Wednesday, September 10, 2008

The Xbox 360 story Microsoft doesn't want you to know about?

Yes, I know, been deadly silent around here. I might go into the past couple of weeks in a later post... but don't count on it.

Anyways, the subject of this post is the price-amputation on the Microsoft Xbox 360. Microsoft now has a version of the Xbox 360 out that's cheaper than the Nintendo Wii, and according to Kotaku, Microsoft says the following:
Coming off the heels of the console price drop last week, Microsoft Xbox 360 sales have surged, with retailers reporting over 100% sales lift for all Xbox 360 models compared to the previous weekend. Additionally, retailers are reporting that between Friday, Sept. 5 and Sunday, Sept. 7, some Xbox 360 models were selling at six times the rate they were the weekend prior.
Impressive statistics to say the least, but it doesn't make sense. Thing is, a 6 fold increase would be 600%. That means that if Microsoft estimate is accurate, while one Xbox 360 improvied it's sales by 600%, the others had to fall in sales numbers. That's logical enough, or is it?

What if one model of the Xbox 360 was selling so badly that it could experience a 600% increase in sales, and not really add that much to the bottom line of systems moving out the door?

Well, yeah. Such a version does exist. The hard-drive lacking Arcade version. With it's lack of an HDMI port, lack of a hard-drive, and so on, it hasn't exactly been the sales darling if I read the retail reports right.

However, it's now cheaper than a Wii, and more plentiful, so of course it's a ripe target... but for who?

The phenomenal sales figures the Xbox 360 has posted after the price cut may not have actually grown the Xbox 360 market. Dean Takahashi's inside look at the Xbox 360 failures on Venture Beat clues in to the market that was probably buying up the cut-price Xbox 360's. It is estimated that at least 50% plus of all Xbox 360's coming off the assembly lines at launch were dead on arrival. According to the Venture Beat article, the production problems haven't exactly gotten better as the Xbox 360 has continued in the market.

Rather, Microsoft's already written off well over a billion dollars on product replacements, and I don't think they even scratched the surface of the Xbox 360's quality problem.

Here's my catch on the situation. I'm well over 14 people that I know that are technically Xbox 360 owners. I say technically because while they bought an Xbox 360, got the hard-drive, got the memory card, got the controllers, and so on, they don't actually have an Xbox 360. Why? Because their products broke and Microsoft refused to replace or repair the units. Even after the Red Ring of Death Scandal became public, many of these Xbox 360 owners I know continued to remain out of luck in successfully getting their consoles repaired under warranty.

I also know that after the price drop, these Xbox 360 owners went out and picked up the arcade version. Why? So they could play the library of games they already had, so they could get a new Xbox 360 with a warrenty, and because they would get a unit that would hopefully contain the latest motherboard revision with the new heatinks.

Now I don't have any evidence to suggest that a large percentage of new Xbox 360's sold were being used to replace defective and broken units that Microsoft refused to repair or service. I'm not an Xbox 360 owner, and I'm repeating second hand information that I get from chat rooms, message boards, and email. That doesn't qualify as legitimate news source material.

If the anecdotal evidence is right though, Microsoft may have a problem on their hands. The Xbox 360 sales may have sky rocketed, but given the admitted production problems and customer service issues, it's extremely questionable if Microsoft actually grew their targeted market.

Now, Kotaku posted that they'd like to see a Price War start up between the consoles. That's... doubtful.

Here's why.

Sales of the Xbox Arcade present a large problem to Xbox 360 developers. Media Molecule mentioned it when talking about Little Big Planet on Gamesindustry.giz. ID Software has also mentioned it when talking about Rage on the Xbox 360. Developers can't count on gamers actually having a hard-drive. That means developers have to plan on mass-market games fitting onto standard DVD discs. That means that developers run out of the ability to produce or generate high quality visuals on Xbox 360 a lot sooner than they would on a PS3, which is backed by both the massive 25gig single side Blu-Ray disc, and a hard-drive in each machine.

Developers targeting the hard-core market then have to make a sacrifice on the Xbox 360 platform. Requiring hard-drive support, while boosting the capabilities of the game, drastically cuts down on the number of sold consoles the game will work on. However, the chances of the game selling go up, as Hard-core gamers are more likely to part with their money for a good game.

For the hardcore gamer then, whose buying hardcore games, and wants the best visual display, only one Microsoft console actually fits that request. The Playstation 3 competitor, the Xbox 360 Elite, both of which carry a price tag of $399.

So, right now, the hard-core gamer who is wanting it all, isn't going to be interested in the lower versions of the Xbox 360.

And at an equal price, the Xbox 360 really isn't that great of a choice. Microsoft doesn't exactly have that many first party developers. In fact, they are shutting one of them down. Sony, on the other hand, has been pushing first and second party exclusives left and right. One of the most recent, Echochrome, quite literally carried a That's a Sony Game? type confusion.

I could go into the high resolution video and other advantages of the Playstation 3... but I'm not since that isn't the point.

Point wise, feature for feature, Playstation 3's price point offers more than an Xbox 360 at the same price point.

And, come on. Get realistic please. Xbox 360 taking back Wii Sales when Nintendo is still short on stock? Not likely.

I honestly don't see Sony or Nintendo cutting prices for this Christmas Season. Right now, there just isn't a reason to do so.

Now, if Microsoft puts one of the Xbox 360's with a hard-drive below the Wii's current price point, there might be some action from Sony and Nintendo, but I don't see Microsoft wanting to match Sony loss for loss on amount of money running out the door.
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