MS/PS3 News Roundup PLUS a Prediction: a Xbox 360 Price Drop at Tuesday’s E3 (or soon, soon, soon!)

After the RROD/3 year warranty enhancement news, “other” news has just poured out of Redmond, or at least about the Redmond giant Microsoft.

First off, though, the PS3 news: for those of you in caves, be aware that on July 9th, Sony confirmed rumors of an upcoming new price structure for the glossy box. Effective immediately, Sony announced the PS3 60 gig model would be sold for $100 less than the current price, bringing to $499. Sony also announced an 80 gig version, to be released in August, that would be sold for $599. Apart from the hard drive size, the units apparently are otherwise indistinguishable.

Beautiful quote from an unnamed MS rep in response to the Sony price cut:

We’ll see if it makes a difference. It’s interesting to note that they’ve significantly dropped their price in the first eight months while Xbox 360 has continued to sell well at our launch price for more than a year and a half. We’re right where we want to be right now — it’s all about choice and bringing the best games and entertainment to homes around the world.

Second, Darren Huston, President of MS’ Japan unit, stated that despite the PS3’s recent $100 price cut in the U.S., MS had ruled out any price cuts for the 360 in the tight Japanese market.

Third, Microsoft announced its intent to launch the Elite in Japan in October 07, with the Elite selling for ¥47,800 ($390), far less than the $479 current Elite price in the U.S. Also, it’s noteworthy that the 360 Premium already sells in Japan for ¥29,800 ($240)–far less than the U.S. $399 price. These factors could easily explain MS’ reluctance to cut Japanese prices further–MS already has set them low. The U.S. market is waiting in line for a drop.

Fourth, Dean Takahashi over at San Jose Mercury News reported that MS has a strong hand to be played in the near future: a project code-named “Falcon.” Takahashi reports that Falcon is the newest internal chipset for the 360, incorporating an IBM microprocessor and an AMD/ATI graphics chip, both manufactured at the smaller 65-nanometer production process (current is 90 nanometer). The smaller chips have many benefits: they produce less heat (thus a smaller chance of overheating, possibly the cause of the RROD); they use less material, are cheaper, and take fewer manufacturing steps to produce. All allow MS to cut costs and improve quality.

Taking all of this in consideration, the RROD news plus the write-off, Sony’s price drop, and “Falcon,” it’s high time for MS to respond: the time is just so perfectly ripe, and a price cur would be the best prophylactic against the hyperbolically negative spin some have given to the RROD news (don’t get me wrong, it’s bad news, but it’s not what some have given it). Last night this occurred to me as inevitable by the time of Tuesday night’s E3 (Microsoft presents at 1130 EST, watch over at 1UP or G3TV), or soon thereafter.

It would be an ingenious business move to overshadow Sony’s price drop (as noted above, only 8 months after the system’s debut) by taking advantage of the news swell surrounding the 360 surrounding the write-off, and turn it to MS’ advantage with some strong positive news. The drop would serve a tripartite role: (1) bring some potential Wii (selling at $249 currently) buyers into the fold, with a Core system price drop to a similar strata; (2) counter the recent (and unduly) negative RROD/$1 billion tax writeoff news; and (3) riposte Sony’s attempt to bring the PS3 into competitive pricing with the Xbox 360.

With that, this beautiful Monday morning I found that I’d delayed posting too long: PC World, Gamasutra, Play.tm, and Joystiq had all posted the same prediction, stemming from not one but from several financial analyists from different firms, namely, that at MS’ E3 press briefing MS would announce that the $299 Core would drop to $249, the $399 Premium would drop to $349, and the Elite would drop from $479 to $399.

I suspect that the $249 and $349 prices are indeed a likely outcome, with the HD-DVD possibly bundled for an additional $99. That would bring the Premium/HD-DVD bundle to $448, still more attractively priced than the $499 60 gig PS3.

I’d like to see something more aggressive to grab the average consumer’s eye: a $199 Core, to undercut the Wii. The Premium would ideally be $299, and the Elite $399. The HD-DVD drive could then be priced at $149, or better yet, $99. Best value, a $399 Elite plus a $99 HD-DVD would bring the unit to $498, clearly undercutting the PS3: you’ve got the next-gen DVD drive, plus a larger HD–Sony would be very hard-pressed at that point to offer anything to trump MS’ position.

Sony, of course, is having its own financial woes right now… MS, though, should be trying to make a profit: and if the $323.30 actual production cost of a Premium, back in Q4 ’06, is still accurate, the $299 cost won’t work too well. I suspect, however, that production costs have dropped even further since last report–especially with the 65 nm chipset–so MS might just be able to make an aggressive move.

If that’s the case, a $199/ $299 / $399 pricing structure for the 360 could be a golden opportunity to stave off any sympathy Sony’s price drop might have given its still-overpriced console, and possibly allow the 360 to continue to prevail over the PS3 in this year’s skirmish between the two next-gen giants.

As with all things, time will tell. Remember: E3 starts tomorrow, Tuesday July 10th. Watch this space for E3 updates.
Lime out

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3 Comments

Filed under Business, Gaming, Tech, Xbox 360

3 responses to “MS/PS3 News Roundup PLUS a Prediction: a Xbox 360 Price Drop at Tuesday’s E3 (or soon, soon, soon!)

  1. Pingback: June 07 Comparison: XBox 360 Graphics vs. PS3 Graphics « Armillary Observations

  2. writeitoutplease

    $323.30 in production costs? I think they can make up for it by doing the price structure that you’ve listed, and maybe doing something like having a mass amount of beginner, upcoming programmers working on hit, first-party games for cheap (not too cheap) or something like that. Most of the profit will go to Microsoft, and they will have made their money back. They can pay the programmers upfront and give them a percentage of commission on game sales.

    PS3 needs to just lower their prices to the same amount, or just give up on the system altogether and start working on PS4. This was a disaster: they lost my potential investment at the announcement of the price tag before the system was even released.

  3. Pingback: $100 price cut on all Xbox 360 SKUs, 1 August? (RUMOR) « Armillary Observations

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