Microsoft plans on cutting the prices of its Xbox 360 Elite and Xbox 360 Pro gaming systems, following Sony's decision to cut the price of its own PlayStation 3. Despite Microsoft's renewed focus on its traditional lines of business in the midst of a global recession, including the release of Windows 7 in October, the company's Xbox 360 division has continued to be profitable. The Xbox 360 line has sold 31.4 million units since its release.
Microsoft plans to slash the price of its Xbox 360 Elite gaming system from $399 to $299
on Aug. 28, as part of a product-line restructuring that will see the Xbox 360
Pro discontinued once those units sell out.
In order to rapidly reduce their stock of Xbox 360 Pro
consoles, Microsoft has lowered the unit price to $249. Eventually, Microsoft
will offer only the Xbox 360 Pro and the Xbox 360 Arcade, which retails for $199
and lacks a hard drive.
The Xbox 360 price cuts follow its arch-rival
Sony's
decision to drop the price of its own PlayStation 3 console to $299 for the
120GB edition. A 160GB edition will sell for $399. Analysts have generally
concurred that Sony made that pricing move in order to make its pricey console
more competitive with both the Xbox 360 and the Wii, which sell for less.
Microsoft's own price drop may initially appear to be an
answer to Sony's move. But Microsoft's director of product management for Xbox
360 and Xbox Live, Aaron Greenberg, has told
Don Reisinger that the
price reduction had been in the works for months, and was intended to position
the Xbox 360 line for the holiday season.
Video-game
sales have suffered in the recessionary environment, with sales in July
falling 24 percent year-over-year, to $848.8 million. Sales of gaming systems
and consoles dropped to $280.9 million, a 37 percent drop over the same quarter
in 2008. Microsoft's Xbox 360 has managed to outsell Sony's PlayStation 3, but
continues to lag behind Nintendo's Wii gaming platform. Overall, Microsoft has
sold 31.4 million Xbox 360 units since the device's release.
Despite declining overall revenues for the company,
Microsoft's Xbox division continues to be profitable. More unprofitable
applications and services have been given the merciless axe by Microsoft
throughout the course of 2009, as
Redmond
retrenches and refocuses on core products such as the upcoming Windows 7
operating system and Office 2010.
The Xbox line represents one of Microsoft's more successful
experiments outside of those main lines of business. Others have traditionally
not fared so well; in the late 1990s, Microsoft invested billions in cable
television companies, with the hope of integrating software and applications
into digital programming, only to see those efforts crash and
burn.
Revenues from video games, whose prices have only increased
in recent years, may also help Microsoft at least marginally offset potential
future losses from traditionally profitable platforms such as Microsoft Office,
whose latest iteration will be offered as a stripped-down free service to
Microsoft Live subscribers.
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