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Microsoft Reaches Out to Casual Gamers With Xbox 360 Price Cuts

By Keith Regan
Mar 10, 2008 1:39 PM PT

Microsoft's Xbox price-cutting campaign is going global, though it's not clear whether U.S. consumers will be in line for any additional discounts.

Microsoft Reaches Out to Casual Gamers With Xbox 360 Price Cuts

Bidding to break ahead of the pack vying for next-generation gaming console dominance, Microsoft confirmed Monday it cut the price of its Xbox 360 device in European markets.

The move came a month after Microsoft said it would debut a bargain-priced version of the Xbox 360 in Japan -- the home market of key rivals the Nintendo Wii and the Sony PlayStation 3.

Late last week, Microsoft made across-the-board price cuts on the three Xbox models it sells in Europe, slashing 80 euros (US$123) off the retail prices. That brings the low-end Arcade model's price tag to 200 euros, or about $307, while the high-end Elite model now retails for 370 euros, or about $570. Prices were also cut in the United Kingdom, where the Elite model -- which features a 120 gigabyte hard drive -- will now sell for Pounds 259, or about $520, a Pounds 40 price reduction.

The discounts mean that the Xbox 360 Arcade will retail for less than the entry-level Wii console in some markets, and also puts the basic models within reach of many more casual gamers.

Rays of Light

The price cuts come hard on the heels of the decision by Toshiba to pull the plug on HD DVD, the next-generation DVD format that Microsoft built into its gaming console.

HD DVD never got traction in the market against rival Sony's Blu-ray format, and after several recent high-profile decisions by movie studios and retailers to back Blu-ray, Toshiba announced last month it would stop making HD DVD players.

That decision may give Sony's PS3 a boost, since game console buyers may not want to be stuck with a high-definition player for which few movies will be available.

It's unclear how much of an impact the death of HD DVD will have on Xbox sales, however. Most gamers considered the DVD players in both Microsoft's and Sony's consoles to be add-ons and buy the devices because of their gaming capabilities and the titles that are available for them, JupiterResearch Analyst Michael Gartenberg told the E-Commerce Times.

For instance, the launch of "Halo 3" for Xbox 360 late last year was far more important for would-be console buyers, especially hard-core and devoted gamers, than such extra features. On the other hand, he said, price changes can be a powerful tool for motivating purchases.

"The lower entry price might convince more people to give Xbox a try in addition to or instead of another platform," Gartenberg noted.

Slow Time

Microsoft did not respond to a request for comment on whether more price cuts for North America may be in the offing. Last summer, Microsoft lowered the price of the Xbox 360 in the U.S. by $50, a move that came shortly after Sony cut the asking price for the PS3.

The latest price cuts come during a seasonally slow period for gaming hardware, which generally sell the best heading into and during the holiday season each year.

Game console makers often use price cuts to jazz up sales during slower periods and to move inventory, especially ahead of new product releases. None of the major game console makers is expected to bring a major change to the platform to market for some time, however.

In January, sales of all major consoles fell short of projections in North America, according to the NPD Group, due in part to inventory shortages. The same figures showed Sony's PS3 outselling Xbox in the U.S. for the first time.

Microsoft may be trying to tap into the demographic that has sent Wii into the stratosphere, said Forrester Research analyst James McQuivey.

"The Wii managed to appeal to non-gamers, and part of that was the price point," McQuivey told the E-Commerce Times.

By comparison, hard-core gamers that Sony and Microsoft are targeting likely already have last-generation consoles.

"Smart game-buyers know that the first price is the highest price and if they're willing to wait and not be the first on the block to have a game or a console, prices will come down," he added.


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