Microsoft plans on slashing 360 to "mass market price point"
By Paul Miller 
posted Jul 12th 2007 11:51AM
posted Jul 12th 2007 11:51AM
[Thanks, Robert W]
posted Jul 12th 2007 11:51AM
Number of Nintendo Wiis sold in Oct 2009.
Gaming industry numbers in October, 2009 showed the Wii to hold the top sales spot, followed by the PS3 and the Xbox 360.
Now that we've thrown 'em off the trail, use the form below to get in touch with the people at Engadget. Please fill in all of the required fields because they're required.
They **should** be able to pull off a profit this fiscal year.. the $1.15 billion for the warranty fund was written off in Fiscal 2006 (june 2007). As long as that fund doesnt balloon.. things are cool (lol).
Maybe I'm thinking of this wrong but I think that folks are only looking at Microsoft's extension of the 360 warranty and cash write-off as a sign that there is trouble afoot. I think it's possible that this was a very shrewd fiscal move on Microsoft's part and not just from a customer satisfaction point of view. Consider this:
If Microsoft already wrote off the cash in anticipation of repairs on the 360 to the tune of $1.5B at the same time that they extended the warranty to three years, the cash write off is tied to the 2006 fiscal year. That likely means that they were comfortable with their fiscal year-end finances and believed that the cash should be written off ASAP instead of having multiple write-offs annually to provide cash to fix the consoles. (A good thing)
$1.5B is a lot of money...any way you look at it. Looking at Wikipedia, they list that 11.6 million consoles have been sold so far. Assuming that every single one breaks, they are dedicating about $129 to repairing each one. An Xbit labs article in late 2006 puts the cost of manufacture of the 360 at
Chaos, I'm an accountant, and while I generally agree with your point, Cash is never "written off" - Cash is cash.
warranty reserves are judgemental - and things can get a little hairy in 3 years when they still have a reserve up on the books for a billion dollars that, suddenly, in their judgement, they no longer need that reserve because the liability doesn't exist as the original 1.5B was a little too conservative, so, they get rid of that billion dollar reserve, and release it to income - straight to the bottom line - what looked like a mediocre quarter suddenly becomes a bit better and because we're talking about a company the size of microsoft, no one ever notices the measly billion of cushion that was taken down
this is how businesses get in trouble every day
This is a sweet announcement why didn't they make it at E3 would have helped them a lot I think, and with the new chipset along with the 3 year warranty and a price cut sounds like Microsoft could really be starting to gain some steam here, can't wait for all this so I can get an Elite with the new chipset for cheaper
I am in the same boat as you pretty much. Waiting for a cheaper Elite.
Cut the prices all you want. I'm not buying until Halo 3, thank you.
I don't care about Halo 3, but Grand Theft Auto IV might be the game that sends me out looking for a 360...
I'm definitely all about some GTA4. I'm holding off on buying either a 360 or a PS3 until it comes out. If the problems with the 360 have been fixed, then I'll probably go with that since it'll be cheaper. If not, $500 for a PS3 won't hurt too bad.
Why the fuck would you wait for even the price cuts? There are so many awesome games out there, and you are missing out on it. Lol. I "lol" at YOU!
Because some people can't afford it, dipshit.
Oh really, you think? By him saying hes not going to buy it until Halo 3 is out, hes implying that he can buy it, but just won't because it would be a waste of his money. Dipshit.
Sounds like they're going to wait for Falcons entering the retail channel before they cut the price. I'm OK with that as long as it doesn't take too long, they need a cut before the Holiday buying season begins.
You've hit the nail right on the head, they'll wait until the holiday buying season. And the reference to "casual gamers" is another major clue as to why they won't announce at E3: the audience they want isn't really paying attention right now, anyway...
A black Friday cut seems most logical to me. Halo 3 will drive 360 system purchases more than any other game, but Microsoft would certainly prefer those purchases come in at a higher price point. Halo 3's launch in early Sept. will drive sales for almost 3 months. Then, when the market is dried up of those willing to buy a 360 for Halo 3 at that price the timing would be perfect for a new injection of sales from holiday buyers. An alternative to lowering the price could also be a Halo 3 game bundle for the same price (or just slightly higher). That being said, if 360 sales are strong from Halo 3 release all the way to black Friday they might not feel the need to lower the price until after the holidays. With Mass Effect, Halo 3, and Bioshock the 360 is in the lead dog position with or without pricing changes and Microsoft knows it.
Yeah, but isn't a lot of the 'casual gamer' trend because of the type of games and the control interface used on the Wii/DS? I don't see my grandmother getting a 360 because it's cheap so she can play Halo 3. She's actually excited about the Brain Age sequel though.
