Wednesday, August 17, 2005

Notes on the 360 Pricing Announcement

Okay, I've had a little time to think about this, and here are some of the implications of this morning's pricing announcement.

I seriously doubt that the hard drive is going to be used by anyone (except maybe MMORPG's). As an optional component, it will now almost exclusively be used for custom soundtracks and downloadable content (music, video, etc.). An interesting question is whether games offering supplemental content (maps, etc.) will require the hard drive. I assume they will.

So the Core unit is just a way for people to get into the game, so to speak. And I'm sure that Microsoft wants to make the core unit as unattractive as possible, because they're going to take a huge loss on each one. However, they can still claim that they're hitting the $299 price point.

With the Premium Edition, they should do much better. For a hundred dollars extra, getting a hard drive, a wireless controller, HD cables, and other assorted items is actually a pretty good deal for us as well. Except, of course, that it looked like for several months we'd be getting all of that for $299--with the console.

Oh, and by the way, that's not really the full price for either console. Since the hard drive isn't standard, it's likely that all games will required--you guessed it--memory cards. There's a little $39.99 hickey for you. Not including a memory card is nothing new--that's how the PS2 was launched, if I remember correctly--but it's just additional fog when trying to determine how much the console will actually cost to be functional.

For me, this announcement is somewhat of a letdown. I'm fine with the price, and the two-tier strategy is not a bad one, but it would have been a killer at $249 and $349. Those were the price points to use, at least in terms of market penetration.

I strongly suspect that this multi-tier strategy is going to be used by Sony as well, so this is a new era in pricing instead of a one-off.

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