Flay

Microsoft Slashes XBox Price to Compete with Playstation 2

HB DÜSSELDORF. Microsoft Corp. will try to jump-start disappointing sales of its X-Box games console – launched on March 14 in Europe – by slashing the product's recommended unit price to 299 euros from 479 euros on April 26 for all European territories.

Hans Stettmeier, Microsoft's chief of operations in Germany, confirmed the move. "People are interested, but the main complaint is the price," he said.

The X-Box's new price will be in line with Sony's pricing strategy for Playstation 2. Sony cut the games console's price at the end of 2001, and was rewarded with a rapid surge in sales. Sony sold 850,000 units in Germany alone and expects that number to "at least double" in the next 12 months, according to Manfred Gerdes, managing director of Sony Computer Entertainment's German operations.

With 25 million units sold worldwide, Sony leads the global market for games consoles. Microsoft declined to provide concrete sales figures for the X-Box's Europe launch. But the console's start was widely regarded as rocky, with German retailers offering the product at a big discount to lure buyers.

Sony's Gerdes said two X-Boxes were sold for every one Playstation 2 in the first week of its launch. But by the third week, retailers were again moving 4.4 Playstation 2 units for every one X-Box.

To avoid backlash from its customer base, Microsoft said it plans to offer pre-price cut buyers of the X-Box, who show their receipts, two free X-Box games of their choice and a game controller.

Microsoft's goal is to sell 4.5 to 6 million X-Boxes worldwide by mid-year, but several banks and analysts have already started chipping away at that estimate.

http://www.handelsblatt.com/hbiwwwan...t/0/index.html


Not too shabby. The early adopters get 2 games and a controller.

That brings the price of the XBox down to $266.17 from $426.41.

joshd2012

Wow, this is a huge step that I didn't think Microsoft had the balls to do. I mean, they are cutting the price by alot of money and offering rebates for those who purchased before the price cut. Looks like Bill is digging deep into his pockets to keep this ship afloat. Anyone see this happening in Japan or even the US over the next few weeks?

Flay

It's already priced very well in Japan. I've seen deals such as an XBox and 2 games for $300.

As for here, I bet they will wait and see what gets announced at E3. If Sony decides to cut (and on a lesser extent Nintendo), we will probably see an XBox cut this year too.

Liver&Onions

Really, they have no choice. If they want market share in Japan and Europe, then they'll need to do something to take sales away from Sony and Nintendo.

belboz

Well, analysts have been calling for the price cut since shortly after the initial launch numbers came in and sales levelled off at a depressingly low rate.

I believe this price cut brings them exactly in line with the PS2 in Europe. They would have been much better off if they had launched with the lower price, but hindsight's 20/20. In any event, this should help boost sales significiantly.

Somehow reimbursing the people who have already bought XBoxes is almost mandatory if MS doesn't want to royally piss off the hardcore market that comprises most of the early adopters. While 2 games and a controller is generous enough to placate most, I think, I would hope that a customer isn't limited to choosing those two games from the current catalog. This soon after launch, it's probably quite common for an early adopter to already own all the games she/he would care to buy. It would suck to have to pick 2 games you had no intention of buying in the first place.

I'm not sure that I'd expect a similar price cut in Japan. I think Microsoft's main problem there isn't price, but rather games. As Flay mentioned, I believe the XBox is already priced comparably to the PS2 there and if they cut the price signficantly, it would become cheaper than the PS2 which MS definitely does not want since I would guess that action would be perceived as a sign of weakness by the consumers there.

jeffdsmith

I'm slightly confused. Wern't retailers already selling the system for less? I didn't pay perfect attention to the matter. (Please exclude the cell phone example, that's not what I'm refering too.) My question is, if the system was already sold for less money in the first place, will this move really increase sales that much?

Flay

Only in Germany. 1 or 2 major retailers were selling it for 299 instead of 479 and it screwed up preorders at all the mom and pop stores.

The rest of Europe was selling it for full price, so yes. This will effect sales greatly, especially in the UK where it sold the best.

joshd2012

Belboz makes an interesting point. If they have to choose from two games in the current library, that wouldn't be to benefitial to those who purchased it at launch. Also, while an extra controller is nice, it is useless to those who already have 2 controllers (the free one being the 3rd). While I do agree that Microsoft needs to give these people these free things to make up for the premature price drop, I think they are going at it the wrong way. What they should do is give them a certificate for the difference towards X-box products. That way they wouldn't be restricted to getting games now and can wait til there is something decent out. At the US launch it was reported that Microsoft was losing $300 for every console they sold (i believe that was the number, correct me if I'm wrong). Does anyone know what the current loss per console number is and how much they are losing per console in Europe after the price drops?

Flay

Actually, it's never been reported by Microsoft. Analysts have estimated anywhere between $15 to $125, but nobody really knows.

That's the first I've ever heard of losing $300 per console. That sounds like a rumor gone wild. Anyway, MS has never released any info on the subject.

belboz

The estimates that I've seen of Microsoft's production cost for the XBox range anywhere from $320 to over $400 per unit. Maybe those were the numbers that josh was thinking of. Since the XBox sells for a slightly different price in each foreign region, the actual loss will vary according to region as well as currency fluctuations. For production cost, I think the most widely quoted number was from a Merrill Lynch analyst who put it at $375.

