Xbox for $99? Xbox 2 in 2005? CNN/Money
01-28-04, 09:48 PM
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Xbox for $99? Xbox 2 in 2005? CNN/Money
http://money.cnn.com/2004/01/28/comm...ming/index.htm
NEW YORK (CNN/Money) – For the past two years, Microsoft has established a reputation as a follower in the video game war. When Sony acted, Microsoft reacted – especially when it came to price cuts. Things could be about to change.
Microsoft's Xbox may be on the verge of a substantial price cut, falling from $179 to $99 by Labor Day, according to P.J. McNealy, an analyst with American Technology Research.
"It is our belief that the price on the consoles in North America could see a stepped drop this year, with both the PS2 and Xbox being cut to $129 between now and the May E3 trade show, with [Microsoft] then cutting the Xbox further to $99 in the late summer," he wrote in a research note released Wednesday.
McNealy also believes Microsoft will launch its next generation console in late 2005 – a year earlier than has been previously rumored. That would put the Xbox 2 on store shelves up to a full year before Sony's PlayStation 3.
Microsoft, when asked about the report, said it does not comment on rumors and speculation.
The predictions are pretty bold – but not without merit. It's no mystery that the price of home video game machines will be coming down this year. After 2003's lackluster $20 cuts, Microsoft and Sony both saw console sales falter. Xbox hardware sales fell 18 percent in North America between 2002 and 2003. PlayStation 2 sales were off 49 percent in Holiday 2003. (Only Nintendo, which dropped GameCube prices to $99, saw sales increase.)
The price cut would result in a flood of red ink, though. When Microsoft launched the Xbox in 2001 for $299, it reportedly lost $100 for every unit it sold. Component prices have certainly gone down since then, but the console has never reached the break-even point.
But at this stage of the game (so to speak), Microsoft doesn't seem to care much about that. Deep price cuts – especially if they go unmatched by Sony – would drive up the number of people who own and begin growing accustomed to the Xbox. And having that deep installed customer base is the key to driving sales of a next generation machine.
So $99 would certainly build brand awareness as Microsoft prepares for the launch of its next machine. But I'm not sure a 2005 launch is necessarily a good move.
Xbox for $179 has not attracted new buyers.
Yes, being the first to market would let Microsoft do away with that reputation it has as a follower. It might also force Sony to either step up production of the PS3 or increase the technical specs.
But showing your hand a year before the industry's 500 lb. gorilla does carries a significant amount of risk. Just ask Sega, which tried doing that with the Dreamcast – and got booted from the hardware business as a result. Gamers looked at what the Dreamcast could do and were generally impressed – but decided to save their dollars for the PS2, since they considered it a sure bet.
Microsoft, certainly, is in a much stronger position than Sega. The Xbox's buzz factor is on the rise – and will soar higher if the company opts for a $99 price tag. But it hasn't yet established a reputation that's strong enough for it to sway Sony loyalists. (Not to mention there's a fringe faction that refuses to buy the machine simply because it's made by Microsoft.)
Certainly, it could hurt Sony during the crucial holiday sales period – both 2004 (with Microsoft offering a lower price point) and 2005 (with Microsoft offering a state-of-the-art product). But a rush to market could give Sony time to wind up for a devastating punch.
Look at the software situation. "Halo 2" – the second installment of the most popular Xbox game (by far) – is due later this year. Exactly when is a mystery – Microsoft will only offer "it will be ready when it's ready". It's possible we won't see the game until this holiday season. That would leave an insufficient amount of time to prepare another installment to launch in conjunction with Xbox 2.
One more time?
Obviously, it's not essential that the system launch with its best game. And an argument could be made that holding "Halo 3" to meet the PS3 launch head on might be wise. But the Xbox has so far been unable to deliver another game line that is anywhere near as effective at moving hardware.
All Sony (SNE: Research, Estimates) needs to do is announce that a new "Grand Theft Auto" title – and perhaps a new "Jak" or "Ratchet and Clank" game – will launch simultaneously with the PS3 and it could suck the wind out of Microsoft's (MSFT: Research, Estimates) sails.
And the nightmare scenario in Redmond has to be releasing the Xbox 2 a year early – only to have it move off shelves at a lackluster pace.
NEW YORK (CNN/Money) – For the past two years, Microsoft has established a reputation as a follower in the video game war. When Sony acted, Microsoft reacted – especially when it came to price cuts. Things could be about to change.
Microsoft's Xbox may be on the verge of a substantial price cut, falling from $179 to $99 by Labor Day, according to P.J. McNealy, an analyst with American Technology Research.
