Microsoft Moves Xbox 360 Price Point, Deck Chairs on Titanic
If you glance at game industry news every now and again, you might have noticed that Microsoft (MSFT) is lowering the price of its Xbox 360 line by $50, starting today. But unless you’re a hardcore gamer who’s already planning to buy a 360, it’s too little, too late. It won’t significantly extend the 360′s waning lead in the market, or bolster Microsoft’s dreams of owning the PC living room space, let alone stop the juggernaut that is the Nintendo Wii.
Why? Neither the original Xbox or its follow-up have built up much of an install base outside of the hardcore gamer demographic, which typically buys next-generation consoles in the first few years of their cycle. By one estimate, these “power gamers” comprise just 6 million U.S. households; the remaining 47 million who play games but aren’t so eager to pay $350-plus for a new gaming system are likely to remain unmoved by such a paltry price cut. With 10.3 million units sold worldwide, this market is pretty much tapped out, leaving Microsoft to struggle against 360′s branding as a hardcore gamer system (which the company itself fostered) while competing with a console that entirely owns the “game system for everybody” niche.
Consider this handy chart of the current install base: at the moment, the Wii (U.S. retail price: $250) is primed to surpass the 360, and it did so in less than half the time it took for Microsoft to get that far.
Then again, the 360′s entry-level Core now retails at $279, within striking distance of the Wii’s suggested retail price — that should make a difference, right? Maybe, but then there are unconfirmed rumors swirling that the Core is quietly being discontinued by major retailers. Microsoft insists that’s not the case, but true or not, the gossip isn’t bound to inspire excitement for a crippled model. (The Core comes without a hard drive.)
And regardless the 360′s price, the industry is moving away from the system in the area that matters most: exclusive titles and development budgets. Here the Wii has already claimed victory; it has the most exclusives currently in production, while top publishers like Electronic Arts and Activision are shifting their budgets in Nintendo’s direction. (It’s doubtful that the sequel to the 360′s upcoming lead exclusive, Halo 3, will bring in any new customers.)
So in the end, it doesn’t matter if the 360 is $50 or even $100 less. Ultimately, the price cut will just reveal how niche the system has become.
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I agree with the general sentiment that $50 isn’t going to spur anyone to purchase the system who wasn’t already planning on it. I’d even cede it’s near its climax in system sales. Microsoft’s attempts to target the casual industry are paltry at best.
But the general tone of your article is sensationalist. The industry isn’t “moving away from the system.” If anything, they’re moving towards it. In the past few months there have been a flurry of announcements regarding PlayStation 3 exclusives migrating to the 360 (as multi-format releases).
Publishers are gravitating towards the Wii because of its adoption rate, but that doesn’t guarantee they’ll find success there. As we’ve already seen, most titles are derivatives. For comparisons sake, I doubt many who purchased the Nintendo DS with the intent to play Brain Age made many additional game purchases.
“(It’s doubtful that the sequel to the 360’s upcoming lead exclusive, Halo 3, will bring in any new customers.)”
I bet you pulled that little nugget outta someplace where sun doesn’t shine. Chalk full of speculation based on absolutely nothing.
Om I hope you’re site doesn’t devolve into a roughlydrafted’esque anti-MS demagoguery.
The gaming market is driven my FPS, Shoot em ups, action, racing, RPG and so forth and with the new Live ecosystem where PC and Xbox360 online multiplay can seamlessly occur…the sky is the limit.
The Wii is novelty item that has cut itself a niche market, i bought a Wii for my folks and my nieces and nephews who already own a 360. Its a fun toy…not a gaming console.
Au needs to lay of hyperbole…
It’s interesting that within the gaming press, the 360 is still considered the king of the hill. While everyone refers to the Wii as a money-printing machine, gaming writers still seem to be have a wait-and-see attitude as to the Wii’s longevity.
From the macro perspective however, whether here or in places like Forbes or the financial sites, the Wii’s expansion of the gaming market seems key, while Microsoft and Sony are left battling for the minds of adolescent boys – and adolescent men in their twenties.
Funnily enough, though, it’s almost Sony who have become the dark horse. With Home, Singstar and smart pricing on the PSN, they might creep into the casual market enough not to get entirely trounced by Nintendo over the next few years.
A bit of premature, sensationalist blogging here.
