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.
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.
Halo 3 will be the biggest game in history. So yes it will sell new consoles. Remember those 30% or so figures on election day that sit on the fence? I am not saying it will be 30% but Halo 3 will bring some fence sitters down.
Microsoft knows how to partner well. There channels program for partners are some of the best in the world. An under the radar but crtical area for business execution. They will continue breaking other company’s exclusives as well as creating/ acquiring their own.
And in these days of Web 2.0 lets not forget the frighteningly successful LIVE service. Is it not possible that in three years online subscriptions and not the number of consoles sold will be the real measure of a gaming faranchise’s success?
Methinx the news of XBOx’s relegation to anonymity are greatly exaggerated.
Uh…software is where you make your money.
“Half of all next-gen video games (PS3, Wii, and 360) sold are sold for the XBOX 360″ – paraphrase from Microsoft
This holiday season the Wii’s and PS3’s game lineup is not impressive. Sure the Wii has a lot of exclusive titles. They’ve gotten niche games with their input device. However, Microsoft’s holiday lineup is the biggest in next-gen history.
Uh…there are more than two video game systems in the mix. Where is your commentary about the PS3? Why do you only mention the Wii? Microsoft announces a $50 price drop for their video game system and you fail to mention SONY and how it factors into the equation. In instead wave your hand and cite Wii sales figures.
I know 5 or 6 people that will be buying an XBOX 360 for the first time in September for the release of HALO 3. It will have some kind of impact on sales. But I don’t think anyone is expecting the 360 to catch up to the Wii in sales/week.
But it will help.
mmmmm, I spell a cloaked big N fanboy lurking beneath this article.
I own both a 360 and a wii, I lot of people I know do to.
This is how it breaks down. People buy a 360 for the manly games, FPS etc. They then want to keep the Mrs happy and then go and buy a wii. The wii is great but its not a console to play fps etc on.
If titanic was to be used in reference to any of the current consoles I would say the PS3 is a perfect fit. In fact I think its sinking faster :p
However I think MS missed the boat here, they should of just taken a massive hit from their cash reserves and put it out at $200 and it would have killed sony out right.
Jeez Om, I’ve said it before and I’ll say it again. Fire up Gigagamez again so Wagner can take his trollbaiting somewhere more relevant. Please!
If you ask the wrong questions you will get the wrong answer. The 360 and Wii are different market segments. The wii is the home equivalent of the nintendo DS and wii can sell 100 million consoles. This will not effect sony or MS, nor developers profit when you look at attach rates. MS has also won the segment of the market that spends the most on games. So wii sells 100 million and 1 or 2 games a system. MS sells 20 million and sells 5 or 6+ games a system, who wins? Answer : they both do as well as the developers and gamers. Start asking the right questions and your analysis will make more sense.
I work as a middle school teacher, and trust me, no kid wants a wii. Their little 6 year old brother might have one but middle school kids want the 360 first and the ps3 second. Nintendo has done a brilliant job of finding a new market but they have not reduced nor are they affecting the group of gamers that will buy the 360 and ps3. This is the same 120 million+ gamers that bought an xbox or ps2 and will now look to a 360 or ps3, even if they get a wii to.
Good points Joe. Attach rates are quite important and 360 gamers buy lots of games. The Wii is a nice toy and I would like one when the price reflects this but you’re never going to buy alot of games for it. Nintendo seem to foster this kind of behaviour – I have a few games for my DS but I mainly play Brain Training. I doubt that more casual buyers are going to buy more than 3 games a year for the Wii.
I think Wag is being way too hard on the 360. Selling 10m consoles at a distinctly non mass-market price is good going. And the potential market is way bigger than that.
This is poor journalism, there are many factors that it neglects to mention.
Let me first state that i’m not a fanboy, I generally end up owning all the formats but I stopped being an early adopter some years ago.
I’m pleased that Nintendo are having so much immediate success which I think most everbody would agree is attributed to the motion sensing controls and the price, but I doubt if they will be able to maintain the head of steam that they’ve built up since launch.
The Wii’s wow factor is in the controls more so than it’s games but making it a kind of fad phenominer, (no offence to Wii fans, i’m planning on buying one) where as the 360’s wow factor is in the ever improving games library, and will spur on console sales as better titles are constantly being released.
On top of this another will that bodes well for the 360 is it’s attach rate, if MS can continue to expand it’s healthy attach rate it will not have to sell as many units as the Wii to become profitable.
Also given the production time for true next gen platforms, this xmas will be the first holiday period where the 360’s top franchises will be delivering that wow factor and selling consoles.
MS have held off price cuts for some time but with the new 65nm model hitting the shelves already and a 45nm in the works, their ability for further price cuts in the future should keep it competitive.
Which ever consoles you choose, enjoy and take this kind of weak journalism with a large pinch of salt.
Seems like the people critical of this post all have some kind of ax to grind.
“Seems like the people critical of this post all have some kind of ax to grind.”
If i’m included in that remark, you’re way off track, I think all the consoles have something unique to offer, I just think it’s poor journalism end of.
Valid observations soured by Au’s boring old “games are on the way out” agenda.
It’s a bit of a stretch to describe a piece of kit that’s sold (uh, shipped) 11M units as “niche”.