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The 360 Is Too Cheap? 291

The always interesting GamerDad site is running a 'LongShot' column wondering if perhaps the 360 wasn't expensive enough? From the article: "The beginning of a console generation has typically been for those with deep pockets or an unhealthy hardcore jones for videogames. These people are willing to smack down big bucks for the latest technology. The price of 360 was too low to keep the launch confined to that group and it was a big mistake in my opinion. With a higher price tag, Microsoft would have made more money, made sure sellouts wouldn't have lasted for months after Christmas and still sold through all the units they had to sell before the holiday. The demand for a new system was far higher than most people anticipated, especially given the early demise of the original Xbox, a system that will probably be gone from store shelves by February 2007."
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The 360 Is Too Cheap?

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  • Oh no! (Score:5, Funny)

    by TimAbdulla ( 970443 ) <> on Monday April 24, 2006 @02:45PM (#15191680)
    It's too cheap?! Darn. I was just about to buy one too. Hopefully the PS3 can deliver in price!
  • Reaching (Score:5, Insightful)

    by AKAImBatman ( 238306 ) * <{akaimbatman} {at} {}> on Monday April 24, 2006 @02:45PM (#15191682) Homepage Journal
    That has to be the most reaching analysis I've heard yet. His basic argument is that gamers have grown up, therefore they're willing to spend gobs more money. I'm sorry, did he miss the $400 price tag? Many of the early units were sold for far more than that! If it was priced any higher, consumers would start to wonder why they shouldn't get a new gaming-rig computer instead! (Or at least a bigger HDTV and a load of HD-DVDs or BlueRays.)

    If Dave of GamerDad wants to know why the 360 isn't taking the market by storm, he needs to look no farther than the games. As X-Play on G4* said, (and I'm paraphrasing here) "The XBox 360 needs to stop charging more money for less game." (In a review of Tiger Wood's Golf.) Microsoft and their affiliates need to realize that pretty graphics are not the only ingredient in making a good game. When you pay $60 for a game, you expect to get enough to entertain you until at least your next paycheck!

    * No, I don't normally watch G4's game shows. I just happened to see their marathon of reviews this weekend. Which again convinced me why modern gaming sucks. Now, will someone please tell the hosts to stop nodding and making faces while the other person is talking? Also, get them into some adult-looking clothes without pockets. They look absolutely shriveled up with their arms so close to their sides. Last but not least, they need to eschew the ridiculous stream of bad jokes in favor of a few good jokes (read: not stupid!) and more off-the-cuff banter between the hosts. This practice of reading j0kes from a script really shows.
    • Re:Reaching (Score:5, Interesting)

      by Shadow Wrought ( 586631 ) * <> on Monday April 24, 2006 @02:52PM (#15191749) Homepage Journal
      I don't think that that's necessarily what he's trying to say. Instead, by having the price between a 360 and OG Xbox be so close together, people who would ahve otherwise happily settled for an Xbox tried to pay the extra instead, and you have a crash of shortages. If they had priced it at say $500, then they still would have sold out, would have made more money, would not have shortages, and would have sold more Xbox's. It is certainly a stretch, but there is a note of truth in his logic.
      • Re:Reaching (Score:4, Insightful)

        by gEvil (beta) ( 945888 ) on Monday April 24, 2006 @03:00PM (#15191809)
        So instead of paying $150 for an original xbox, people instead decided to pay $300-$400 for a 360? That's not a trivial difference by any means. Not to mention, if you've waited this long to get an original xbox, you most likely aren't going to be an early adopter of the next one.
        • ~$250 is certainly not a trivial amount. However, that $250 looks more affordable if you believe that they are not going to make the $150 console nigh on obsolete within a matter of months. So I can see how making the jump from $250 to $350 would override the obsolesence concern.
        • You might not be an early-adopter of the next one, but you might see it as a way of "future proofing" your purchase ... especially with the compatibility MS was touting around at the time.

          If you hadn't bought a PS1 when the PlayStation2 came out, would you spend some more, and get a console that could play most of the old games as well as the new ones (once they drop in price)? You might if you're thinking long term.

          Of course MS's idea of "backward compatibility" is a joke, but the average consumer might n
      • Re:Reaching (Score:5, Interesting)

        by AKAImBatman ( 238306 ) * <{akaimbatman} {at} {}> on Monday April 24, 2006 @03:07PM (#15191875) Homepage Journal
        I agree with you, but for the initial run of units, many (most?) DID sell far above the MSRP. JC Penny, for example, sold their stock at $799 a unit []. Not to mention the eBay retailers who managed to sell units for upwards of $1000 [].

        so in reality, a large number of units went for far more than the $400 price. i.e. The market self-adjusted the price. Microsoft may not have seen the profits, but that wasn't the point. Microsoft is selling the console as a loss-leader using the "razor blade" model. Advertising the system to be more costly would reduce demand, and thereby cut profits for Microsoft as fewer games got sold. With the lower MSRP, Microsoft was able to generate not only demand for games, but also buzz about the system. Buzz leads to more system sales (in the future), and more system sales can lead to more game sales. More game sales == more profit.

