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Ballmer Denies 360 Price Cut an Act of Desperation
Microsoft chief Steve Ballmer has refuted claims that the recent Xbox 360 price cut is a sign of a console maker desperate to regain lost sales traction.
Asked by The San Jose Mercury News if Microsoft cut the price because it had "run out of ideas to boost sales," Ballmer replied, "No, that's the craziest thing I've ever heard anybody say. All consoles start at higher prices. They always come down through the long cycle."
During the interview, he called Xbox 360 an "unqualified success," adding, "The product is selling very well. The Xbox is an absolute home run."
Microsoft cut the price of the entire Xbox 360 hardware lineup in early September, dropping the low-end Xbox 360 Arcade to $199, which is $50 cheaper than Nintendo Wii. The high-end 120GB Xbox 360 Elite retails for $399.
Sony's 80GB PS3 retails for $399.
After the price drop, Microsoft said sales improved over 100 percent weekend to weekend.
Prior to the price drop in the U.S., Xbox 360 had been selling around 50,000 units per week on average.
The exec said, "If you ask me, Xbox Live is going gangbusters. The console is selling well."
Ballmer also called Microsoft's other major products--Vista, Mediaroom and Office 2007--"unqualified successes."
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A Jose Conseco homerun.
Xbox 360's new price is a very intelligent business decision!
Xbox 360 has a HUGE lineup of HIGH QUALITY games in EVERY GENRE!
Having a price point that allows gamers of all ages to buy the console and play whatever types of games they are interested in is an important reason why the Xbox 360 is the top-selling high-definition system in North America and Europe, and has gained all sorts of sales momentum in Japan. But if it wasn't for the great games the Xbox 360 has in every genre, the price wouldn't matter.
Playstation 3 lacks games that Xbox 360 has at THIS point in time. Playstation 3 has been available for THREE shopping seasons now, yet is still has ZERO games in certain genres. For example, Playstation 3 still has ZERO games in the Real-Time Strategy genre at THIS point in time. So, you could be selling the PS3 for $50, but it would NOT be of much interest to people who like Real-Time Strategy games.
Success is not based exclusively on price. Success is based on a combination of software, price, and features. Xbox 360 has the best software, the best price, and the best features for online entertainment, in-game achievements, controller rumbling, controllers with guitars, drums, microphones, dance pads, ect...
Xbox 360 will likely retake the hardware sales lead from the Wii in North America. Xbox 360 outsold the Wii in 2007 during the month when Halo 3 was released, even though the Xbox 360 was priced so much higher than the Wii.
This season the Xbox 360 is actually priced lower than the Wii, and we will see the release of awesome high-profile games like Gears of War 2 and Fable 2. In Japan, the people are really looking forward to the great games like Star Ocean 4, and The Last Remnant.
Xbox 360 is experiencing very high sales at this point in time because it is the #1 game cosole with the best games and best features!
Hey BTS.WRKNG,
The articles I read stating MS was making a profit on hardware were before the first price drop. Component prices drop pretty fast in the industry though (I work for an EMS provider), so I think it's a safe bet that MS is at least breaking even on hardware sales. Yes, both the previous $50 price drop and the most recent were the longest any game console went without a price drop. However, I believe you're right about 360 hitting that sweet spot of $199 earlier than PS2 (too lazy to look it up, but that sounds right).
It looks like MS' model is to rely on accessories (ridiculous markup on those), Live and licensing fees on third-party software (hence their obsession with attach rates) to make a profit and if they're happy just breaking even on hardware. The good news is that all three console makers should make a profit ensuring that this healthy competition will proceed for at least another generation - which is good for all gamers.
DS Lite still costs £99.99 and Wii still costs £179.99. Same prices since launch.
I bet Microsoft wouldn't price cut if they were struggling to meet demand like Nintendo.