The actual number, I'm sure, is only known by a few of the executives at Microsoft and Flextronics.

gcribbs

plus shipping I bet the figure is around 385 or so after you move units to the businesses. they lose I bet around $85 per unit. The PS2 costs around $220. So Sony makes around $74 after freight costs.

Good to see that the XBox is finally going to compete on price no matter what. I was hoping they would make a move. I want Sony to drop to $199 so this might push them to get to that level.

This will be an exciting E3

jeffdsmith

Thanks.

Outlaw

Why can't the price cut happen here in the U.S? I'd get one fast if it hit $199....or maybe even $249. Well perhaps thats a rhetorical question now that I think about it and read the other responses about the production costs, but everyone likes price cuts (easier on the old checking account). Europe gets all the luck.

samuelowens

In Australia, the price will be dropping to $A399 ($US215) on 26 April. Microsoft will be giving existing owners $A250 worth of accessories which is nice of them.

Tuan Jim

Well, I didn't see anything in the article that specified a date by which the customer had to bring in their receipt to get the trade in. It's possible that they'd let you come in a month from now for the trade or even later. It didn't really specify, but I'm betting that they're not limiting it to a narrow window.

edit -- yep, existing owners have till July 1st to pick up their new goodies: http://www.teamxbox.com/news.php?id=2896

Tuan Jim

AgtFox

Your first question is simple to answer. Sony would start the domino effect by reducing the price of the PS2 to $249 or $199, then Nintendo and Microsoft would follow suit. MS would most likely match PS2's price (better system technologically speaking for the same price) and Nintendo would drop the GC $50-100 to make it more enticing for their top-notch games that are coming out.

MS had to do something in Europe and they will probably do something in Japan to fire up sales numbers. They will hold off until E3 to do any sort of changing in the US. I would guess they already have plans in case Sony drops the price, but for something to happen in the US it almost always happens pre, post or during E3. If E3 was earlier in the year we would already have the price drop, but because it is in almost the middle of the year the wait is agonizing.

You also need to keep this in mind...this is a slow time for games and there really is nothing in the US that can entice someone to buy a system now via new games (Spider-Man notwithstanding). However the hot time is coming up (after E3) and they can probably spark sales with what they show at E3.

It would be really cool if MS gave the US 2 free games for early buyers when they drop the price as well...as long as they aren't Kabuki Warriors and Shrek!

Spiderbite

It never ceases to amaze how people will bitch about anything. They do not have to give back anything to the early adopters (although we all agree it is in their best interest to do so). But to complain that you get 2 free games & an extra controler ($150 that did not have to be given) it amazes me the whine of people. I have a bunch of games & 4 controllers. You think I would be upset if they wanted to give me 2 games (that could be taken back to stores, traded, etc.) and an extra controller when I never expected it or was looking for it. I would be down right impressed & certainly pleased. I personally was surprised that MS was giving anything back at all. Some of you guys expect the world...

agrall

100% agreed.

Microsoft is certainly going above and beyond expectations by doing this. I know I would be thrilled with MS if I were an X-Box owner in Europe...

Michael T Hudson

I agree. I love my Dreamcast but do not recall getting any free games or extras for buying one at 199.99 on 9/9/99.

Josh H

I agree with the above sentiments. It's pretty pathetic to whine about getting anything free, much less two games and a controller.

Early adopter are always going to pay more for the console than the majority of people who wait until there are more games out and a price drop.

I've never heard of any company ever offereing anything to early adopters. Much less nearly $150 worth of hardware and software.

This is certainly a bright move by Mircosoft, and the first one they've made in quite a while. It should definitely sell some more X-boxes in Europe.

Now they just need to come up with a way to get the Japanese interested in the system, and as a result get better support from Japanese developers.

Aghama

The huge price drop is pretty unexpected, but the early adopter "rewards" are simply astonishing. Huge to Microsoft for this.

BTW, how is having 3 controllers "useless?"

joshd2012

Well, here is what I found...

http://news.com.com/2100-1040-253654.html?legacy=cnet

Figure in that Microsoft spent $500 million in marketing alone, that bumps the price up a little. I don't know where I got the $300 (I apologize) but it seems that $150 would be a good estimation. This means it cost Microsoft $450 when production started. Its only been about 6 months since production started, so production cost have not gone down too much. At that new price, they are taking quite a hit to the pocket. This isn't a huge problem since Bill has too much money anyways.

While Microsoft didn't have to give them two free games and a controller, they sort of did if they ever wanted to make an X-box2. No one is going it when the purchase a system and a few months later it is going down in price. This is the only way to cool down the anger that one would have. Sega screwed a lot of people and prolly would have had better sales if they had this sort of deal.

Grimfarrow

Microsoft had better do something in Japan *fast*.

http://news.lycos.co.jp/company/stor...i204815&cat=10
(in Japanese)

1. SCE Playstation 2 55,000 total: 1,323,000
2. Nintendo Game Boy Advance 31,000 total: 969,000
3. Nintendo GameCube 10,000 total: 510,000
4. Playstation 3,000 total: 86,000
5. Bandai Wonderswan Color 2,000 total: 74,000
6. Microsoft X-Box 1,800 total: 169,000
7. Sega Dreamcast 1,500 total:12,000

Groucho

Is that total column "all time"? I'm pretty sure Sega sold more than 12,000 Dreamcasts.

Is there any recent sales data for USA? I haven't seen anything since about December.

darkside

Damn, getting outsold by the Wonderswan is pretty tough.

I like what Microsoft is doing in Europe. Its a good start, but software needs to be their biggest focus.