TVGenius nailed it. Price is only 1 factor. The type of games and the control interface are more important to casual gamers.
Besides, Microsoft made their decision, let them live by it. They want the 360 to be an in-home point-of-sales terminal for Microsoft-controlled transactions (that happens to play games). So be it.
With all of the income generated by the marketplace, one has to wonder why people must still pay for Live (Gold).
If the 360 prices drop, it will probably have more to do with marketplace profits subsidizing the device.... more units, more potential income from the marketplace.
I think TVGenius misunderstands the definition of casual gamer. I've been a gamer all my life, but I'd currently consider myself casual because I don't devote as much time or money to gaming as I used to. I bought a Wii because it was cheap, totally worth the money for the little bit of gaming I do. If 360 makes it down to the $250 price point I'd get one.
I understand what you're saying, but I'm using it the way the industry seems to be using it. I guess really a better term they could be using is 'non-traditional' gamers-- those not normally drawn to gaming, be it older people or people like you who just don't play as much. I'm pretty much in the same boat as you. I played more as a teenager, then life happens and you get married and and and...
MS really has no choice in the matter...and it's not because of Nintendo.
Nintendo has conceded the hard core market and now caters to a completely different demographic who, for the most part, aren't going to buy a 360 or PS3 if they were $50.00 (women, old folks, casual gamers)
By this holiday basically a handful of games will separate the 360 from the PS3, as both systems have very few exclusives that won't eventually wind up on the competitors console.
With that in mind those in the market for a gaming system will have this choice by Christmas...pay $399 for a console that could scratch your $60.00 game with a approx 30% chance of failing (the rate will be better by then but bad pub sticks...see Sony), no wifi, no HDMI, no hi def player,...or $499 for a console with all that, free online and a 1% chance of failing?
That's not really a hard choice in my book. Unless the 360's worth having (premium and up) are $150 to $200 less than the PS3, MS is gonna get dusted this holiday...something MS cannot afford.
But that $499 console has only a small number of games to justify the higher price.
I couldn't have said it better. I'm surprised anyone buys a 360 with the defect rate and price. I have been holding out until 65nm, and to tell you the truth, I will go into it with the expectation my game play be interrupted for a few days even still. MS has the content and online service very solid it seems. The barrier to entry is where they are really screwing up, the console!
Is it me or are the execs arrogant? The E3 unveil of the Halo console was...LAME! These execs clearly are more into selling "units" than creating a kick a$$ user experience.
If this were an Apple product, you would never hear the end of 90nm, no wi-fi, no high-def drive, taking how long to respond to the purported 30% rrod? I don't understand the immunity MS holds.
The 360 wont be getting, as you put it, "dusted" anytime soon.
Microsoft set a new standard with what they have done to correct any problems with the 360 that most other manufacturers couldn't and or wouldn't do. As a 360 owner that had a faulty 360 that was repaired (and has been flawless since), I would say the fact that it broke and the way they took care of it actually went FURTHER with my opinion of them than if it never broke at all.
All you ever hear from non 360 owners bashing it is crap about the 'RRofDeath'.....but when you talk to 360 owners that have one and have HAD the problem, you find nearly all are completely satisfied with how quickly the issue was taken care of and how happy they are with the console.
So, I wonder (and these are not factual statistics)...if one product has a %10 failure rate in which all 10% are able to have the failure corrected at no cost for 3 years, and a competitor has a 1% failure rate where the failure is either not corrected or you are charged for it after 1 year, which is the better product to buy?
@chadow
So your argument for MS is..."there stuff breaks a lot but at least they fix it promptly and give me a 3 year warranty in case it breaks again"...and by your logic a product that malfunctions 10-30% of the time (but is promptly repaired) is more consumer friendly than a product that has a 99% chance of functioning properly?
Is Bill Gates shipping LSD with 360s now?
Not that anything I say is going to matter to you, but MS only did what they had to seeing as they sold you and millions others A LEMON! 1 billion is cheap considering what they would have paid lawyers and consumers in a class action suit.
Yeah you're right that IS a hard choice. Let me see here, do I want a console that has the widest and best selection of games, or do I want a console that has a few good games but keeps trying to push it's second life ripoff on me as its answer to Xbox Live. Such a hard choice...gosh which one....
Also, disc scratching is not a widespread problem. If anything I'd be willing to bet that disc scratching is probably 90% people moving their console while it's on.
