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This won't happen....this is just pure speculation. There's no need for such aggressive pricing this year when the next gen consoles won't be coming out til 2006. The next price drop we will most likely see is a drop to $149 or $129 in Spring or Fall.


Now, word on the street is MS loses a bit of money on the XBOX. What that figure is I have no clue. I don't think MS would be quick to take a much bigger loss on their console to beat Sony to the punch. MS' strategy has always been to follow Sony on price since that's who they consider is their main competition. Chances are that will hold true this year as MS will wait and see what Sony does on PS2 pricing and follow suit.
 

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Quote:
Originally posted by dschroll
This won't happen....this is just pure speculation. There's no need for such aggressive pricing this year when the next gen consoles won't be coming out til 2006. The next price drop we will most likely see is a drop to $149 or $129 in Spring or Fall.


Now, word on the street is MS loses a bit of money on the XBOX. What that figure is I have no clue. I don't think MS would be quick to take a much bigger loss on their console to beat Sony to the punch. MS' strategy has always been to follow Sony on price since that's who they consider is their main competition. Chances are that will hold true this year as MS will wait and see what Sony does on PS2 pricing and follow suit.
I admit that I've been out of the loop for quite a while, but wasn't Sony losing $100 per PS2 even when priced at $299/per unit? Maybe they're having them assembled somewhere else now?
 

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Quote:
Originally posted by audiom3
I admit that I've been out of the loop for quite a while, but wasn't Sony losing $100 per PS2 even when priced at $299/per unit? Maybe they're having them assembled somewhere else now?
Sony built a new plant that produces parts for the PS2 and several other devices I think in 2002. This probably lowered the actual cost of PS2's significantly. If I recall correctly they gained the ability to make new components doing the jobs of multiple components to lower the cost.


Considering the XBox was outsold by under 150K units by most sites numbers in 2003, It's hard to imagine they would drop to $99. There $149/$129 rumors floating around seem more believable.
 

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Hey....don't yell at me. If you bothered to read the article it even talks about MS losing money on the console and how it has never reached a breakeven point and how cutting the price to $99 would be a huge loss per console sold. It's not to say MS wouldn't cut the price just to build up momentum for XBOX 2, but it just seems rather unlikely when there are so many uncertainties going into the future.


Do you even own an XBOX??? You should seriously look into getting one. Well worth it IMO. I know you're a Nintendo fan and all, but as a wise man once side, "Think outside the box....err...I mean cube." :)
 

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You heard it here first!!!


If MS lowers the price to $99.99 or lower, I will help them lose money by purchasing a XBox.


:)
 

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I've been hearing about both sides losing money on each unit sold for a while. In fact, I think the cartoon strip "Foxtrot" even did a bit on this a while back. When I first heard the MS figure, it was upwards of $200/unit around launch time. They apparently are hoping to make up their losses on the back end through 3rd party licensing. Not too far fetched of an idea, and I've seen it enough places to tend to think it's not just blowing smoke. But who knows... maybe they're just trying to get us to feel sorry for them. :p


My guess is that if there's going to be price drops on either or both units, it'll be shortly after E3. I'd be shocked if the X-box dropped so low as to hit $99 though... that may happen NEXT year if MS announces a street date for X2 at E3. But I think we're too far away from that street date yet to hit the $99 mark already.


But hey... even if they do drop it to $99 this year - hopefully the extra sales will just help to drive down the prices of the "must have" games even faster!
 

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I know for a fact that even MSFT employees cannot buy an XBOX console in the company stores they have for employees. The reasoning is that MS loses money on every unit sold and that, no matter what prices they put on the unit internally, the COGS pricing would be higher than any place you can get the box externally, including at the original MSRP price of $300. Software and accessories (and every other product MSFT makes) are sold to employees (up to a yearly limit) for COGS. My $0.02.
 

