With the successful showing of the Xbox 360 this past year, some industry analysts are foreseeing a move by Microsoft to further secure its early lead in the next-gen console races by possibly slashing the price of both versions of the 360, with a cut anywhere from $50 to $100 below the current retail price of the machine viable.
Collin Sebastian of Lazard Capital Markets based his reasoning upon the typical downward trend of production costs related to the manufacturing of game consoles. Parts become more inexpensive to make as time goes on, and savings are realized through more efficient manufacturing methods.
Michael Goodman of Yankee Group put it more bluntly and said that a price reduction of the Xbox 360 would be Microsoft’s attempt to bury Sony in the next-gen wars. "It’s a market share battle. The $100 cut in price is what Microsoft would do if [it] wants to be super competitive–put Sony against the wall and put competitive pressure on the Wii," said Goodman.
While Goodman and Sebastian see Microsoft a possible price reduction as a strategy to enhance market share, analyst Michael Pachter of Wedbush Morgan doubted the scenario offered by his business peers. Pachter said, "Microsoft will not cut price below its cost of production…I’m not convinced a $300 [price for the premium Xbox 360] will spike demand."
However, a recent price reduction of the Xbox 360 core model on Amazon.com seems to indicate just the very opposite of Pachter’s contentions. On Thanksgiving Day, Amazon offered the 360 Core system for only $100–a $200 discount off of the normally priced $299 machine. The response to the price reduction of the unit caused malfunctions at Amazon due to the intense demand for the product. The 1,000 available units sold out within 8 minutes.
If Microsoft is truly focused in making the Xbox 360 a success over its competition, a price reduction may very well be another tool in their arsenal to fend off Sony and Nintendo from shortening the 360’s lead.
