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E3 Predictions Part 2: Xbox 360 Price Cut Won’t Help Sales

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An astute reader of this site (Okay fine, Hello aceattorney from Xboxcheaterwatch) read my original predictions post from yesterday and brought up a few interesting points.

He started off with my lack of mention of any price cuts. As you can tell by the title of this post, I don’t think they matter all that much. Consider why a console would cut its price. The main factors are stagnant sales and/or the need to cut price in the face of a competitors price cut.

Sony isn’t going to be cutting the price of the PS3 at all as confirmed today by their CFO. Sony could be lying, but why would they need to cut the price of the PS3 now with easily the best game of the year in Metal Gear Solid 4? The value of the PS3 at $399 considering the Blu Ray player, media capabilities, and library as a total package sits today as the best bang for your buck in a console. Plus, the numbers don’t lie. The PS3 is doing just fine in terms of sales against the Xbox 360.

The Nintendo Wii is still selling like hot cakes on the backing of such titles as Wii Fit and Mario Kart. Almost two years later, I still don’t think I have seen one in a store just perusing through. A price cut for them makes almost no sense at this point.

We’ve all on the other hand by now seen the all but confirmed rumors of Microsoft’s price cut (thank you retail circulars). When you make the claim you have the best library of next gen games and the best online console gaming service; you would think the sales numbers would be heavily in your favor. Yet, they’re not. A price cut will help sales only marginally as the cut to $299 in of itself isn’t really all that significant. The Xbox 360 has four main issues none of which are addressed by a price cut.

1. The library is stagnant. As a gamer, what exclusives have you done for me lately? Sure, Halo 3 was great but that was almost a year ago now which might as well be ten years ago in this industry. Where are the next good exclusive games? Forget sequels and games that can’t live up to the hype and promise (Sorry Denis). Show me substance. Where you at on that Microsoft?

2. Xbox 360 is undeniably stuck in yesterday. The next gen format war loss for HD-DVD still looms large even though Microsoft didn’t officially back one format over another. The use of a plain ol’ DVD will as time goes on this generation become a bigger and bigger problem for 360 games. I’m not even sure there’s a viable solution for this problem for at least another year because the last thing you would want to do is launch a blu ray player internally or externally that ends up costing more than a PS3 (and let’s face it MS, you are severely guilty of your overpriced accessories).

3. Xbox live made a lot of nice strides this generation, but Sony is catching up online. No spring update to speak of and no news on a fall update to this point. There’s a lot Xbox live is missing, where is it? How do you skip an entire update time window and make no statement? Where is the conference chat, inter-game party ability, and the web browser? Where’s netflix and IPTV? I don’t want to hear the tired excuse of “If we work on that, we won’t be able to work on other cool stuff”. Sony is catching up in terms of services and quality of service, and most of it is free. Put up or shut up time for the live team.

4. The overall direction of the brand and the new leadership regime is extremely suspect. I made point of this yesterday. Motion controls? Home clones? This sounds like the strategy Electronic Arts used to use when they were the laughingstock of the industry. Yet at the same time, many of these same executives have made the move to MS. A ton of people and companies who made the Xbox what it was have left the division or company altogether. A long list including former front man Peter Moore, Bungie, Shane Kim, and Jeff Bell (oh noes!). Who is Don Mattrick and where is he?

A price cut solves none of these issues. A price cut helps propel sales a little but without the substance to back it up what is the point? You’ll see a slight bleep in the increase of sales post announcement and it will be spun as a major success by PR but is it really? Maybe Microsoft has something up their sleeves worth showing at E3 and maybe they don’t. But a price cut doesn’t address any of fundamental issues that are plaguing the console at this point in time. This price cut was extremely overdue to begin with and it’s just not that significant to change the game. It’s just temporarily plugging one hole on what now appears to be a sinking ship.

6 Comments, Comment or Ping

  1. JLee

    Hmm, I’ll bite. Considering I have all 3 consoles, two PS3s btw. So maybe you could call me a fanboy of gaming. The best value for your money first of all is the Wii. If this was not the case it would not be selling brick loads every month over its competitors.

    Now that we got that out of the way let’s move to the steak and potatoes of your argument;

    A sinking ship.

    First and foremost is library. Having all the consoles and I can say without a doubt the 360 is the most diversied and has the best line-up for the rest of the year without question. For its main competitor it essentially has about 2 exclusives that could move additional hardware, but most certainly will move little. The Wii on the other hand will continue to move HW regardless. No one can convince me that games such as Gears of War 2, Fable 2, Banjo, Star Ocean 4, Alan Wake, Tales of Vesperia, Too Human, Infinite Undicovery as well as others are a weak line-up by any stretch of the imagination. Gears of War 2 will help move a ridiculous amount of HW during the holiday months. Microsoft always does over a million plus every December in US NPD alone and with proper pricing this game will only help to reinforce this move.

    Number two isn’t even worth talking about.

    Number 3 is very interesting. Live is still the king and this will probably not ever change this generation. With that said Sony is by no means catching up to the 360. No cross game voice chat or invite I don’t think so. I will probably never buy a 3rd party multi-console game on my PS3s because of this and the fact that these games still seem to run so much better on the 360, save a couple of instances.

    Brand has done extremely well in the last year. Live has gained to levels never reached before. The console has surpassed the sales of the original Xbox in UK in much less time and at a price point differential. It is selling ~20% faster in the US according to NPD compared to the original and much higher price points. Neilson Media Research, probably the biggest name in the industry for tracking trends shows Microsoft has a huge lock on a big chunk of youth gamers in the industry. This essentially provides a nice move for the 360 every Christmas because this age group wants the console. Microsoft will also report next week, per Bach, that the division will now have a full year of profit under their belt. While they may have a long way to go in there drive to profits overall they unlike Sony are starting to make money in the division. Sony has lost over 3 billion in the last two years essentially wiping out every bit of profit they ever made on the PS2. That in itself is amazing.