And with that new 3 year warranty I am just SOOO worried about my console failing. I'm really glad you pointed that out to me. I really just need to sell my 360 now and buy a PS3 so I can watch some blu-ray movies. I mean isn't that so much better? Wouldn't I rather want to go out to the store and actually find the movie and drive all the way there and back instead of just having it instantly become accessible (relatively speaking) on my console?
Man what was I THINKING! Thank you for showing me the error in my ways.
Yesimseriousrightnow,
Yeah I'm serious. Lets see a few product purchases as of late and how those went.....
A $2700 RCA Scenium 52 inch HDTV. That broke 5 (yes...FIVE) times the first year. They put too small of a high voltage fly-by unit in it. That part burned up the motherboard each time, and once the HD processor as well. All they ever did during the warranty was put the exact same part in it. 11 days after the warranty it fried again. My customer service adventure went so high I had the assistant to the CEO of Circuit City calling me, and had spent hours on the phone with Thompson/RCA. In the end, well...that TV is boxed now and in my garage broke. They quit making it altogether. During the ordeal had myself acquired near 100 names of people with the same failure in legal attempts to resolve it. With this model TV, I'm sure the failure % rate was extremely high.
I bought a $1200 Epson wide format photo printer. Never even used it enough to go through the ink that came with it and 2 months after the warranty ended its dead. Epson isn't doing anything but telling me where to get it fixed. This thing gets the flashing LINE of death ironically, and lots of owners have the same problem.
I bought a $1300 Infocus DLP projector, bulb burned up after 3 months (just over 300 hours), customer service told me they can sell me another bulb for nearly $400, thats all they would offer.
My latest, a $2800 58 inch 1080p TV. Looks and works great, but has a known defect of speaker hum and light wheel noise. Customer service is doing nothing to fix the issue.
I have also had build issues with 2 Motorola phones with loose hinges and failing keypads, a Motorola HD DVR with a frozen hard drive, a Samsung phone that constantly locks up, and Sony car stereo with a faulty bluetooth system. All of which are unresolved with the manufacturers and Im just was "stuck" with them.
So yeah...It seems to me that nearly every manufacturer has failures. Its how they handle them that speaks.
Well boy thats your fault for buying a RCA TV. DO you read reviews before you buy something or you just buy it cause it looks good in the store. My father in law has a Scenium TV and it has the worst convergence issues I have ever seen and picture quality worse than the 1960 B&W GE sitting in my parents basement for show.
Infocus projectors have bad bulbs and Epson printers, while having the best output break very easily. I wouldn't buy an Epson wide format printer for my business ever. Too bad HP is too busy screwing thier customers by decreasing the volume in the cartridges to 1 sheet of paper per.
The only reply you get from XBOX fanboys is, "Well our console has the most and best games". Really, it has a lot of great games. Wow Gears of War, Dead Rising, Oblivion, PGR2, those are the best games right? The ones that are always talked about. Most of the 360 library is available on a console everyoen already has, the PS2. Fine it won't have the best graphics but if you don't have a HDTV it really isn't going to matter. SO if you feel like buying a 360 later on this year you may have already played half its library. If you don't like FPS games there really isn't that much to offer. If you do buy a 360 you pretty much know that at som epoin tit is going to die on you. That makes for a great experience.
I remember last year in June before E3 when the 360 had one great game, Oblivion, and the rest were sorry launch titles. The PS3 is in the same place now and does have some really good games. I really only play 1 or two games max at a time and it takes me a month or two to finish a game. SO the game library is fin efor now. There are enough great games coming out over the next year to last me th erest of th econsoles life.
Sorry that I'm not a hardcore XBOX gamer that blows through 20 games a month and thinks achievement points and a gamer score is the most important thing in life. Oh boy I shot a guy in the crotch with a sniper rifle in level 7 section 2, 1000 achievement points, woot.
Got news for you guys, there aren't that many of you and casual gamers hate your guts and hate playing against you online. For as good as live is that fact alone will prevent the masses from enjoying the Live experience and leave the 360 as a hardcore gamer machine only. Normal people won't accept a box that fails on them 6 times in one year. Parents won't buy something like that for thier kids either. That is why 360 sales have been flat, they should be at 15 million by now but are still stuck close to 11. Fine the PS3 is still behind but Sony may sell 10 million systems by the end of the year. It could happen. If Nintendo keeps its momentum they could be at 20 million.
"Microsoft set a new standard with what they have done to correct any problems with the 360 that most other manufacturers couldn't and or wouldn't do."
Yeah, I'm pretty sure Nintendo actually "set the standard" when they *recalled* every single Famicom on the market when they determined the system was the victim of a design flaw. That's what MS should be doing. What they *are* doing is far below that standard; they're doing the bare minimum that they have determined will help them avoid a class action lawsuit.
