't mean that a followup won't be out in four or five. It could simply mean that they plan on the 360 being commercially viable through 2011, which isn't unreasonable if the console is a success.
Sony is still making PS1s, by the way. PS1 software is still selling. I'm sure the smart publishers are looking at the Xbox/Xbox 360 transition and giving MS funny looks.
Actually, I was leaning towards the same thing. As of now, the PS3 is, by far, the console I am least interested in.
I'm pretty apathetic towards the 360 and PS3 at this point, but personally I give PS3 a slight edge due to Sony being more likely to subsidize weird, unprofitable games. GTA4 will probably give Sony a bit of a boost as well.

[ElectricMonk]

the system isn't going to come out for another couple months yet and already we're talking price cuts? c'mon already

[rein]

I have not seen it mentioned but even if MS cuts the price of the 360 to match the PS3, or is $50 cheaper, it will still be the "old" system. PS3 & Revolution will be the shiny new objects. If someone has waited a year (maybe less but most likely a year) to buy a PS3 instead of a 360 do you really think they will change their mind at the last minute? No way, they are going to stick to their guns and buy the PS3.

I don't think we can even guess about prices and price cuts untill we see what the PS3 and Revolution are launching at.