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Microsoft Cuts Xbox Price To Match Sony PS2

By Jennifer LeClaire
May 15, 2002 3:25 PM PT

Microsoft is slashing the price of its Xbox video game system in a move to compete with Sony's industry-leading PlayStation 2.

Microsoft Cuts Xbox Price To Match Sony PS2

In a price war that is getting hotter by the minute, Microsoft said Wednesday that it will slash Xbox prices in the United States from US$299 to $199. The $100 price cut mirrors Sony's reduction announced Monday.

The price cuts come on the eve of the game industry's Electronic Entertainment Expo, also known as E3, in Los Angeles. It levels the cost of the three most popular video game consoles -- PS2, Xbox and Nintendo's GameCube -- at $199.

MS Promotes Price Slashing

John O'Rourke, director of worldwide Xbox marketing at Microsoft, told the E-Commerce Times that the price cut is part of the company's long-term strategy to broaden the Xbox's reach and make it accessible to more consumers.

"Price reductions are part of being successful in this business," O'Rourke said. "With Sony announcing their price reduction, we figured gamers shouldn't have to wait another week to buy an Xbox."

Microsoft said the Xbox price reduction will be supported by a multimillion-dollar national merchandising and marketing campaign set to begin this weekend.

No Surprise

Gartner Dataquest analyst Van Baker told the E-Commerce Times that he is not surprised by Sony's and Microsoft's price cuts. But will Microsoft's reduction be effective?

"For Microsoft, it is not so much an issue of effectiveness as an issue of must-do in response to Sony," said Baker. "But it will be effective for both of them."

Xbox vs. PS2

Baker added that there is strong historical evidence that game platform sales volumes dramatically increase when prices fall below $200. He noted that the reduction should give both players a boost.

Sony's PS2 gained an early advantage with its 2000 debut; in contrast, Xbox launched just six months ago. Sony is the clear-cut leader in the video game console market, shipping more than 30 million PS2s to date.

Meanwhile, Microsoft said that it expects to have shipped 3.5 million to 4 million Xbox consoles by the end of June, after initially estimating shipments of 4.5 million to 6 million early this year.

Still, the Redmond, Washington-based giant is making some noise in the market. The Xbox is attracting video game enthusiasts, with about four game titles sold for each console purchased in North America. Xbox offers more than 70 titles.

Nintendo's Play

Nintendo could not immediately be reached for comment, but the company reportedly has no plans to reduce the price of its GameCube system.

Analysts are divided on the question of whether Nintendo will follow suit with its own price cuts.

Nintendo has reported about 4 million GameCube unit sales worldwide since the console's introduction last November.

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