That said, I'm no Nintendo fanboy - don't own a Wii, probably never will after their poor press conference that convinced me that I am just no longer their demographic. But they did what's right in the Famicom's case, and not only that, they proved that an outright recall is hardly the death of a system. The Famicom went on to iconic status and a 20 year production run. MS could learn a bit from Nintendo's experience.
@chadow
You, my friend, need a subscription to Consumer Reports. Honestly, with you earning such frequent failure miles, I can see why you appreciate the replacement gesture. I also have to echo the poster that brought up RCA...they have a hideous reputation of selling crap. It sounds like you didn't do enough product research, even after repeated failures. For anything over $100, I'd hope you'd take a gander at comments, ratings, and other such things.
But in the end, I'd go with the company with a 1% failure rate and a 90 day warranty (Nintendo or Sony, take your pick). Charging it with a good credit card gives you a year more, and the uber paranoid can always get additional warranties.
The reason Sony isn't troubled by the 360 is that they still sell more PS2s than MS does 360s. The PS3 is nicely positioned against the 360 as well.
The Wii is a whole different cattle of fish and I don't think they abandoned the hard core gamer market as hard core gamers will often get a Wii on the side. Making a great product is often the best strategy... Nintendo still can't make enough of them..
Sales numbers for May:
http://www.reghardware.co.uk/2007/06/15/us_may_console_sales/
Numbers for consoles in May 2007 (change on April)
Wii: 338,000 (-6%)
360: 155,000 (-10%)
PS3: 82,000 (flat)
PS2: 188,000 (-3%)
These numbers show that Sony is in a perfect position vs Microsoft - the 360 is nothing to worry about given the absolute numbers and the trend.
The Wii is wiping the floor with everyone so that's where Sony and MS have trouble.
@ Borland.
I research what I buy more than anyone I have ever met. My wife thinks I am a lunatic because I cannot walk into a store and see something I want and just buy it. I have to go home and do research first. That RCA was no different and it was even against my better judgment when I bought it (RCA), but it had excellent reviews. It also had HDMI before nearly any other model, had a built in HD tuner back when almost no TV's did, and even had a web browser with wireless keyboard. Reports and reviews were praising it and saying it had one of the best pictures of the competition.
So, I stand to my original point.
"Microsoft's Shane Kim has admitted in an interview that Microsoft needs to cut the 360's price to lure casual gamer types that are currently falling for the Wii."
Agree with TVGenius. Are they just totally clueless in Redmond or what?
The casual gamer avoids the Xbox360 (and PS3) not because of the price but because of the freakin' steep learning curve for those devices.
A $250 to $300 "real" Xbox (with better motherboard, hard drive and HDMI), right about the time Halo 3 comes out? I'd probably buy one.
The current model? Not so much.
Lots of peoples are buying PS3, I did verify, in a tech retailer out of 57 PSS3 consoles, 28 left after 2 days, multiply that by thousand of retail store... MS is not feeling the Heat!?
Anecdotal evidence rocks.
Wait, no, it's a logical fallacy.
I'm sure Sony is selling more PS3s since the price drop, but that doesn't mean it's anything MS needs to worry about at this time. There are still few good, exclusive games for the PS3, and selling games is where the real money is.
"Falling" for the Wii? How about choosing the Wii cause it's more funner than anything out there.
They say that they don't feel the heat from Sony's price cut, but then they need to cut prices to compete with the Wii? So are you too expensive or not?
Let's hope your price cuts don't come at the expense of cheaper components or lesser QC.
The casual market had no problem buying the PS2 when it finally came down in price. And no, the hardcore market is not 100 million strong, as much as someone might like to dismiss that. The PS2 was a very family friendly console that nearly anyone could afford and play. The Wii is an entirely different animal, where you will definitely see non-gamers sticking only with the Wii this generation. (Note, I didnt say CASUAL gamers, two totally different groups!)
When is Sony really going to cut the price of the PS3? I seem to remember them having two versions at launch priced at $499 and $599. I checked again after the announced price cuts and the cost is $499 and $599 for the two different versions.
ps3 price has been cut i think - the one that was 599 is 499, and there is a new 1 at 599 with motorstorm, and an 80gig hard drive (not out yet)
BUT IT HAS NO GAMES AND NO RUMBLE!!!!!!
so wait until it rumbles
unless u need it now, in which case circuit city u get 5 movies and a controller or amazon 6 movies and a blu ray remote - better
Ben you missed Todd's point.
He is saying that if the PS3 had two SKU's priced at 499 and 599 and now have two SKU's priced 499 and 599 that really there was no price cut.