        And that's without assuming that Microsoft isn't using its resources to undercut the competition in an attempt to monopolize the market.
        • Buzz leads to more system sales (in the future), and more system sales can lead to more game sales. More game sales == more profit. So what you are saying is: 1. Sell consoles at a loss 2. Sell plastic discs (games) for $60. 3. Profit!!?!! By George I believe you have discovered the answer!!
        • Re:Reaching (Score:5, Interesting)

          by xenocide2 ( 231786 ) on Monday April 24, 2006 @07:45PM (#15193684) Homepage
          Loss leader economics only works when your production capacity is larger than the equalibrium price. Without the razor blade approach, there's a number of units to produce that maximized returns, and a set of numbers greater and fewer than that that result in less profit. The razor blade model says that it's okay to dip into the set of numbers larger than exceed the optimal production, because you'll benefit in the auxiliery market, video games sales. Ideally there is no shortage of the loss leader product-- selling out is a missed opportunity to expand the installed base. Yet shortages not only happened but persisted for some time (is the shortage even over? I see walmart selling online for 500 dollars =/). So while microsoft may have intended to be a loss leader, what we instead saw was the market raising prices in the face of scarcity. Microsoft was either unwilling or incapable of providing more 360s at the price listed. Effectively, they lost out on both the demand for the product at MSRP by not producing enough, and/or the profits they could have realized by pricing closer to the open market average.

          Sure, you can say that they simply did far better than they expected, or that the shortages were intentional. But do you realize how many games you have to buy to justify the difference between 400 dollars and 800? My napkin math suggests somewhere between 8 and 20, depending on how much of each sale goes to MS. And this doesn't even include the fact that people who bought that JC Penny package still presumably wanted to purchase a game or two for it!
      • He is missing the point though. When it comes to consoles money is made on games, not the consoles themsesles.

        Otherwise, I agree with everyone, these are big reaches.

        • It's not so much where they make money, rather why were several hundred dollars per console/future game revenue streams left on the table? There was ample supply of xBoxs going for $500-$700 on eBay, which suggests that they would have sold out with a $500 price tag, that's $100 bucks more than they got.
          The problem was that the price and their launch inventory/capacity were badly out of whack which suggests that one of three things happened:
          Someone messed up ($50-$100 million is a pretty expensive mista
    • The premium was several hundred dollars above retail. Someone pocketed that profit and it sure wasn't Microsoft. It'd say the author's point is valid on those grounds alone.
      • by Sycraft-fu ( 314770 ) on Monday April 24, 2006 @03:20PM (#15191983)
        Any and all profit they could have made on the boxes is totally insignificant to them. MS makes billions, a million or two from this doesn't matter.

        What is more important is getting lots of those consoles out there. They want everyone to own one. Well this shortage goes a long way to that. For one it generated massive advertising, you can't buy advertising as good as the 360 hype. Also, it has lead to an aura of "specialness" about the 360. It's hard to get, so it's coveted so people will work for it. Finally, you don't want people getting the idea in their head that it's expensive, you want them to think of it as cheap. Absolute price plays a factor, but also the sellout helps that. If something is sold ou all the time, it's obviously cheap right?

        Really, I think this has all played in to MS's hands magnicifently. By the time the PS3 launches, they should have a good pipe of supply going on and be ready for a rpice drop. So the PS3 comes out, they slash prices and flood 360s on the market, not to mention release Halo 3 which has conveniently been finished then. Go a long way to taking the thunder out of Sony's US launch, which is what this is really about. The overall name of the game and the money to be made is not on the consoles, but on being bigger than Sony in the market.
        • There was a fixed number of consoles manufactured prior to the Xmas season. By increasing price to the level of demand they would have upped their margin, which they might have liked. Or, perhaps unlike every other for-profit company, the simply don't care about such business-wonk stuff.

          The original author claimed MS could have raised prices. The top-level comment poster disagreed. I argued back that high ebay prices showed what the market was willing to bear at that time. Your reply to me that they needed 'to get more consoles out there' is both true and irrelevant given what was available in the channel at that time. Are you arguing that MS could not have lowered the price once production increased to the point where the supply shortage ended?
          • The original author claimed MS could have raised prices.

            That is part of the O.A.'s argument. It is the part that I agree with.

            The other part is the assertion that it was a mistake for Microsoft NOT to have raised prices. I don't know that to be the case. Regardless of MSRP, the Xbox 360 WAS the "hot" product of the 2005 holiday shopping season. I'd assume Microsoft's leadership is pretty pleased with that, even if some middlemen did take home some profit that theoretically could have been theirs.
      • The premium was several hundred dollars above retail. Someone pocketed that profit and it sure wasn't Microsoft. It'd say the author's point is valid on those grounds alone.

