Speculation about Microsoft Xbox price cut on Tuesday

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Tony Gikas, analyst for Piper Jaffray, is guessing Microsoft will drop the price of the Xbox game console to $ 149 next Tuesday morning. This is in an effort to generate some short term sales increases in retail stores. However, he also is somewhat pessimistic about the strategy being effective long term. He says that's still $ 20 above where the Xbox price needs to be in order to build sales momentum and boost the console's user base.

"Xbox management must be under pressure to limit losses on its Xbox hardware system," he wrote. "We think the $ 149 price point is a risky undertaking that will limit unit sales without additional promotions or killer applications to drive interest. We had been expecting the $ 129 price point to drive hardware and ultimately software sales during the next 12 months. We doubt a $ 149 price point will be enough to drive (2004) hardware unit sales above 2003 levels."

Microsoft executives have refused to comment on this prediction, even when asked at the Game Developers Conference in San Jose, California held this week. Some had speculated the price move would be announced at that time. So we will have to wait and seee what happens after this weekend. All they will say is pricing is not driven by profitability. They are looking at the business quarterly and asking themselves where do they want the installed user base to be. It is more of an investment.

News source: CDFreaks - Speculation about Microsoft Xbox price cut on Tuesday

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#1 iczman on 27 Mar 2004 - 05:29

I really doubt how much profit if at all MS is making on this console (w/games)?
It seems like MS has an endless hole in their wallet...

#2 Milliamp on 27 Mar 2004 - 06:49

MS does not make money on the console. The idea is to sell the console at a loss and try to make money on the games. I think PS2 is pretty much the same deal.

(1 reply) #3 pete_moriarty on 27 Mar 2004 - 07:09

why are they losing so much money??? will someone please tell me why these companies are losing money on the consoles even if they are making it on the games....?????

#3.1 Xeonzinc on 27 Mar 2004 - 07:29

Well the console contains all the hardware, you'd be hard pressed to get a 800mhz PC for $150, but once someone has the console you can be certain they'll buy some games for it. Microsoft gets a percentage of every game sold, even if they didnt do any work on it, so basically they get money for doing nothing then. Thye just need people to buy enough games and they wont have lost any money. Also games do not cost much to make once they have been created once. e.g.

Cost to make each time Sale Price Profit
Games $1 $50 $49
Hardware $200-$300 $150 -$50-150

Hope that explains it for you.

#4 sputnik on 27 Mar 2004 - 10:29

yeah they are wasting more and more money of hardware if hoep the software bring more then enough to compensate... bet it getting harder every year.

(4 replies) #5 perochan on 27 Mar 2004 - 11:38

MS should just drops dead. They can't win everything.

Pick a catagory and go there and I HATE IT when they want to monopolized everything they get their hands on.

#5.1 _Pablo on 27 Mar 2004 - 14:34

What the hell are you talking about - this is what companies do, they want as much of your money as possible and if they can get a monopoly on it then even better. Do you really think Sony want Microsoft and Nintendo taking consumers money away from them? I can assure you the answer is no.

As for Microsoft choosing to enter the console market, perhaps you should cast your mind back to a time when Sony didn't make consoles...they now dominate the industry.

Be under no illusions, there is no company on the face of the earth which would turn down the chance of making more profits by gaining a stranglehold on a particular sector, and once that sector is being bled dry then they would try to conquer another sector.

#5.2 ‡GÒÐ§ÉÑT‡® on 27 Mar 2004 - 15:00

M$ drops a great console down to $149, which will in turn cause Sony to drop the price down to $149. Nintendo already dropped down to $99 because of the increased competition caused by M$ entering the market. M$ has brought or caused many great new games to come into the market. If you wan't you can now have a very capable $149 dollar PC. What exactly is the problem here?

#5.3 STV on 27 Mar 2004 - 20:09

‡GÒÐ§ÉÑT‡®, how pathetic that you use $ all the time.

thanks for adding to the conversation,
STV

#5.4 insurektion on 29 Mar 2004 - 06:02

well your post also contributed nicely too. i also get emotionally disturbed by people using a $ instead of s.

on a serios note there is no problem i get a cheap console. mroe games (and by association more opportunity for beter games) come across. like godsent said 149 pc if u want run a lil linux on their do some large screen web browsing or watch movies.

(2 replies) #6 codykm on 27 Mar 2004 - 17:27

If you have been reading up on the Xbox, analysts have already said Microsoft will not make a profit on the Xbox (hardware or software wise) EVER. This is why so much effort is being put into Xbox Next. Removing the hard drive, creating a decent set of introductory games, and keeping the price (as well as size) down to a minimum. Next year could possibly be the biggest console war you've ever seen, this is child's play right now, so dont worry about it, Microsoft has bigger things to worry about then profits on the xbox, so should you

#6.1 gameguy on 27 Mar 2004 - 19:08

Removing the hard drive is just speculation by some hardware manufacturers who have no right to claim anything other than that the next console will have some sort of flash-based storage. No one said the hard drive is disappearing, and we shouldn't assume it will until Microsoft says what they're planning for Xbox Live and the next console. How will you download new content without a hard drive? Unless you store that content on the new storage, which is just as good as a hard drive in that respect then...

#6.2 codykm on 28 Mar 2004 - 02:47

Seem to be focused on 3 words out of the entire paragraph, its really not the point im getting at. But yes, this is a 3rd party speculation, however, not entirely far off, the 3rd party company is a vendor of Xbox Next. It may not be true, however they do plan on moving to an online storage system or some sort of flash storage system, to cut costs and size, it may be merely speculation at this point, but probably not far off.

#7 rbet on 28 Mar 2004 - 02:02

If the price goes down to $149, I'll buy one. And then mod it!

#8 Jack31081 on 29 Mar 2004 - 04:07

I'm already planning on buying one in the next week or two, since my PS2 finally crapped out on me for the last time. This price drop couldn't have come at a better time!

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