No Discount For Xbox 360
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No Price Cut for Xbox 360
Overview
Recently, there were rumors that Microsoft might reduce the price of the Xbox 360 during the holiday season to counter Sony's launch of the PS3. Many gamers awaited a price drop and the PS3's release before making a purchase decision. However, John Porcaro, Microsoft's US PR representative, announced there will be no price reduction for the Xbox 360.
Current Market Position
The Xbox 360 is already more affordable than Sony's new console, so Microsoft sees no need for a price cut. The Nintendo Wii, targeting a different audience, doesn't pose a significant threat. Analysts at UBS previously noted that Microsoft subsidizes the Xbox 360 by $75 to keep prices competitive. Rumors suggest Microsoft might lose up to $100 per console due to dependency on external manufacturers like Intel and NVIDIA for essential parts, which incurs royalty fees.
Financial Context
Microsoft reportedly continues to face losses from Xbox sales, utilizing a subsidy strategy with previous models as well. Despite the high production costs and lower selling price, Microsoft claims to have met their targets for the year. Their survival strategy includes selling a variety of console accessories and leveraging strong marketing efforts. Most Xbox users purchase at least one accessory to enhance gameplay, and game sales significantly contribute to Microsoft's revenue. With a steady release of new game titles and robust DRM protection, individual game purchases accumulate substantial income for the company.
Future Prospects
While there is no immediate plan for a price cut, there remains hope for consumers. The holiday season is a lucrative period when people are more willing to spend. Microsoft could find it tempting to offer promotions. Although Sony's PS3 is priced near $600 and will attract buyers, facing a choice between one PS3 and three Xbox 360s, consumers often lean towards the more budget-friendly option. This approach spreads holiday cheer by making gaming more accessible.
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