        I would disagree as it is about the price drops. You have to wait a certain amount of time before dropping the price, so your initial price point has to ensure sales for about a year say, not the first couple of months. Remember to original Xbox, when MS had to drop the price of that after a few weeks (which happened in the UK, I don't know about elsewhere), they had to give all of the people who paid they higher price accessories and games to compensate and smooth over the PR.

        So Xbox 360 are in short supply to start with, but they get:

        1) The hype of being sold out.

        2) Good will amongst many customers outside the US, at least many more of us had a "chance" at a bite of the cherry..

        3) A price which will last them till the PS3 comes out when they can drop the price without aggravating those people who already have one.

    • Re:Reaching (Score:5, Insightful)

      by Goyuix ( 698012 ) on Monday April 24, 2006 @02:58PM (#15191801) Homepage
      The other assumption is ignoring the market reaction six months later when they cut the price back down to $400... lets say they really ramped up the price to an even 1K - which is what some systems sold for on eBay, using that argument - How many customers would just happily wait the six months for the system to drop back down. Yes it may serve to stave off the out-of-stock problems, but you are just going to aggravate your consumers and at the end of the day - not to mention store owners paying the inflated price, only to have MS cut it in half and deal with that hassle. The real answer is to launch when your inventory and production are sufficient to handle the demand. This is a fine point of launching a device in Japan, Americas and Europe at different times - it really helps the inventory problems. Not that I like waiting, but there is a WHOLE lot more going on than MS simply missing out on an opportunity to fill the cash bucket.

      I really can't believe I am feeding the troll of this story.
    • Yeah. A fairly small lunatic fringe has been willing to pay ridiculous prices on eBay to be the first on their street to get one, but there was some question as to whether Joe Average Consumer would be willing to drop $400 on the console. And really by the time you get done putting together a starter bundle it'll end up running you $500-$600. From the sales, I'd say Microsoft just about nailed the price point. And the console gaming business has never been about making money from the console. The biggest on
      • Re:Reaching (Score:4, Informative)

        by ILikeRed ( 141848 ) on Monday April 24, 2006 @03:34PM (#15192094) Journal
        Please stop saying this falsehood - most game consoles have NOT been sold at a loss []. And the only reason MicroSoft can do so is because of the buttload of money they get from their OS and Office.
        • Re:Reaching (Score:5, Insightful)

          by Serapth ( 643581 ) on Monday April 24, 2006 @03:55PM (#15192274)

          I see this reference everytime mention of selling a console at a loss is mentioned. Hey, I love the Gord. I wasted many many many days at work reading the Gords awesome website.

          That said, when the hell did some guy that owns a video game stores commentary become "the truth".

          The Gord said it, thus it is true! And you know what... some guy at EBGames once told me that EA fired all its programmers and replaced them with monkeys. I thought this was insane at first, then it dawned on me, he works at a game store, it must be true!
          • Re:Reaching (Score:5, Insightful)

            by oGMo ( 379 ) on Monday April 24, 2006 @04:25PM (#15192489)
            The Gord said it, thus it is true! And you know what... some guy at EBGames once told me that EA fired all its programmers and replaced them with monkeys. I thought this was insane at first, then it dawned on me, he works at a game store, it must be true!

            Except Gord isn't an idiot, and he goes on to make a good case for his speculation. It's pretty simple math; read the article. If Sony lost $100 on each of the 1000000 consoles it sold at launch, it would be pretty damn hard for SCE to sweep a $100mil loss under the carpet. According to wikipedia [] they sold around 10 million in about 2 years; how do you hide a $1 billion production loss? You don't; billion-dollar losses are more Microsoft's area.

    • I really miss the days of my youth when every new system was so awe inspiring. NES, Sega, SNES, Neo Geo, etc. etc. Yes, yes, I know I was just young and naive, but back then it seemed game systems were growing by leaps and bounds (not to mention arcade games), so whatever system you got would have at least a few killer games.

      Nowadays I'm impressed by new systems for about half an hour before the novelty of the graphics wear off and I'm wondering where the gameplay is at. I'm hoping by the time I have kid
    • The easy answer is don't buy games unless they are good. I bought GRAW for my 360 and its far and away worth $60 (thought I bought it for less than retail). Many of the other games are not. I rented Quake 4 and a few others. That's about all they were worth.
    • Re:Reaching (Score:5, Funny)

      by Life2Short ( 593815 ) on Monday April 24, 2006 @03:25PM (#15192022)
      I'm sorry, did you say something about the quality of Xplay?

      I was staring at Morgan Breast's Webb.

      Er, Morgan Webb's breasts...

