Monday, June 11, 2007

Microsoft aims mothers with Xbox 360 price fall.

Earlier this morning, Bloomberg first broke the news that Microsoft was planning to lower the price of the Xbox 360 by this holiday season. The reason for the lower price would be to target the growing market of consumers who are snapping up consoles based on price, and the leader of that pack is the Nintendo Wii. How exactly do they plan to do this? Target the person most likely to buy the console, dear old mom.

Microsoft is reported as planning to revamp in-store displays, add new family orientated titles to their already impressive lineup, and make the children’s titles easier to find. They are doing this with the goal to make the mothers of the world, who do most of the holiday shopping, customers. The lower price will allow them to compete with Nintendo in the family oriented vertical market, something that Nintendo is doing quite well, allowing it to maintain the lead in the console wars. The Xbox is a console for the serious gamer, ask any hard core gamer what they play and most will answer 360 with excitement and proceed to tell you why.

When the Wii was released last holiday season, Nintendo took aim at the casual gamer, women, kids, and according to some reports the elderly. This is a Market Microsoft wants to get into and the price drop is one way to do it. According to the Bloomberg article, “If we don't make that move, make it early and expand our demographic, we will wind up in the same place as with Xbox 1, a solid business with twenty-five million people,” said Peter Moore, a vice president who oversees the Xbox. “What I need is a solid business with ninety million people.” Adding that Microsoft is loosing money on each unit sold, which might be true, but it is nowhere near what rival Sony is reported to lose.

The other point for the price drop is the “sweet spot” price that Nintendo appears to have hit. “We are well aware that the sweet spot of the market is really 199 bucks,” said David Hufford, a director of Xbox product management. Bloomberg then added that Sony sold 75 million PlayStation 2s at or below that price. “Wii costs $250 and makes a “strong value proposition,” Hufford said. “When mom walks into the store and sees she can get a console with a game for $250, she sees it as a $300 value. They've done a good job.”

Now, Hufford refutes the quote as misleading and taken way out of context. “Some are getting really spun up about the Bloomberg story and inaccurately reading tea leaves that don’t exist. I spoke to Bloomberg nearly two months ago and we were talking about NPD data that had just been released, and chatting generally about price points of consoles in the market. The comment, which is accurately reported, unfortunately has now been taken way out of context and being reported as if I am signaling a price drop. I was not, I am not,” he said on the Gamerscore Blog. Adding, “With Xbox 360s selling well at their current price point, Elites selling out at $479, and an insanely great portfolio of games in the market, there’s no reason to announce any kind of price drop anytime soon.”

Just as the rumor and hype surrounding the release of the Xbox Elite, some call this more Microsoft spin, but until the price drops officially then the entire story, and related reports are just rumors. One comment on the Gamerscore Blog, a Microsoft approved blog ran by a Microsoft staffer, one person called it just that.

“I thought MS doesn't comment on rumors and speculation? Anyway no one buys your load of crock. Of course MS would deny a price drop right now because it would stall sales until the price drop happens and that could be months away. Price drop is confirmed and I'm telling everyone to wait for it. You guys are getting stomped by the Wii and need to do something before you lose the console lead and price drop around the Holidays is exactly what MS plans to do,” said user Shamrock.

John Porcaro, a Sr. Group Manager in Microsoft's Global Games Marketing Team, responded to Shamrock and said future price drops were imminent, “Shamrock, the point is that he was being misquoted, and lots of sites were saying he said we were dropping the price this holiday. If you read the original article, that isn't the case. I/he was just clarifying that. Of course, [we will] drop price at some point in the future.”

Therefore, while the reports of a holiday price drop are somewhat misleading, according to a Microsoft source, another Microsoft source says they are coming “at some point in the future.” So where does that leave the consumer? Just maybe it leaves them inline to buy a Wii, or if they can afford it a $479 Elite.

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