    PS3s sales maybe doing just fine to the 360 as you say, but software on the other hand is no where even in the ball park. Every month Microsoft is killing the PS3 in software sales overall and this trend isn’t changing any time soon. The biggest problem for Sony right now is catching up to the 360 in the US. They have had a few wins overall in monthly NPD this year, but they are still essentially 6 million behind here and with a price cut that isn’t going to get any better any time soon. The 360 did nearly 500k more last December than the PS3. The PS3 IIRC has not done much more than 100k this year better than the 360 in NPD. How in the world can you ever get over that hump like that and particularly even when we know it’s most likely going to happen again this Christmas.

    The value proposition is still in the eye of the beholder and price cuts do matter. Wii is still the King and will be this generation. The 360 however is a very good value proposition and is a cash king for developers because software still rules all, and Microsoft themselves are now reaping the rewards of that software cash cow. The PS3 on the other hand has a long, long way to go, sinking ship, maybe not, not going anywhere fast, pretty much.

  2. MAE

    funny, I tried to read this column/blog with an open mind, because I too have been thinking “What is MS Doing!!!!” But the doom and gloom is a little over the top and this analysis isn’t very credible or thorough. “The 360 is undeniably stuck in yesterday.” No, I think I can deny that one pretty easily, thank you very much. “The library is stagnant.” Huh?? It’s summer. And really, which system has the best, largest, and most diversified library that keeps on growing? Ding ding ding. The only “point” that this guy makes that I sort of agree with is number 4. I’m wondering where the leadership is. The xbox brand is MUCH too big now for MS to let it sink, but I want to see them step up to the plate and address things (E3?). It’s been too long. However, in regards to how that affects sales, I think it’s a VERY minor point. The average Joe Consumer could care less about the Peter Moores and the Reggies and the Miyamotos of the console world. What’s happening in Redmond, WA means absolutely diddly squat to most people’s console purchasing decisions. So, overall, a weak point to make (in regard to sales), although I do agree somewhat with the sentiment.

    I must also say that the first comment (from JLEE) sounds MUCH more knowledgeable and well-thought out than the goofy ramblings on this site.

  3. SGD

    Criticize the article or not, you both are reaching heavily at best to counter my points.

    JLEE dismisses the hi def format war which already shows how much he knows. Then goes on to point out Star Ocean and Tales of Vesperia alongside Gears 2 and Fable 2 as world killers. Way to go…. I’ll bet you 5 bucks those games combined don’t sell half what Gears does. Too Human which I am more than confident you have never played and I have is a dud. Same goes for Banjo.

    The difference between me and you both is that I’ve played what the holiday lineup has to offer while you both just read fanboy impressions and articles. Like always, the press won’t give it straight in a preview but when a review rolls around they’ll all of a sudden score a game a 7 on the 7 to 10 point scale.

    The software sales numbers will adjust themselves accordingly as times goes on. PS3’s software library on the whole is still pretty scant but the upcoming titles as you’re about to find out at E3 for 2008/09 will far outshine the 360’s. Strip out the emotion fans and look at something objectively.

    Also MAE, for you to discount what the level of control over the direction of the Xbox console the executives of the brand have shows how little you understand the business overall. You’re right the average joe consumer could less, they probably don’t even know who any of those people are. But face the facts, those no-names to the general consumer are the same people determining where everything is headed.

    Then again, I suspect both of you showed up from TXB so I anticipate nothing less.

  4. Zoalord

    I also come from TXB just an avid gamer that also has all 3 consoles.
    I am ex-360 fanboy because of having to have my 360 replaced 5 times in the past two years. 3 times this past month.

    Wii is winning the war overall and I agree like most analysts that it is a fad. The games that come out for it are horrid. Wii fit, I own and played for 3 days. Wii Mario Kart I think I’ve played four days. My wife finds the wii appealing and that is the only reason games are ever purchased for the wii. It was also a good way to keep my Resident Evil collection for Game Cube alive.

    Xbox 360 does have a little bit of everything as far as games are concerned, but I think you will start to see the effects of RROD and other hardware complaints affecting their sales. This is my belief as to why they dropped the price of their console. There are to many youtube vids on how to fix the 360 and to many forum posts of broken units. This is what sparked my PS3 purchase. I am also an owner of a glorified paper weight of an hddvd player attached to my 360.

    PS3 is making strides to improve their dashboard/XMB I think their network has a ways to go before getting near the ease of use of the x360, but in time anything can happen. MGS4 is one of the best games I have ever played. I’m one of the old gamers of Doom via serial cable to a second pc.

    One of my arguments for the 360 over PS3 was that game developers would rather make a game off of a dvd format so they could sell for both consoles instead of doing an exclusive for one. I think that still stands for the most part as EA, Activision, Ubisoft and other game companies would rather make twice the money than a small excluivity fee and then profits from one console.

    Microsoft doesn’t admit their mistakes freely so I doubt you will see a blueray player in this lifetime of the 360.
    PS3 players will still get amazing games like the final fantasies and mgs4 from japan.

    Time will tell, but the general public I think will begin to be swayed more towards Sony because of bad customer service and hardware issues.

    By the time PS3 has fixed their faults. Microsoft will have released another product early, having hardware faults and the like. RRODv2
    Hopefully the game developers will have more of an impact on conformity the next go round.

  5. @ZOALORD: I think you meant Wii is winning the battle, not the war ;-).

  6. JLEE

    Tell me the same thing now, heh.

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