"It is our belief that the price on the consoles in North America could see a stepped drop this year, with both the PS2 and Xbox being cut to $129 between now and the May E3 trade show, with [Microsoft] then cutting the Xbox further to $99 in the late summer," he wrote in a research note released Wednesday.
McNealy also believes Microsoft will launch its next generation console in late 2005 – a year earlier than has been previously rumored. That would put the Xbox 2 on store shelves up to a full year before Sony's PlayStation 3.
Microsoft, when asked about the report, said it does not comment on rumors and speculation.
The predictions are pretty bold – but not without merit. It's no mystery that the price of home video game machines will be coming down this year. After 2003's lackluster $20 cuts, Microsoft and Sony both saw console sales falter. Xbox hardware sales fell 18 percent in North America between 2002 and 2003. PlayStation 2 sales were off 49 percent in Holiday 2003. (Only Nintendo, which dropped GameCube prices to $99, saw sales increase.)
The price cut would result in a flood of red ink, though. When Microsoft launched the Xbox in 2001 for $299, it reportedly lost $100 for every unit it sold. Component prices have certainly gone down since then, but the console has never reached the break-even point.
But at this stage of the game (so to speak), Microsoft doesn't seem to care much about that. Deep price cuts – especially if they go unmatched by Sony – would drive up the number of people who own and begin growing accustomed to the Xbox. And having that deep installed customer base is the key to driving sales of a next generation machine.
So $99 would certainly build brand awareness as Microsoft prepares for the launch of its next machine. But I'm not sure a 2005 launch is necessarily a good move.
Xbox for $179 has not attracted new buyers.
Yes, being the first to market would let Microsoft do away with that reputation it has as a follower. It might also force Sony to either step up production of the PS3 or increase the technical specs.
But showing your hand a year before the industry's 500 lb. gorilla does carries a significant amount of risk. Just ask Sega, which tried doing that with the Dreamcast – and got booted from the hardware business as a result. Gamers looked at what the Dreamcast could do and were generally impressed – but decided to save their dollars for the PS2, since they considered it a sure bet.
Microsoft, certainly, is in a much stronger position than Sega. The Xbox's buzz factor is on the rise – and will soar higher if the company opts for a $99 price tag. But it hasn't yet established a reputation that's strong enough for it to sway Sony loyalists. (Not to mention there's a fringe faction that refuses to buy the machine simply because it's made by Microsoft.)
Certainly, it could hurt Sony during the crucial holiday sales period – both 2004 (with Microsoft offering a lower price point) and 2005 (with Microsoft offering a state-of-the-art product). But a rush to market could give Sony time to wind up for a devastating punch.
Look at the software situation. "Halo 2" – the second installment of the most popular Xbox game (by far) – is due later this year. Exactly when is a mystery – Microsoft will only offer "it will be ready when it's ready". It's possible we won't see the game until this holiday season. That would leave an insufficient amount of time to prepare another installment to launch in conjunction with Xbox 2.
One more time?
Obviously, it's not essential that the system launch with its best game. And an argument could be made that holding "Halo 3" to meet the PS3 launch head on might be wise. But the Xbox has so far been unable to deliver another game line that is anywhere near as effective at moving hardware.
All Sony (SNE: Research, Estimates) needs to do is announce that a new "Grand Theft Auto" title – and perhaps a new "Jak" or "Ratchet and Clank" game – will launch simultaneously with the PS3 and it could suck the wind out of Microsoft's (MSFT: Research, Estimates) sails.
And the nightmare scenario in Redmond has to be releasing the Xbox 2 a year early – only to have it move off shelves at a lackluster pace.
01-29-04, 01:04 AM
#3
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Do not be surprised to see Sony cut the price in a huge way to undercut MS.
It is all about perception and Sony knows this. They also have a system that is far cheaper to make than MS. I would not be surprised to see that the PS2 is down to around $100 cost now.
Sony would prefer to not go down to $99 for a PS2. but i could see them doing it to slam MS.
MS will not gain much from launching early IMO. The same people who would buy it a year later will buy it then. The majority of people will wait to see what Sony is going to do before buying.
It is all about perception and Sony knows this. They also have a system that is far cheaper to make than MS. I would not be surprised to see that the PS2 is down to around $100 cost now.
Sony would prefer to not go down to $99 for a PS2. but i could see them doing it to slam MS.
MS will not gain much from launching early IMO. The same people who would buy it a year later will buy it then. The majority of people will wait to see what Sony is going to do before buying.
