InsideMicrosoft

Microsoft Confirms AND Denies Xbox 360 Price Cut

Ooh, this is always fun: Two seperate stories I read last night, one saying Microsoft was smashing an analyst who claimed the Xbox 360 was about to get a price cut, and one another saying they had finally admitted one was going to happen. I love official contradictions!

First, at Gizmodo, Microsoft officially stated that Wedbush Morgan-analyst Michael Pachter didn’t know what he was talking about when he stated price cuts of $50-80 were coming for all three Xbox 360 models. Pachter has said to expect the Elite to drop to $400, the Premium to $350, and the Core system to $250. It didn’t happen Tuesday night, and Microsoft said it ain’t happening, period.

For the record, I’d love a job as an analyst, because it seems to be the only media job where you get to make stuff up. Sure, there are analysts who base what they say on actual investigative reporting, like leaks from the supply chain, but then there are analysts who look at a product and announce, “I think a new version is coming!” or “I think a price cut is coming!” Well whooppidy-doo! I can be an analyst, too. Here’s a prediction: Microsoft will sell a lot of copies of Halo 3. Now give me a paycheck and call me an analyst!

Anyway, on the other side of the coin, Microsoft finally admitted that a price cut was coming. Contradiction? Not exactly. Microsoft Game Studios VP Shane Kim said in an interview with Bloomberg that Microsoft needed to drop the price of the console, and “We definitely are working on that area.” He didn’t say when or how much, just that it was definitely happening.

How is that not a contradiction to the first statement? Because, as any analyst could tell you, a price cut is an obvious thing, it’s the timing and amount of the cut that is relevant. Most company spokespeople would deny one entirely, as they are told to do, but everyone knows these things happen eventually. Kim was just being honest.

When will the 360 get a price cut? It’s way overdue, considering that Tuesday would have been the perfect time to announce one. In the last generation, the first price cut came from the last place company, Microsoft, at six months, as well as the second place company, Nintendo, at six months, and lastly, by the market leaders, Sony, at 18-19 months. So the market leader tends to cut prices last.

Problem is, Nintendo is doing so well it’s acting like a market leader, and may not cut prices for another year (see how I can talk like an analyst?). Microsoft can’t wait that long and let Sony regain its momentum, and it can’t wait until after the holiday season to lose a great opportunity to boost sales. My prediction: There are three times Microsoft may announce a price cut, and if it didn’t happen at one of them, I’d be shocked.

• Mid-August - Since Microsoft passed on E3 for announcing a cut, forget it, it isn’t happening now. But it might happen mid-to-late next month, announced as a special back-to-school price cut. That’s the first opportunity, and it accomplishes the same thing as the second possibility, which is…
• September 25 - It is highly possible Microsoft is announcing a price cut for the day Halo 3 comes out, in order to create enormous buzz and turn Halo 3’s huge opening day into an even bigger one, by selling hundreds of thousands of consoles alongside it. This is a very likely scenario.
• Mid-November - If Microsoft fails to price cut by November, it’ll have to do it then or risk bad press. A two-year period with no cut is unheard of, and it’s going to piss off potential customers (read: people with less money) who are going to give up waiting and just buy a Wii. Microsoft can’t have the bad press of failing to cut at all, so they will have to at the two-year birthday of the 360. Don’t be surprised, though, if it’s a “reluctant cut”, that the only console dropping in price is the Premium.

July 12th, 2007 Posted by Nathan Weinberg | Halo 3, Halo, Xbox 360, Xbox | 2 comments