Gaming insiders say the new 360 will sell for $299.
Of course, that’s $75 less than they cost Microsoft
to make them. While that
doesn’t really make sense to the average person, gamers are a crafty lot and we understand making money today does not equal making money in ten years. In fact, losing money on this Xbox is a great strategy, and here’s why:
1-Microsoft will make money on Xbox LIVE! subscriptions.
Yes, this service is essentially a no cost item for Microsoft. While it does cost money to set things up and for maintenance, for the most part, it’s free money for them. And LIVE! is going in the right direction. Microsoft has taken a service that is extremely popular and made it even better in the 360. I can’t wait to play it. There are even rumors Halo 2 will be playable with up to 50 people! Now if there were just a way to mute the potty-mouthed 12-year-olds who take such pleasure in my demise…
2-Microsoft will make money on the games.
This one is self-explanatory. Remember Halo is the biggest selling game in history, and Halo 2 sold 2.4 million games in the first 24 hours. I shouldn’t have to remind you that Bungee, the developer of the Halo games, is owned by Microsoft.
3-Microsoft is willing to take a loss, for a long time, to make a gob of money.
In an interview with a top Xbox executive, it was revealed the
initial investment in Xbox was over a billion (yes a billion) dollars and
they’ve pumped at least twice that much in this cash cow since then. However, with a market share of zero when the thing launched, growth has been staggering.
And, they’re in it for the long haul. They didn’t even plan to be in
profit-mode for the first 10 years.
4-Bill Gates and Microsoft hate to lose.
Don’t we all. But seriously, he really, really hates to lose. His ego is
legendary in the industry. Don’t underestimate his desire to win. It’s what has made him such a phenomenal success.
Knowing the Xbox has taken a huge loss for some time, why wouldn’t they choose to take bigger losses to push Sony out? Playstation has a 70%+ share in the market with MS and Nintendo at around 15%, give or take a few points. I think, technically, Microsoft is in 2nd place, but they aren’t beating Nintendo by much.
But, I’ll wager that if you look at these same numbers in 10 years, Microsoft will be living large in the lead, with the others trailing. Sony’s new PS3 is AWESOME looking, but I doubt they’ll be selling it at a loss. Informed sources say $500 or so is a good ballpark for this new console, and how many kids are gonna be getting $500 consoles in their stockings at Christmas? Too few, I’d bet. In fact, Sony seems
to be betting the farm that most gamers are over 30 and catering to that subsection of people. But to exclude a core market, like anyone under 25, would be suicide. However, if this thing is really $500, light the funeral pyres, Sony’s going down. Of course, I reserve the right to change my mind if I am wrong, and to deny I ever wrote this.
I’m sure I’ll eventually have all three, but I’ll probably buy Xbox 360 and NT Revolution at their launch. Of course, I’ll be forking out money to buy Halo 3 at the launch time of the PS3 so I won’t be able to buy it then. Yes, Bill Gates has already told us Halo 3 will come out the week the PS3 is released.
Do you see what I mean about shrewd marketing?
Hardcore gamers will buy all three systems, but teens, 20-something adults (eating Ramen noodles on spools), and part-time adult gamers will choose one, or maybe even Nintendo plus one, which seems to be common now. Think about it like this, if you were in one of those categories, which one would you choose?