Wednesday, July 26, 2006

X360 Pricedrop Not In 2006 Says Analysts

There have been many rumors suggesting that the 360 will have a pricedrop in 2006. Well analysts are coming out and saying that's bull. And they are giving some good healthy reasons why. So Next Gen went to talk with a couple analysts, Micheal Pachter and Colin Sebastian, talk about these statements: Pachter noted that Microsoft brass has informed the Xbox division that it must turn a profit or at least break even in fiscal 2007, which ends June 30 next year. He explained, “That means that price cuts on the Xbox 360 will come only if the box costs less to produce, ship, and market than the wholesale price. Our best guess is that the box currently costs around $400 - 450 to produce, and it's likely that the company can get that down to below $400 later this year.“ Pachter continued, “The retail margin is around $10 - 15 per box, so the wholesale price of the $399 SKU is around $385 - 390. In other words, Microsoft doesn't make any money on the hardware.” Pachter says,"…The company plans to sell 10 million Xbox 360 hardware units over the next year, so a price cut in November would likely impact 8 million of these, costing the company $800 million. At a software royalty profit of around $10 per unit, the company would have to sell 80 million incremental software units in order to be in the same place as without a price cut.“ Sebastian, who correctly predicted a PS2 price drop earlier this year, added, “A price cut is much more likely next year, in my opinion, when there will be more production cost efficiencies, and when the competitive landscape with the lower-priced Nintendo Wii is better understood.” Some very strong points. First suggesting that price drop would propose quite a hurdle to loss in money. And with Pachter saying that MS needs to break even this time next year is a big thing. As he shows how they are losing so much already that in a little while they'll start to not lose thigns. But if they have a pricedrop this year that'll take away that oppurtunity to start their road to breaking even which would mean that they'd be losing more than ever. That being he goes off that it would just be plain bad to do that and the only way to get up their is to sell an almost impossible number of software. Sebastian goes on to say that the X360 pricedrop is likely next year for 2 reasons. One reason being that productions costs will be a lot more efficient to handle a pricedrop and secondly it will be a lot more competive arena because of the lower priced Nintendo Wii so they can know that competition. Basically saying depending on what the Nintendo Wii accomplishes does will directly affect how MS handles their pricedrop. Wow very strong words by these 2 analysts. I've been saying for awhile that a pricedrop would be simply ludacris for MS to do this year and these analysts who really know there stuff tend to agree with me on the same levels of money wise and efficiency wise. Also quite surprised to see the Wii dependent thing but is a good point. If the Wii starts to takeoff like there is not tomorrow due to the cheaper price then MS will need to be prepared for that so they can have a lower price to make the Wii not look so low and maybe get it some sales off of it. So very heated as it seems like it will be. But if Sony fails to get out a pricedrop by that time then their price will be double and that just won't look to great. Seems like 2007 will be really heated. Can't wait for next year: Source Zucas

6 Comments:

Blogger SUPRAMAN84 said...

That's kinda funny. I just posted another article on Moviecodec contradicting it.

7/26/2006 05:13:00 PM  
Blogger PS3 Fan said...

M$ won't drop price till they switch to 65nm like Sony,not before late 2007.

7/26/2006 05:21:00 PM  
Blogger SUPRAMAN84 said...

Ur not ms, so you don't know.

7/26/2006 06:28:00 PM  
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