Microsoft HD DVD drive for Xbox 360 raises price question

Stan Beer
Wednesday, 09 August 2006 18:21

Your IT - Home IT

Microsoft has lifted the covers on its promised external HD DVD drive for its Xbox 360 consoles and predictably tongues have started wagging with speculation about the price.

The new book-sized HD DVD drive, expected to be available in time for the end of year shopping season, is Microsoft's answer to Sony PlayStation 3, which is equipped with a high definition video drive in the rival Blu-ray format and will come on the market at the same time.

Microsoft has promised the new drive will the least expensive HD DVD drive on the market. It will have to be. Given that the least expensive HD DVD drive is currently around US$400, in order to compete with PS3 Microsoft will have to undercut that price by 50%.

PS3 models will come on the market at US$499 and US$599, including the built-in Blu-ray player. Xbox 360 models cost US$299 and US$399. Thus, in order for Xbox 360 to be competitive, the new Microsoft HD DVD drive needs to come on the market at around US$200.

Microsoft could play pricing games of course and drop the price of the Xbox 360 console and bring out the drive at a higher price. However, Microsoft already loses considerable money on each console it sells and it will almost certainly lose money on the HD DVD drives, just as Sony will lose money on each PS3.

An issue for Microsoft is that the external HD DVD drive is really just a stop gap device because it makes the built-in DVD in the Xbox 360 redundant.

Without a shadow of a doubt, in the not too distant future, Microsoft will release an upgraded Xbox 360 with an integrated HD DVD drive. When PS3 is released, the question on the lips of intending Xbox 360 buyers may be whether they should hold off until the integrated HD DVD Xbox 360 console is released.

One of the most fascinating aspects of the high definition video war is that the major battle ground is in the gaming space, where the two major players are prepared to subsidise the prices of players. What makes the battle even more fascinating is that the market still hasn't made up its mind about which format will win out.

A recent iTWire poll, which ran over the space of one week, asked readers the question: who will win the high definition video war? The response was uncanny. The hundreds of respondents were almost exactly evenly divided in their opinions.