In terms of Next Gen you have the Wii then the 360/PS3. Different market segments (Wii happens to hit the larger segment of non-hardcore gamer). But you overlook a very real point – HD. Wii is not HD, only the 360/PS3 are. If you want to game at 1080p, there is no Wii that will get you there.
I own a Wii and will probably get a 360 at some point. double the price drops and it would have been now, but I’m willing to wait a little longer. Another thing you overlook is the huge market for older systems. I’m still buying titles for GameCube, PS2 and XBox – used and new. I don’t have to play Halo 3 now I can wait a few years.
Finally, you overlook these systems are used for more than just games. One would be insane to buy a BlueRay or HD DVD player when you can pick up a console for less. Xbox also allows for downloading HD movies and working as a Media Center. My Xbox does more work as XBMC than gaming.
Microsoft should have gotten way more aggressive with their price drops. A core at $250 with a memory card and discount game could have made things slightly interesting. Regardless, they’re in one heck of a predicament at the moment. Their traction has slowed to a crawl, and they really need to have a huge holiday season before they do become irrelevant.
Trust me, everyone I know who doesn’t have a 360 is waiting on Halo 3 before making their purchase. The fact that Take Two/Rockstar screwed up on GTAIV might hurt them, but it should hurt PS3 more than the 360.
If it werent for a gift card that was about to expire I wouldnt have gotten my xbox360 until October of this year.
This is just wishful MS bashing on Au’s part. Its funny he doesn’t mention a lick about the 360′s true competitor which is the
PS3. Both when all said is said and done will be the market leaders.
“It’s interesting that within the gaming press, the 360 is still considered the king of the hill. While everyone refers to the Wii as a money-printing machine, gaming writers still seem to be have a wait-and-see attitude as to the Wii’s longevity.”
Nav you have an excellent point. And in all likelihood, Wii will wind up with the highest console install base. But on the other hand, the mainstream press has a tendency to grab hold of trends that don’t always live up to the hype.
Wagner Au,
You are ABSOLUTELY right!
My 10 yr old son wanted a gaming console for his birthday, and guess which one he wanted – a Wii and only a Wii. It didn’t matter to him what it cost, it didn’t matter who made it, he just wanted a Wii.
And I got him one. And we don’t plan on buying a 360 – price drop or no price drop.
The Wii has everything going for it:
- The coolness factor
- A unique product
- A shortage (there were only 15 Wii boxes delivered to the store we bought it from, and they were delivered at 10:00AM on a Saturday – and they were sold out in 10 minutes).
Microsoft really needs to go back to the basics in Sales if it’s serious about gaming.
Good post, Wagner!
As I was reading the article I thought – where does he get this information from? Just inventing, apparently. Trying to predict the trends in the gaming industry is one of the most interesting conversation pieces among young men, and one of the most futile, too. The veterans at EA and Activision didn’t get it right, why would you?
So let me see if I understand this correctly. The XBox 360 has 10 million consoles out there, and the Wii has 10 million. PS3 has 4.5 million. Previous generation consoles have about 20 million, suggesting that we are approaching 50% of saturation. This makes the XBox a “titanic”, about to “sink” into irrelevance.
What are you smoking, James, and where do I get some? This isn’t “irrelevance”, it is simply not “total market dominance”. In a couple of years, if there are 50 million Wii’s and XBox 360 is still at 10 million, I suppose you might have a point. But that hasn’t happened yet and seems improbable. And if you are looking at current trends and expecting those to continue indefinitely, I would respectfully suggest you are really out to lunch.
I’d expect that, in a couple of years, there will be 25 million Wiis, and perhaps 15-20 million XBox 360s. A “win” for Nintendo, but not “sinking of the titanic”. The Wii is great for a) folks who treat Mario Kart and other bobble-headed arcade platform “heroes” as a religion; and b) party games. That’s a broader niche than the XBox 360, but a niche none the less.
I personally don’t like the “wave your arms around like a spastic chimp” Wiimote controller, nor am I a fan of the types of games that Wii attracts. I’m happy it is doing really well, though. I believe a healthy market is one where there is strong competition. Particularly when the competitors can shake each other up. The Wii took a totally different approach from Sony and Microsoft, focusing on simple and involving gameplay rather than sophisticated graphics and advanced technology. The fact that they are doing so well should make both Sony and Microsoft stop and think.