      Seriously, silly banter aside, the reviews are quite good in that they seem to know how to use a 5 point Likert scale. Most of their reviews are a 3/5. The distribution of many of the other reviews I see seems to be bimodal - the game either totally sucks, or it rocks "TO THE EXTREME!!!" At least I know that when I watch Xplay if they give a game a 1 it must really suck, and games good enough to earn a 5 are equally rare.
    • x-play (Score:3, Interesting)

      by svallarian ( 43156 )
      Well, it USED to be a decent show when it was on tech TV. They had to add Morgan's boobies and dumb adam down to 5th grade level to make it geared more their targeted audience.
    • I fully agree. In addition, by selling this system at a loss they ensure more people will buy it and they gain marketshare. So when PS3 comes out people will say "hey i just spent $400, no way I am spending another $400 - besides I like my 360"....Sony loses out on the customers who are only willing to buy one system. I am one of those people, though I am a ps3 fan so am waiting for that.
    • "That has to be the most reaching analysis I've heard yet. His basic argument is that gamers have grown up, therefore they're willing to spend gobs more money."

      Which is correct. The 20-30 bracket is a gold mine for gaming companies as you have young single adults with lots of disposable income. And they love to buy this stuff.

      "I'm sorry, did he miss the $400 price tag?"

      I didn't. When I saw it I did a little math in the back of my head: a PC rig that does those kinds of graphics (with 3 cores) would run a
    • I think this guy forgot about the NeoGeo
    • I disagree with your analysis because the assumptions that your are founding your position on are false, as demonstrated by the general prublic. What do I mean?

      The first false assumption that you make is that the most consumers are CAPABLE of building a custom rig for around that price tag. We often taken that for granted here because most of us have the skillset necessary to do this; many people would have no clue how to do this. But wait why not have a friend do it? That may incur more cost and certai
  • by Threni ( 635302 ) on Monday April 24, 2006 @02:45PM (#15191684)
    > With a higher price tag, Microsoft would have made more money

    Pure speculation, your honour. They'd have made more money per unit, certainly. That's about all you can say.
    • > With a higher price tag, Microsoft would have made more money

      Pure speculation, your honour. They'd have made more money per unit, certainly. That's about all you can say.

      Aren't they selling these things at a loss? So with a higher price tag, they would have lost less money per unit. And less money total as well.

    • Unfortunately, that's not necessarily correct. Component prices are based on estimated purchase quantity. By raising the price so that fewer were purchased, you're also raising the price of the parts to make it. So it could turn out that you make less. Fewer customers at a smaller profit isn't a very good corporate policy.
      • That's ex ante, they'd already ordered the components by the time they should have had a pretty good idea what supply capacity was going to be, and demand at varying prices would be. Raising the pre-Xmas price wouldn't have impacted compontent orders (as they couldn't have ordered more in time). They could lower the price post Christmas and maintained their volume price break agreements.
  • He's right! (Score:5, Funny)

    by gEvil (beta) ( 945888 ) on Monday April 24, 2006 @02:46PM (#15191692)
    He's absolutely right. I mean, look at the 3DO. The perfect price point got it the penetration that it needed.
    • by poot_rootbeer ( 188613 ) on Monday April 24, 2006 @04:24PM (#15192467)

      And keep in mind, the 3D0 was SEVENTY BETTER than the 360, hexadecimally.
    • Not only funny, but insightful.

      The article is junk. MS did exactly the right thing by pricing it where they did, any higher and they'll lose customers due to the fact that they reduce prices on a schedule and people will wait, which potentially cripples the market.

      They need instant demand, and the best way to do that is to release something at a reasonable price.

      1,000 units @ $1000 = $1m
      10,000 units @ $400 = $4m and 9,000 more people seeing your products and buying your games.
      • ignore my dumbass math at the end there... it's retarded...

        but still... if it costs you $300 to make it my numbers above make more sense...
        1,000 units @ $700 profit = $700,000
        10,000 units @ $100 profit = $1,000,000

        point is, you make it up in volume or something...
  • by DeadCatX2 ( 950953 ) on Monday April 24, 2006 @02:46PM (#15191704) Journal
    Of course the 360 was too cheap. Look at what they went for on eBay.

    Microsoft obviously failed to find the appropriate point on the supply/demand curve for the market.
    • Re:Market forces (Score:4, Insightful)

      by wileyAU ( 889251 ) on Monday April 24, 2006 @03:02PM (#15191835) Homepage
      Microsoft obviously failed to find the appropriate point on the supply/demand curve for the market.
      Consoles always make their money from selling games. Microsoft intensionally sold below the market curve for consoles in order to drive the sales of games which are priced about $10 higher than new PS2/X-box games.
      • It may also have been deliberate in the sense that they wanted to put intense pressure on Sony to generate the same loss leadership (or face people deciding the buy the cheaper of the two consoles).
    • Obviously it was too cheap in **hindsight**

      How do you predict demand?
      For that matter, how do you predict supply, when you're sourcing hundreds of components from all kinds of different manufacturers?
      Microsoft guessed, and guessed wrong.

      If you can predict demand, you can make a shitload of money. It's not easy.
  • Yes... (Score:4, Insightful)

    by bssteph ( 967858 ) * on Monday April 24, 2006 @02:48PM (#15191718) Homepage
    ...that early demise which hasn't happened yet really hurt the Xbox...

