http://www.gametrailers.com/viewnews.php?id=4569

According to this the 360 is only costing them $323 to make a premium system. That is a pretty big profit so why hasn't the Microsoft decided to sell the systems at a lower price. Especially since it is the beginning of summer and sales for all consoles are going to be down.

Probably because folks that studied marketing and sales have decided that dropping the price now isn't necessary.

Perhaps because they don't need to? The PS3 doesn't seem to be providing any serious competition based on gaming value (i.e. discounting Blu-Ray playback capabilities), at least not at the current relative price points.

Why drop in price if its selling fine? Doesnt make sense. When sales slow. Then you drop.

I thought I read somewhere that sales of 360 were down %25 or something since it was summer and there are no titles out right now. Also, wouldn't a price cut sway potential ps3 and wii buyers into getting a 360?

I would think a price cut just before the holidays would be the way to go. The price cut coupled with GTA4 and Halo 3 would allow Microsoft to gain some serious market share.

The fall does look like a likely candidate, especially given the upcoming 65nm chips.

Having a price cut during the fall and holidays doesn't make that much sense to me because of the games that will be coming out on the 360. GTA IV, Halo 3, Mass Effect, BioShock, possibly Alan Wake and Assassins Creed. These games, especially halo 3, is going to get people buying the 360. So why have a price cut when people are going to get the console just because of the games. If the 360 doesn't have a price cut during the summer then I could see Microsoft waiting till spring of 08' which is too long IMO. The system has been out since november 05'

Exactly.. there will be no price cuts until either after the holiday or after Sony/Nintendo cuts their price first.

Mainly because the console is still selling well.. the biggest titles yet (besides GOW) are all coming out back to back in the next 6 months.. and November, December and January are all historically the best months for console sales.

I'm sure that Microsoft has a much more intimate knowledge of the potential elasticitity of the demand curve than we do, and will also take into account relative cost to the Wii and whether or not closer pricing would influence those buyers. They'll do whatever they think is a better business strategy.

I'm sure that Microsoft has a much more intimate knowledge of the potential elasticitity of the demand curve than we do, and will also take into account relative cost to the Wii and whether or not closer pricing would influence those buyers. They'll do whatever they think is a better business strategy.

Well said. None of us (Im guessing at least) are economics professionals. There are marketing folks at every company who's sole job is to understand the supply/demand curve and how it pertains to their product, in combination with the fact of how much the hardware costs, what kind of profit/loss they are willing to take, etc. In other words, there is a lot more that goes into it than what most of us realize.

Cuz they have been too busy replacing the broken 360 to even have time to think about a price drop. LOL

I kid Billy boy...

According to this the 360 is only costing them $323 to make a premium system. That is a pretty big profit so why hasn't the Microsoft decided to sell the systems at a lower price. Especially since it is the beginning of summer and sales for all consoles are going to be down.

Even if that cost is true, it doesn't include all the other costs (admin, development etc).

I doubt a cost cut will come until you see a PS3 cost cut. Infact since PS3 cost increased by $100 (i.e. the entry cost with the discontinuation of 20GB), the chances of any cut till the end of this fiscal (June) are remote.

The price of a product is completely unrelated to the cost to produce that product. The price of a product is related to elasticity of demand and the selling company's perception of that elasticity.

Perhaps because they don't need to? The PS3 doesn't seem to be providing any serious competition based on gaming value (i.e. discounting Blu-Ray playback capabilities), at least not at the current relative price points.
Yep. Price cuts not coming until Sony does it.

Why lower the price when it's easily outselling the PS3?

The price of a product is completely unrelated to the cost to produce that product. The price of a product is related to elasticity of demand and the selling company's perception of that elasticity.

Thank you for illustrating this very clear, often misunderstood point.

I wouldn;t expect one this year. Maybe early next year since halo 3 would be out and the holidays would be over.

This Christmas season it will drop some. I can feel it! :)

There was already a price cut this past Christmas, temporarily. Did you guys miss the $100 rebates? $100 gift cards? I'm willing to bet that these huge rebates and gift cards were all sponsored by Microsoft.

My Premium cost me $200 at Micro Center after 2 $100 rebates (one of them was a credit card application deal).

I suspect that you will either see similar deals this holiday season, or that a price cut will happen around Thanksgiving time. MS really needs to have a good Christmas this year.

The price of a product is completely unrelated to the cost to produce that product. The price of a product is related to elasticity of demand and the selling company's perception of that elasticity.

Exactly. When a company figures out a way to make their product cheaper they don't say "Woo hoo! We can drop the price now!!" They say "Woo hoo! More profit on every sale!!"

And in some people's minds that makes the company greedy bastards. Those people are wrong. It's just smart business.

The 65nm chips are coming, and that will reduce production costs. If you're hoping for a 360 price cut, the earliest that would happen would be holiday this year. I'm still doubtful about even that however. They definitely won't drop the price until after halo 3. That game is going to sell a whole bunch of consoles, just like Halo: CE did for the first xBox. They're going to capitalize as much as possible on that.

Also, even if the $323 per console price is accurate. Microsoft still lost $315 million in their Entertainment and Devices division last quarter. This division includes the xbox 360, zune and other devices. They are claiming it will be profitable by 2008, so I wouldn't expect a price cut until its profitable for them.

I got my 360 premium console at Microcenter also, they had $100 rebate on it.