Microsoft To Cut Xbox 360 Prices
Posted on: Thursday, 4 September 2008, 09:20 CDT
On Wednesday, Microsoft announced it will be cutting the U.S. prices of its Xbox 360 video game console, pricing the machine $50 below Nintendo’s top-selling Wii.
The price drop makes the Xbox 360 the first game console of this generation to be priced below $200. Microsoft says the $200 and below price has historically accounted for more than 75 percent of all game console sales.
The lower prices come just before the crucial holiday season, the most profitable period for the gaming industry. The new price also puts pressure on Nintendo and Sony to drop the price of their consoles.
Microsoft says it will drop the price of its entry-level Xbox 360 Arcade from $279 to $199 on September 5. They will also drop its mid-range, and top-end consoles by $50 each.
Currently Nintendo’s Wii sells for $249 and Sony’s Playstation 3, which also includes a Blu-ray video player, sells for $399.
"Microsoft wants to drum up demand for the holiday. Microsoft's long-term vision for the Xbox is not to turn a profit today," said analyst Toan Tran. "It's a way to get a foothold into people's living rooms."
The U.S. price drop comes after a similar price cut in Japan where Xbox sales have been slow.
Currently, Microsoft has sold over 20 million Xbox 360 consoles since 2005, while Nintendo has sold 30 million Wii, and Sony has sold 14.4 million of its Playstation 3 console.
Recently, the Playstation 3 has outsold the Xbox 360 in the U.S.
"Microsoft recognized it needed to do something and I think they also can afford it," said analyst Michael Pachter. "They've got to make it up by penetrating more households and selling more software."
In total, Microsoft has turned a $426 million profit in its entertainment and devices division in 2008, which includes the Xbox business. Overall, the company has lost nearly $5 billion since taking its first steps in the video game market.
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Source: redOrbit Staff & Wire Reports
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