Yes the HDD is larger in the new upcoming 599 SKU but the price points are still the same.
"He is saying that if the PS3 had two SKU's priced at 499 and 599 and now have two SKU's priced 499 and 599 that really there was no price cut."
Which is a bullshit argument.
By that same logic, the PS2 is actually more expensive now than it was at launch because Sony now sells a game system that costs $600. By extension, the PS2 also costs $600. All Sony game systems are the same, right? That's the only way you make an argument like this.
The system that costs $600 now is a *different system* than the one that cost $600 a month ago. The system that used to cost $600 now costs $500. That's called a price cut, any way you slice it.
Jeff, you are correct though your analogy was terrible.
A PS2 isn't a PS3. Sure they can both play PS2 games but they both can't play Blu-Ray. Since the PS2 isn't a PS3 it isn't priced at 600.
I'm sorry you don't understand that the PS3 with it's abilities came with two price points, one at 499 and one at 599. The removal of the 20GB only means that units all have WiFi and media card reading abilities. The systems have been upgraded put I cannot purchase a PS3 for less than 499 or 599.
I understand where you are going with this. Yes the 60GB unit is now cheaper than it was a week ago. However, an upgrade in the system specs for each price point doesn't impress your everyday consumer.
If a consumer goes out today they know that PS3's cost either 499 or 599. When they get to the store they see the 499 model. When the 80GB comes out they will see a 499 model and a 599 model. While the drives are larger they are still stuck paying either 499 or 599.
If Microsoft decides to ditch the core system and replaces it with the Premium and moves the Elite down in price making the options 299 and 399, the same issue would occur. If they made the same move but made the prices 249 and 349 the consumer would see that their two options are $50 cheaper than they were the day before. In all honesty the Elite would be $130 cheaper but bumping the old core SKU might make people forget of the Elite price point.
Again, if you know the contents of the purchase you are getting more for your money. But for a parent or casual person looking to purchase a system they didn't really know what came in the box for the price before, to them it still costs the same.
I totally understand what you mean because you are in fact correct. The unit is cheaper, however the price points to purchase a PS3 remain the same.
I guess if Microsoft didn't intend to do this very soon, now they'll be under pressure. After hearing this, most people wouldn't buy a 360 at the current price. They'd rather wait for the cheaper one, so this could potentially hurt MS's sales until the price cut.
As much as I wish it would be sooner, I believe MS will cut prices after Halo 3 is done moving units. They know Halo 3 will push 360's regardless of a price drop so I think they'll milk it as much as they can and then drop the price around November.
@chadow -
I'm unhappy with how long it took to replace my 360. It took a week to get the console package, a week for them to get it, and a week for them to decide to replace it with a new one, and a 4th week to ship it. I suppose the fact that I had the bad luck of my 360 dying on a Thursday and since MS uses United Primate Shippers- we treat your packages like a gorilla and won't work/deliver on Saturdays, that make this process take longer than it really needed to.
I suppose I shouldn't whine so much... most companies would've forced me to send the box to them and pay for shipping myself. That would've cost me $10 but would've shaved off a week in the delay.
But otherwise, I still like my 360. I'm glad I got it back and would buy another (but more reliable) one. I've advised my friends to not buy one until the reliability issues are better resolved but none of them have plans on getting a ps3 as long as that price is north of $400
Right now, the PS3 is $100 cheaper than a 360+HD DVD so I expect at least a $100 cut or a new SKU.
I'd say that Microsoft are concerned, but more concerned with the unexpected popularity of the Wii console.
Over 11m 360s sold since it launched a year before the Wii, and over 8m Wiis launched in 33 weeks.
It's looking likely than the Wii will have a bigger marketshare than the 360 by the end of 2007 let alone the financial year (March 2008).
The appearance of the Wii Balance Board could make for an interesting E3 2008, with games (particularly sports and FPS games) being designed to be controlled by both hands and both feet.
If you had the option of playing FIFA/Pro Evo on the 360 with eyecandy and a bog standard controller or the option of playing FIFA/Pro Evo using the remote, nunchuck and balance board with more immersive play and inferior graphics which would you choose..?
The majority of people (whether they're 'hardcore' or 'casual') would choose the Wii version methinks.
State of the art technology is not compatible with low price, maybe Microsoft and Sony should launch a cheaper system to compete directly with the Wii.
Isn't the Wii pushing the state of the art at a low price?
I'll agree you can't have "teh fastest!!!!11111" processor/graphics at a low price, but state-of-the-art is something that can be pushed as effectively by true innovation or thoughtful design as by moving to expensive hardware.