    *roll eyes*

    The article calls Microsoft an "also-ran console maker in a Sony-dominated market" with respect to the Xbox. Please. Xbox had its problems (especially in Japan), but Microsoft went from 0% market share to beating out Nintendo's Gamecube, a company with established name.

    They've sold 22 million units for chrissakes! There are ghosts of consoles (like the Dreamcast) that would have killed for that kind of "early demise".

    • yet Nintendo still made millions more than Microsoft and never once dipped into the red, while Microsoft has yet to see a profit in its games division.

      Even when Nintendo reported a profit loss, it was a PROFIT loss. Microsoft hasn't even made profit off the Xbox or the 360, it hemorages it out in campaigns to get people to actually play the system.

      the minute Microsoft starts paying what Nintendo pays in advertising and such is the minute the xbox dies and Microsoft leaves the market. They would never su

    • Re:Yes... (Score:4, Interesting)

      by rseuhs ( 322520 ) on Monday April 24, 2006 @03:39PM (#15192140)
      When I'm willing to sink enough money into a market, I can sell large numbers of anything and "gain marketshare".

      That's not the point. Any moron is able to do that.

      The tricky part is to actually get your money back and a profit on top of it.

      Even Microsoft cannot continue to lose money forever on XBox. This is not software, keeping the XBox alive costs a lot of money and things don't look that great for XBox360:

      The shortage excuse is over (Microsoft claims that they want to produce about 1 million/month) but they sold less than 200 000 in the US in March (IIRC 197 000), since they sell less in Europe and nearly nothing in Japan, that would be a total of maybe 350 000 worldwide, 400 000 if we are very optimistic. Not even near the million they want to sell. And given the fact that the launch-hype wears off and the PS3 is coming, I guess they will have a very hard time even repeating the XBox1's performance when we are talking about sales. (So far they sold roughly about half of what they sold during the XBox1 launch during the same time frame.)

      To put it in other words, they already need a small miracle to repeat the XBox1 "success" and they would still be miles behind the Playstation-franchise.

      • Now, keep in mind that I'm pulling these numbers out of my brain, which is not a very reliable storage mechanism:

        Microsoft lost around $20m on the XBox last year. They lost $500m in a lawsuit that they wrote off as the cost of doing business. They have several billion dollars in the bank, and make approximately $2.5bn profit every year. At this rate, they really could afford to just keep throwing money at the XBox. In fact, they could afford to sell them for $200 each, even if it meant they made a $40m

      • "Even Microsoft cannot continue to lose money forever on XBox."

        Maybe not forever but for the next thousand years or so should not be a problem for them at all. MS has a monopoly on operating systems and office software so they are able leverage their profits from those products to "dump" other items on the market. As long as they maintain their monopolies they can continue to dump xboxes on to the market forever. They could even afford to give them away if wanted it.
        • As long as the republicans keep the white house they can. As soon as there is another democrat president, then you can expect the DOJ to start going after them again. Especially if they are dumping XBoxes for half the cost.
      • Re:Yes... (Score:3, Insightful)

        The shortage excuse is over (Microsoft claims that they want to produce about 1 million/month) but they sold less than 200 000 in the US in March (IIRC 197 000), since they sell less in Europe and nearly nothing in Japan, that would be a total of maybe 350 000 worldwide, 400 000 if we are very optimistic.

        How does MS get these new units to the market, teleportation? March wasn't going to show this lack of a shortage because the consoles weren't for sale yet. Shipping via boat takes at least a couple weeks, m
    • The Dreamcast went under because people found an easy way to pirate games. A week after it was discovered is when SEGA announced they were ending their hardware business (why can't Nintendo just buy that damn company already!)

      Also, last time I read (a few weeks ago), XBox to this date is still only a couple hundred thousand units ahead of Gamecube in sales AND NINTENDO MAKES MONEY ON EVERY GAMECUBE AND MS LOSES MONEY ON EACH XBOX.

  • by carbontetra ( 952283 ) on Monday April 24, 2006 @02:53PM (#15191750)
    Microsoft realizes that artificial shortages creating massive hype for their product even at an exorbitant price range (yes, 400 is too much for a toy) will allow them to sell more machines longer, rather than making them readilly available at a higher cost, and trying to sell them all immediately. Author is a moron. Article is very poor trollbait.
    • yes, 400 is too much for a toy

      No, this is a 400 dollar alternative to buying some kid a kick ass machine with a 400 dollar video card to play games on. The alternative to this alternative is to let the 12 year-old-know-it-alls beat up on mom and dads PC installing every demo that comes down the pike as well as all the crap the accompanies the demos for unknown reasons. I've seen what my nephews have done to my brother's PC and I can tell you 400 dollars is a small price compared to the pains that brats wi
      • by carbontetra ( 952283 ) on Monday April 24, 2006 @03:28PM (#15192046)
        The xbox 360 is still a toy. It's a dedicated machine to play games, and it's still a large chunk of money to drop on a dedicated game machine. Whether or not they do the damage to a pc instead is irrelevant to this discussion. It doesn't change the fact that $400 is STILL a lot of money to drop just to play some games, whether it be a game system or a video card.
        • It's a dedicated machine to play games, and it's still a large chunk of money to drop on a dedicated game machine. Whether or not they do the damage to a pc instead is irrelevant to this discussion.