01-29-04, 02:33 AM
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although i won't be buying the new xbox console on its launch but i don't wanna see either MS or nintendo throwing the towel. it is always better to have more choices for the consumers. if it weren't for MS and Nintendo, PS2 price might still have been around $250..
01-29-04, 04:51 AM
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Why are people saying Halo 3 will be on Xbox2 Bungle said Halo 2 is the last Halo game. Maybe they will change thier mind or M$ will make them do it but they said Halo2 is the last Halo they are doing so like why all the talk of Halo3 on Xbox2?
01-29-04, 05:37 AM
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I'd say this pencil pusher knows about as much about what will happen as we do here in the forum. I mean how long have we been talking about 129 - like a couple of months - I mean there is absolutely no real evidence that we did not already know.
01-29-04, 08:31 AM
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I thought it was a good article. Although it is primarily speculation, it is speculation on the part of a financial analyst who is accountable for potentially millions of investor dollars. So his comments do carry some authority and merit.
- I don't think the Xbox Next will be released in 2005. I think it will go toe-to-toe with the PS3
- I don't think the Xbox will go to $99. There are too many high-profile Xbox releases scheduled this year, and I think MS will look at software to drive hardware sales. I do think the $129 pricepoint for the PS2 and Xbox is real, because EA said it as well. And it would make sense to drop the price of the PS2 by the time the hard drive is released, so that the investment of all that hardware isn't too much for the average consumer.
Jeremy
- I don't think the Xbox Next will be released in 2005. I think it will go toe-to-toe with the PS3
- I don't think the Xbox will go to $99. There are too many high-profile Xbox releases scheduled this year, and I think MS will look at software to drive hardware sales. I do think the $129 pricepoint for the PS2 and Xbox is real, because EA said it as well. And it would make sense to drop the price of the PS2 by the time the hard drive is released, so that the investment of all that hardware isn't too much for the average consumer.
Jeremy
01-29-04, 08:37 AM
#12
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What does it do to a company's bottom line when consumers purchase new consoles to replace broken ones because it's cheaper to buy a new one than to repair an older one? Are these companies still losing money on each console sold?
01-29-04, 10:09 AM
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I'd say a price drop around Labor Day sounds about right. That is nearly 8 months from now, and by then games such as Fable, Half Life 2, Halo 2, and Thief III will be out for the Xbox. It's a good strategy.
01-29-04, 10:30 AM
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Originally posted by TOPDAWG
Why are people saying Halo 3 will be on Xbox2 Bungle said Halo 2 is the last Halo game. Maybe they will change thier mind or M$ will make them do it but they said Halo2 is the last Halo they are doing so like why all the talk of Halo3 on Xbox2?
Why are people saying Halo 3 will be on Xbox2 Bungle said Halo 2 is the last Halo game. Maybe they will change thier mind or M$ will make them do it but they said Halo2 is the last Halo they are doing so like why all the talk of Halo3 on Xbox2?
Ahem, with that out of the way. MS lauching X2 a year earlier than PS2 or N5 would be suicide. MS dropping Xbox to $99 this year would be bad as well for next gen. It's all about perception, Nintendo dropping to $99 this year was a good thing perception wise, MS dropping to $99 would mean MS can't play with the big boys in the console industry, perception wise.
From the article:
(Not to mention there's a fringe faction that refuses to buy the machine simply because it's made by Microsoft.)
01-29-04, 11:18 AM
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Originally posted by sphereman100
although i won't be buying the new xbox console on its launch but i don't wanna see either MS or nintendo throwing the towel. it is always better to have more choices for the consumers. if it weren't for MS and Nintendo, PS2 price might still have been around $250..
although i won't be buying the new xbox console on its launch but i don't wanna see either MS or nintendo throwing the towel. it is always better to have more choices for the consumers. if it weren't for MS and Nintendo, PS2 price might still have been around $250..
It might actually lead to more competition, as right now MS and Nintendo aren't remotely challenging Sony. Perhaps they are splitting the market of people that don't have PS2s and if there's only one challenger the one remaining would build a larger user base, and thus present more of a threat to Sony. That could lead to more good games as Sony would have more of a need to put out top notch games.
But it's a moot point as all three companies are in it for at least next gen.
Personally, I won't be buying any of the systems at launch. Prices just drop too fast anymore.
01-29-04, 04:30 PM
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Originally posted by TOPDAWG
What is so funny? I wrote that 3 in that morning and saw nothing funny and I'm tried now and see nothing funny about it.
What is so funny? I wrote that 3 in that morning and saw nothing funny and I'm tried now and see nothing funny about it.