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Quote:
Originally posted by ShawnPeters
This is purely speculation. I would like to see some numbers on this, otherwise I don't buy it.


Shawn
Actually it is in the MSFT annual report (form 10K). There are no Xbox specific numbers but they explain the reason for the decline in the Home and Entertainment segment by attributing it to increased losses due to increased sales of the console system where they take a loss on a per unit basis for each sale.


I also saw in the news just 2 days ago that the CFO stated that this generation's Xbox would "never be profitable". It was a newsfeed so I can't directly confirm it or the context of the statement.


All of the below are taken directly from the MSFT Investor Relations area on their website (it's easy for me to find and I too am not a fan of misinformation so here is some proof):

EDIT: HERE IS A CUT/PASTE FROM THE TRANSCRIPT:

John Connors, CFO, Presentation to Financial Analysts in Boston


Who: John G. Connors, Senior Vice President and Chief Financial Officer, Microsoft Corporation


When: January 27, 2004


Where: Wyndham Boston Hotel, Financial Analysts in Boston



The real crossover though in terms of profitability delta is when we get to the next generation of the Xbox console. Where we are today in the lifecycle of that console, it's very clear if you look at previous lifecycles for consoles that as you get to the end the pricing dynamic has one direction and that's down.


With the current cost of goods, which we have taken down fairly dramatically, there's no way to make money on the console in this first generation. So the key is how do we do in the hardware design and the chipset design and the supply chain design with version two. If we do as expected, we have a good crossover point where that big negative number is no longer a negative number. And because of the size of the revenue and the size of the percentage that is negative, when you have a crossover, that's a good contribution in terms of bottom line.



EDIT 2: HERE IS A CLIP FROM THE 2003 10-K

Home and Entertainment


Home and Entertainment revenue was $1.14 billion, $2.45 billion, and $2.75 billion in 2001, 2002, and 2003. Home & Entertainment includes the Xbox video game system, PC games, consumer software and hardware, and TV platform. Home and Entertainment revenue increased $295 million, as a result of sales of Xbox video game systems and related games which were available for all of fiscal 2003. Xbox revenue grew $309 million or 23% in fiscal 2003 reflecting a $779 million increase from higher volumes for Xbox consoles, games, and peripherals partially offset by a $470 million decrease due to price changes. Revenue from consumer hardware and software and PC games declined $14 million or 1% in fiscal 2003. Operating loss for fiscal 2003 increased 6% from the prior year as the product costs associated with the increased Xbox console sales and increased marketing expense more than offset the 12% increase in revenue.
 

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 http://www.microsoft.com/msft/speech...127Boston.mspx


There's a link about the above post.


here's a quote

Quote:
The real crossover though in terms of profitability delta is when we get to the next generation of the Xbox console. Where we are today in the lifecycle of that console, it's very clear if you look at previous lifecycles for consoles that as you get to the end the pricing dynamic has one direction and that's down.




With the current cost of goods, which we have taken down fairly dramatically, there's no way to make money on the console in this first generation. So the key is how do we do in the hardware design and the chipset design and the supply chain design with version two. If we do as expected, we have a good crossover point where that big negative number is no longer a negative number. And because of the size of the revenue and the size of the percentage that is negative, when you have a crossover, that's a good contribution in terms of bottom line.
 

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Microsoft is still paying about $340 to manufacture Xbox's. Sony has production costs down to about $275. They rely on gamesales to make up for that. It's the only business I know of where this happens.


Nintendo are the only smart ones. Gamecube costs around $40 to make. When it was launched, it cost around $80. This is mainly cause of trade deals they did with Panasonic (The Panasonic Q) and ATI (Tech Demos, game dev research). They're all good buddies.


This isn't to say that MS or Sony are losing financially. Sony has a hell of alot of gamesales, and the Xbox is doing the main thing it was designed to do, build a fanbase so they can hype up the Xbox2 and get the vote from the most important individual, the Single Console Owner.
 
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