          Actually it isn't, because most kids with their own PC use them as little more than a dedicated gaming machine. If you can't accept that I can't help you but it is the truth of the matter.

          It doesn't change the fact that $400 is STILL a lot of money to drop just to play some games, whether it be a game system
      • 400 dollars is a small price compared to the pains that brats will cause you by fouling up your machine.

        Buy your kids a Mac and stop whining.
  • In retrospect maybe. (Score:5, Interesting)

    by Godeke ( 32895 ) * on Monday April 24, 2006 @02:53PM (#15191752)
    If Microsoft had realized the production problems they were going to face (or admitted to themselves they were going to have them, if they knew early as some say they did) then yes, a high price point causes the "per unit" loss to go down or even become profitable. If you only have N of something, you can charge a premium. The bundles proved there was a market for high end spending, but postulating that they could have moved *all* the units sold to date at a grossly higher price is a bit of a stretch.

    To say that Microsoft missed the boat and the PS3 should be sold at a premium really depends on the actual costs at time of release. Sony already *tried* the high priced solution with the PS2 based media product in Japan. That isn't apples to apples though since it was competing with the existing PS2 installed base, which isn't a wise choice. If they expect shortages of Blue-Ray drives or the processors, perhaps they could try the strategy of $800 boxes. I think it is high risk though: the reviewers are going to tear you apart if you don't deliver a $800 experience.
  • by MeanMF ( 631837 ) on Monday April 24, 2006 @02:55PM (#15191772) Homepage
    Slate magazine said the same thing four months ago:

    The Great Xbox Shortage of 2005 []
    Xbox Economics, Part 2 []
  • by ShyGuy91284 ( 701108 ) on Monday April 24, 2006 @02:57PM (#15191787)
    They have plenty of data about consoles launching in the $300 - $400 range and not flopping terribly. There haven't been any successful consoles (if any, at least that I know of) that have launched in the $700 range. lack of market data from previous launches like that makes a move like that extremely dangerous to do. And selling out is also a great way to build up steam for people to want it more. Reguardless of the price, if I hear console A is selling fast compared to console B that is selling slow, I'll be more interested in console A to see what people are so interested in.
  • by __aaclcg7560 ( 824291 ) on Monday April 24, 2006 @03:01PM (#15191825)
    I'm still waiting for prices to drop on the plain vanilla XBox. Call me a cheap bastard for wanting a $100 USD console.
  • The declining prices of the XBox 360 will surely seal its doomed fate.
  • Of course they think it's too cheap. Everyone who thinks it's too expensive is out working their second McJob to buy it.
  • by turbopunk ( 806995 ) <> on Monday April 24, 2006 @03:17PM (#15191958)
    It's hard to really tell one way or the other, but he could have a point. I think the price-point of the 360 was less a function of the value and more a function of the perceived value. If the system cost too much, people wouldn't think they were getting their mony's worth. If the system cost too little, people wouldn't take it as a serious piece of hardware.

    I think the biggest problem was the enforced bundle. No, I'm not talking about the way gamestop raped their customers. I'm talking about the core vs. premium. I think MS could have had a much more effective launch by sellng a single $350 unit that was the system, wireless controller, play and charge adaptor, and s-video cables. Everything else could be an add on for a "reasonable" price. Think about it, the only thing missing is the hard-drive. Sell it at $75 dollars and force the early adopters to HDTV, who probably could afford one more perchase, to purchase the HD cables, and you have a console that implies the true capibilities of the system.
  • by Frag-A-Muffin ( 5490 ) on Monday April 24, 2006 @03:30PM (#15192062) Homepage
    They could have sold through a lot more if they didn't ship 150k units to japan that only sold like what? 10k units? I think they wanted to believe so much that the 360 could take off in japan that they ignored reality. It wouldn't :)

    That really hurt them at the beginning. I wonder if it affected the total number of possible sales?
  • by Belgand ( 14099 ) <belgand&planetfortress,com> on Monday April 24, 2006 @03:34PM (#15192100) Homepage
    What they're basically trying to say is that the XBox 360 sold out because Microsoft priced it low enough that people could actually afford it. An apt comparison would be the recent HD-DVD launch. They've priced the damn things so high that nobody will buy them unless they're simply drooling at the possibility of being able to buy a shiny new toy. Early-adopters and the obsessed will typically buy new products for prices that are far above what anyone else is willing to pay. The statement then, is that the pricing was low enough that it wasn't restricted solely to the early-adopter/gotta-have-it/price-is-no-object segement. As a result the system sold out.

