Microsoft Xbox 360 price cut rumours persist

Stan Beer
Thursday, 27 July 2006 17:41

Your IT - Home IT

Where there is smoke there is fire - or so the saying goes. Over the past 24 hours, Microsoft has been desperately trying to damp down smoke signals that it is planning to cut Xbox 360 prices by US$100 to combat the release of the Sony PlayStation 3 in November.

The rumours are emanating from Taiwan, where component manufacturers who have relationships with Microsoft have leaked details of negotiations for reduced production costs.

According to the Taiwanese manufacturers, Microsoft can reduce production costs by up to 20% because of its increasing scales, leading some to predict that the Xbox 360 will undergo price slashing to combat the release of the PS3.

While the PS3 is already more expensive than Xbox 360 at US$499 for the 20 GB version and US$599 for the 60 GB model, both PS3 models come with a Blu-ray player, while the Xbox 360 just has standard DVD. An extra US$100 for a Blu-ray player does not seem to be a big ask and Microsoft is probably worried.

Sceptics point out that Microsoft is already losing money on each Xbox 360 it sells, so it is not likely to willingly cut prices to lose more.

However, this is a market share game and Microsoft knows only too well the value of having a captive audience. A US$200 price differential may be well worth the cost if it stops a million or two potential Xbox 360 users from choosing to buy a PS3.