No, Nintendo learned after the 64 and the gamecube, that they need money. That is why their consoles have not had a signifigant price drop since release. Seriously, why hasn't the Wii? I imagine that once the motionplus attachment comes out, they will price drop the console, as they do not want to suffer from Segaitis (Where you pump money into attachments that kinda suck). I do believe that it is still a hot game console because of the smart casual gamer approach, but I do not like the fact that they are already talking about a new system for 2011? It just seems too soon. As for the whole Ballmer comments, and the comments on this site about them, I believe that MS has done all right for this console life span. They got more numbers of consoles in people's houses than the original xbox, Lots of people still love the way Xbox Live is setup, they have great IP's on the system (gears of war, halo, fable, ect.) and they have gotten exclusive games away from Sony (Final Fantasy 13 anyone?). In my mind, even if we were not making a profit, I would call that a win in the Microsoft camp. Sony lucked out by having perfect timing. the PS one came out when there was no new systems (64 was delayed, and came out about 6 months later), managed to get exclusives away from nintendo, and built up a solid rep with publishers. Does that not sound like what MS has done this span? Profit or not, it is a win for their camp, as it will set the ground for the next console...
There was another console released with the PS...my beloved Saturn. It just ended up not mattering a whole lot.
Brian
www.brianwoods.com
@BTS.WRKNG - you might want to check your facts. 360 has resisted price cuts longer than any viable console in the history of gaming. The more germain question is why didn't they drop prices earlier, not "did they drop now out of desperation?". Several fabrication trade journals worked up the component and average labor costs for the 360 over a year ago and it was already making a profit at that stage, so the situation is only improved now.
MS is dead set on making a profit from here on out with this division, which is why they resisted a price drop for so long and we see price creep on DLC. However, you can only get away with selling a game console at near launch prices for so long and MS actually held out too long IMO.
But didn't they drop the price $50 a year or so (or less) after launch?
I guess I should have been more specific, as I wasn't referring to price cuts in general but rather to the "magical" price cut that dropped the gimped model to $199. In terms of reaching that so-called "magical" price point it seems to me that they're ahead of the game, aren't they? How long was the PS2 on the market before it hit $199?
Several fabrication trade journals worked up the component and average labor costs for the 360 over a year ago and it was already making a profit at that stage, so the situation is only improved now.
So is that "over a year ago" before or after the first price cut? I'm still not convinced they've ever made a profit on the 360 hardware and feel like they've underwritten a "dumping" pricing policy from day one in their (still) desperate grab for market share. I COULD BE WRONG.
"All consoles start at higher prices. They always come down through the long cycle."
Only a simpleton like Ballmer would be satisfied with this explanation and I'm disappointed to see that Next-Gen's critical thinking and analysis filter seems to be on vacation this week. MAYBE the 360 has achieved such RAPID economies of scale and seen such RAPID reductions in the costs of parts and manufacturing that Microsoft is making a healthy enough profit on each box to pass along some of those savings to the consumer. Maybe. IF, on the other hand, they are still taking any loss on each box at these reduced prices and just throwing more money into the Xbox sinkhole, then this price cut totally smacks of desperation.
Personally, I suspect the latter. Microsoft sees the Wii pulling further out ahead and sees the PS3 coming up in its rearview mirror and figures it'll goose sales a little by dropping the price prematurely. But since they don't share their numbers I guess we'll never know for sure. Look at Microsoft's track record, I guess, and you'll find little they've done for the benefit of the consumer out of the (supposed) goodness of their hearts and LOTS they've done in their own self-interest, oftentimes under a thin, artificial veneer of altruism. Why should this be any different?
"During the interview, he called Xbox 360 an 'unqualified success,' adding, 'The product is selling very well. The Xbox is an absolute home run.'"
Tell that to the people keeping your stock price in the toilet, Ballmer. A couple of mildly profitable quarters does not a successful venture make. People love to talk about how Sony will never make back their investment on the PS3; anyone want to take bets on when—if ever—the Xbox business as a whole will be profitable? DIDN'T THINK SO.
I'll call Vista "unqualified" anyday.