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The 360 Is Too Cheap?
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."
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.
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> 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.
...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".
Whatever.
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.
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.
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?
See this article which quotes Ebay CEO Meg Whitman, who claimed that as of Dec-12-05 of the 400,000 units sold at that time 10% had been resold though ebay. Pretty significant numbers, I'd say. If ebay is good for anything, it is to track current market rates for just about anything. The average pre-xmas price for a 360 was $718.00. That's several hundred dollars lost to MS per unit (or gained by the reseller, if you prefer).
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?
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.
If you read a speed reading book, does it take you less time to read the second half?