, I was laughing at the notion that Halo 2 will be the last in that franchise. It's like Rockstar saying the next Grand Theft Auto will be the last one in the series after they sold 4 million copies of each installment up to that point.
01-30-04, 05:12 AM
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Well I remember reading a interview where they said this would be the last Halo. However I don't beleave that to much I mean M$ will want a part 3 and unless members of the team want to quit or move on they will be making it. I hope they just don't keep making them and turn the name halo into a joke. No more GTA games sould be made before the next gen of hardware cause the 2nd game was just like the first so it's already getting old. Maybe with more powerful hardware they can do somehting new. Damn it I wish I could remember where I saw that interview it may have been in a mag or the net I can't remember.
01-30-04, 08:36 AM
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Originally posted by Galanthas
There is more of us than people realize.
There is more of us than people realize.
02-02-04, 12:35 PM
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http://story.news.yahoo.com/news?tmp...rosoft_xbox_dc
Report: Next Xbox Could Come in Fall 2005
23 minutes ago
LOS ANGELES (Reuters) - The next version of Microsoft Corp.'s (Nasdaq:MSFT - news) Xbox (news - web sites) video game console could be released in the fall of 2005, without the hard drive that was one of the defining characteristics of the current game console, the San Jose Mercury News reported on Monday.
The paper, citing information it said had been shared with game developers and publishers, said the console would use three International Business Machines Corp. (NYSE:IBM - news) processors based on the new generation of powerful 64-bit computing technology and a graphics chip from ATI Technologies Inc. (Toronto:ATY.TO - news)
The newspaper also reported that the new console would likely be shipped without a hard drive and said it was not "guaranteed" that the new console would be able to play current Xbox games.
By eliminating the hard drive, Microsoft could reduce the cost of production while allowing game data to be stored on flash memory, the newspaper said.
A Microsoft spokeswoman was not immediately available to comment on the report.
Both Microsoft and Sony Corp (news - web sites). (6758.T) are expected to divulge more details on the next generation of their hardware in the coming months at industry conferences in March and May. Most in the industry had expected those next-generation systems to come out only in 2005 or 2006.
Microsoft executives have said they do not want to give Sony the head start in the current generation that it had in the last one. Sony's PlayStation 2 (news - web sites) came out a year before the Xbox and has built a commanding worldwide lead.
Part of the strength of the PS2, industry leaders have said, is that it is backward-compatible with the original PlayStation. As the Xbox is Microsoft's first foray into games hardware, it has never been clear if the company intended future generations of the console to play old games.
Video game hardware and software sales totaled $10 billion in the United States in 2003, though growth is expected to slow in coming years ahead of the launch of the new consoles.
Chris
Report: Next Xbox Could Come in Fall 2005
23 minutes ago
LOS ANGELES (Reuters) - The next version of Microsoft Corp.'s (Nasdaq:MSFT - news) Xbox (news - web sites) video game console could be released in the fall of 2005, without the hard drive that was one of the defining characteristics of the current game console, the San Jose Mercury News reported on Monday.
The paper, citing information it said had been shared with game developers and publishers, said the console would use three International Business Machines Corp. (NYSE:IBM - news) processors based on the new generation of powerful 64-bit computing technology and a graphics chip from ATI Technologies Inc. (Toronto:ATY.TO - news)
The newspaper also reported that the new console would likely be shipped without a hard drive and said it was not "guaranteed" that the new console would be able to play current Xbox games.
By eliminating the hard drive, Microsoft could reduce the cost of production while allowing game data to be stored on flash memory, the newspaper said.
A Microsoft spokeswoman was not immediately available to comment on the report.
Both Microsoft and Sony Corp (news - web sites). (6758.T) are expected to divulge more details on the next generation of their hardware in the coming months at industry conferences in March and May. Most in the industry had expected those next-generation systems to come out only in 2005 or 2006.
Microsoft executives have said they do not want to give Sony the head start in the current generation that it had in the last one. Sony's PlayStation 2 (news - web sites) came out a year before the Xbox and has built a commanding worldwide lead.
Part of the strength of the PS2, industry leaders have said, is that it is backward-compatible with the original PlayStation. As the Xbox is Microsoft's first foray into games hardware, it has never been clear if the company intended future generations of the console to play old games.
Video game hardware and software sales totaled $10 billion in the United States in 2003, though growth is expected to slow in coming years ahead of the launch of the new consoles.
Chris
02-02-04, 02:02 PM
#25
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The Xbox2 needs to be backwards compatible IMO.
I also think that some will be not happy to lose the hard drive.
I hope MS rethinks these things.
I also think that some will be not happy to lose the hard drive.
I hope MS rethinks these things.