    There are, however, flaws with this reasoning. First is the idea that the launch of a new product should be accompanied by a phase of normal people wanting it, but feeling the damn thing is just too expensive to drop that kind of cash on. Quite frankly this is idiotic. Sure the company might make a bit more money, but it doesn't help the consumer in the slightest.

    The second problem is that Microsoft only intended this hard-core segment to purchase the Xbox 360 at launch. This is patently untrue. They hyped the hell out of it and barely let up. They wanted everyone to be rushing the stores to buy one just like it actually went down. The problem is that Microsoft screwed up and didn't have the stock they needed.

    Quite frankly it feels like someone who was pissed because they couldn't easily get their hands on one and would have been willing to pay more so they could have.
  • by Psx29 ( 538840 ) on Monday April 24, 2006 @03:41PM (#15192160)
    I know its kind of offtopic but I don't understand why microsoft doesn't act like every other console maker and make a leaner looking lower priced version of the original xbox...which I might actually be tempted to purchase
    • Perhaps they initially decided that they could introduce enough compatibility with the 360 to negate the need. Now, with the relatively abyssmal backwards compatibility they have right now, they might consider building one. But who wants to buy a $100 3 year old tech xbox when you can get the newest one for 300? Smaller PS2's are only still selling because they're still making games for them. Microsoft should have put out a SFF xbox for christmas and held on to the 360 until they could get HD-DVD in it.
    • Because typically, those other console manufacturers (Nintendo, SEGA, NEC) made money on their consoles at the launch, or within a year after launch (SONY). Microsoft has NEVER made money on the original XBox, and still doesn't. There's no impetus to redesign a rat hole.

    • I know its kind of offtopic but I don't understand why microsoft doesn't act like every other console maker and make a leaner looking lower priced version of the original xbox...which I might actually be tempted to purchase.

      It's actually the reason why they rushed the 360. They were bleeding money from the first XBOX. Remember, they basically were buying parts from other people to build the Xboxes. They didn't "own the silicon" as people have been saying about it. They probably COULDN'T build a new version
  • by keyne9 ( 567528 ) on Monday April 24, 2006 @03:44PM (#15192181)
    Not expensive enough? Go to hell. It's a fucking video game system, not a goddamned Rolls Royce.
    • Bingo.

      Also why aren't they trying to do "more with less".

      As many many many many many many people have said before. All the shiny graphics in the world won't make a horrible game bearable. Given that the average game costs $50-70 or so and is really only playable for a short amount of time before getting really boring ... is it worth it anyways?

      Look at the amount of people still playing NES games from the early 80s. I know NES gamers who play games made before their own birth for crying out loud.

      You know
      • You know what extra technology could be useful for? How about more logic in the games. We're still in the world of "you can't interact with this object" on systems with hundreds of megabits of ram, billions of instructions per second of power and the best we can do is Phong shaded 3 layered textured environments?

        But but but... that's crazy talk! Our games have boobies and 'splosions and shiny things! What more could you want?
  • Inflation? (Score:5, Informative)

    by Cyno01 ( 573917 ) <> on Monday April 24, 2006 @04:10PM (#15192377) Homepage
    I think i saw something, maybe on here, someone had the launch prices of all major consoles adjusted for inflation. Actaully i just googled it and here it is from IGN

    Atari VCS launched in 1977 for $249.99 __________________ $811.21 in 2005
    Nintendo Entertainment System launched in 1985 for $199.99 _ $354.91 in 2005
    SEGA Genesis launched in 1989 for $249.99 ______________ $389.67 in 2005
    NeoGeo launched in 1990 for $699.99 ___________________ $1041.12 in 2005
    Super Nintendo launched in 1991 for $199.99 _____________ $282.21 in 2005
    Jaguar launched in 1993 for $249.99 ____________________ $328.69 in 2005
    3DO Interactive Multiplayer launched in 1993 for $699.95 ___ $920.30 in 2005
    SEGA Saturn launched in 1995 for $399.99 _______________ $497.66 in 2005
    Nintendo 64 launched in 1996 for $199.99 ________________ $242.75 in 2005
    SEGA Dreamcast launches in 1999 for $199.99 ____________ $228.09 in 2005
    PlayStation launched in 1995 for $299.99 _________________ $372.01 in 2005
    PlayStation 2 launched in 2000 for $299.99 ________________ $333.15 in 2005
    Xbox Launched in 2001 for $299.99 _____________________ $325.34 in 2005
    GameCube launched in 2001 for $199.99 _________________ $216.89 in 2005

    So according to this, the launch price for the 360, when adjusted for inflation is actually below the historical average of $453.14, and probably only a little above average if you ignore the NeoGeo and 3DO. This also means that the Nintendo Revolution, if it launches at the predicted $149 or even $199, is going to be the cheapest console ever. And, unless sony pulled some piece of patent infringeing crap out of their ass at the last minute, the most technically advanced, not counting pure graphical performance.

