Opine: Microsoft Realizes Consumers Like Low Prices, Will Soon Want Only First-Born
Image courtesy of Wikipedia.
According to The Money Times, Microsoft may soon drop the price of the Xbox 360, amid a market where consumers prefer to pay less for their entertainment.
O Rly?
The article says:
In an interview with Bloomberg Microsoft's David Hufford, a director of Xbox product management admitted that USD 199 price point is the "sweet spot". “We are well aware that the sweet spot of the market is really 199 bucks,” Hufford said in the interview.
So, if that's the case, why are Microsoft charging so much for their console? Particularly when you add in the cost of a XBox Live subscription each year and the growing online marketplace, the cost balloons a little
Surely it would make sense for Microsoft to drop the price of the XBox 360 to compete alongside Nintendo and make up the deficit with micro transactions. Over the life of the console, if there was a deficit of $300 per unit over a ten year period, then that's only $30 a year that Microsoft needs to reclaim, but it will have increased market share and therefore more people buying games. So profits will be up all around and with much more downloadable content being made available, people will buy more. Downloadable content has a higher profit margin that retail sales for Microsoft, so it could easily make up the difference and boost market share at the same time. The other option is to do what they're doing for Halo 3, and release different versions of the game at different price points. XBox Live Arcade has been a huge boon for Microsoft as well, and there's money in that there digital download stuff.
It's simply the concept of the razor blade applied to the console market. Make the console cheap, and people will keep paying for the content. Then again, with the quality control and support issues that have plagued the XBox 360, it might not be a great idea in the first place. The scalability to increase the consumer base isn't there for Microsoft, even if the market base is there.
In the end I can see consumers owning a Wii and one of the other two Now-Gen consoles; whether it's the XBox or the PS3 will come down to individual branding preference in most cases. There may be a number of people who will buy all three, but right now Microsoft is entrenched and has a fantastic lineup of games coming that is building excitement: Halo 3, Bioshock, Assassin's Creed, Gears of Wars 2 *. They have the centralized gaming community and the carrot in the form of Achievement points to push gamers to part with their hard earned dollars.
If Microsoft really wants to keep the lead it has over the Playstation 3, it needs to entrench itself alongside the Wii. The Wii is the casual/family console, although it is getting some more hardcore titles in the form of Manhunt 2. The XBox is already seen as a hardcore gamer's machine, particularly for the competitive and social gamer who needs fragging and bragging rights. Together they have a strange synergy that allows for a crossover of consumers, particularly by meshing the Wii's Virtual Console and Microsoft's Live Arcade.
What I foresee happening is that Microsoft will drop the Core system completely, and move towards dropping the price point of the current Premier system to what the Core is now ($299). The next generation of the Premier will end up at the price of $399 but include a smaller die and inbuilt HDMI, just like the Elite ($479). They'll do this at the time that Halo 3 is released so that Halo 3 will also sell new consoles and raise their sales levels, but also slap Sony and Nintendo in the face leading up to the traditional end of year sale period.
*You KNOW it's coming at some point.. It's a license to print money.