    • Actually, your math is not realistic because you are including data from as far back as 1977. The economics of making computers has changed a lot since then. Look at the prices for the systems released from 1999 on:

      SEGA Dreamcast launches in 1999 for $199.99 ____________ $228.09 in 2005
      PlayStation 2 launched in 2000 for $299.99 ________________ $333.15 in 2005
      Xbox Launched in 2001 for $299.99 _____________________ $325.34 in 2005
      GameCube launched in 2001 for $199.99 _________________ $216.89 in 2005

      As you
      • Re:Inflation? (Score:3, Interesting)

        by Cyno01 ( 573917 )
        I never claimed they were my figures, they're c&p'd from IGN, i'm not an economic anylist. Also, i did say that the 360 is above average if you take out the outliers that are the NeoGeo and 3DO.

        Redoing it quick, if you just take consoles from Nintendo, Sega, Sony and Microsoft, the average comes out to $324.27. The Xbox 360 core then, is still $25 adjusted dollars cheaper than average and the advanced bundle or whatever is not even 20% above average.
    • Nice numbers... but why are you focusing on the average price?

      Let's see how the most expensive systems fared in the market: 1) NeoGeo, 2) 3D0, 3) Atari VCS, 4) Sega Saturn. Wow! They all crashed and burned.

      Now let's check out the cheapest: 1) GameCube, 2) Dreamcast, 3) Nintendo 64, 4) Super Nintendo. I'd call that a 75% success rate. Which list would you really rather be on?

    • The common average, or the mean, is probably not the best measure in this case. What we are looking for is a price that market forces, has, over time, indicated to be the most resonable price for a console. The mean does not provide this number as it can be corrupted buy sellers who offer products at artifically high or low prices. For instances, one can sell a shirt for $300, but for the most part shirts are sold for $25, and selling for more or less might sacrifice sales or profits. Since MS primary g
  • I agree. (Score:3, Insightful)

    by danwesnor ( 896499 ) on Monday April 24, 2006 @04:15PM (#15192407)
    Actually, I agree with him. From a pure supply and demand perspective, the 360 should have been priced $200-300 higher in the US at release. But the high demand would have only lasted for a few months, and then Microsoft would have had to drop it. Imagine how PO'd you'd be if a product dropped in price by 50% 3 months after you bought it?
  • Xbox 360 prices on eBay settled down months ago to about $25-$50 above the retail price, or about breakeven for the reseller. So that's what it's worth. There were thousands of those things for sale on eBay for months, and there are still 801 for sale today.

    The real losers in all this is are the retailers who tied up whole aisles at Xmas with unsaleable Xbox-related accessories based on Microsoft's promises. Microsoft will have more trouble getting shelf space in future.

  • Yeah, Microsoft doesn't screw us enough already. They should do it more, more I tell you.

    And raise the price of gasoline again while you're at it. Only rich people and hard-core drivers should be out on the roads. Higher prices for everything! That's what we need!!

  • ...the problem is that they didn't make enough of them. Duh.
  • by Nom du Keyboard ( 633989 ) on Monday April 24, 2006 @05:25PM (#15192958)
    For those of you who have forgotten, Microsoft intended for these shortages to happen. They allocated units and set pricing to make this happen. This scheme was leaked out before the 360 even went on sale. They priced and shipped it to get the headlines: New Microsoft XBox 360 Sells Out on First Day. Best publicity they could arrange.
  • by hepstah ( 970474 ) on Monday April 24, 2006 @05:42PM (#15193081)
    Basic economics would say that efficiency for both the consumer and producer is maximized at the point where aggregate supply equals aggregate demand. Though we have the gift of hindsight, even Microsoft probably knew that the unit was underpriced for what demand would ultimately be at launch. However, here's the crux of pricing at equilibrium (in a real world setting). As the early adopters group gets their boxes, demand shifts left (or down) because the aggregate preferences of the group changes to a lower price point because the group of consumers itself has changed. Now the 360 is overpriced. In an ideal world, they would just lower the price. Well, you can't exactly do that in the real world because it would piss people off, chipping away at your brand. Sure you can do it, but it builds in distrust toward your company -- not the sort of thing you want to do when you're launching a 5-6+ year product line. I would posit that Microsoft was playing the pricing game for a year down the road, not at launch. This price point puts them in a position to battle Sony effectively on multiple fronts.
  • by sycomonkey ( 666153 ) on Monday April 24, 2006 @05:48PM (#15193106) Homepage
    I'm not even going to discuss the 360. I did for a while want an original Xbox (almost half just for Xbox Media Center, but then Front Row came out, so my interests in the console has waned considerably), but the price was always (and continues to be) way too high. I might have paid $100 for it. Now that the 360 is out, I was hoping used prices would plummet, but nothing like that has happened so far. At this point I've almost completely lost interest.
  • by lamz ( 60321 ) on Monday April 24, 2006 @06:34PM (#15193350) Homepage Journal
    After explaining how Microsoft should have charged more for the XBox 360, he pointed out to the teacher that she forgot to assign homework.

Genius is one percent inspiration and ninety-nine percent perspiration. -- Thomas Alva Edison