UK to see a 360 arcade price increase?

[BenSkywalker]

Retailers have told Eurogamer that Microsoft will increase the price of the Arcade Xbox 360 bundle to £159.99 (from £129.99) starting 1st September. The five XBLA games will no longer be included in the bundle, either.

Link. Pointing to currency exchange rates, but it doesn't sound like a good way to improve sales.

 

[Queasy]

Same thing happened with the Wii FYI - Link

 

[mugs]

Increasing sales is great and all, but I think MS wants to turn a profit on the console.

 

[BenSkywalker]

Increasing sales is great and all, but I think MS wants to turn a profit on the console.

I haven't seen anything indicating that this is true this generation at all. I've seen that they want to make money on the console business, and they have clearly taken the approach of using the console itself as a loss leader to drive this business model. The Nin price increase didn't surprise me as much as they have always seemed to want to make money of the console this generation.

Also, the dollar has a horrible exchange rate and we are hearing constant rumors of a $100 price cut here(for the Elite at least).

 

[Queasy]

Originally posted by: BenSkywalker
Also, the dollar has a horrible exchange rate and we are hearing constant rumors of a $100 price cut here(for the Elite at least).

It's the exchange rate for the pound to Euro that is driving the price increase. Not the dollar exchange rate.

As I mentioned above, Nintendo Europe is doing the same thing with the Wii.

edit: Interesting

However, a closer inspection of the documentation sent to retailers seems to suggest that the Xbox 360 Arcade listing is a placeholder for an as-of-yet unspecified SKU. Whether that?s an enhanced Arcade SKU or a reduced RRP Elite ? or even both ? is yet to be seen.

Sounds like we'll find out what is going on at Gamescom which starts this week in Cologne.

 

[mugs]

Originally posted by: BenSkywalker

Increasing sales is great and all, but I think MS wants to turn a profit on the console.

I haven't seen anything indicating that this is true this generation at all. I've seen that they want to make money on the console business, and they have clearly taken the approach of using the console itself as a loss leader to drive this business model. The Nin price increase didn't surprise me as much as they have always seemed to want to make money of the console this generation.

Also, the dollar has a horrible exchange rate and we are hearing constant rumors of a $100 price cut here(for the Elite at least).

Excluding the abnormally high warranty costs, I believe the base model Xbox 360 has been sold for a profit for a long time now. Not sure about the Arcade.

But even if they are taking a loss on the arcade, you must understand that taking a smaller loss - or turning a profit - would improve the profitability of the whole console business.

1 GBP was worth ~$2 last year, and it's worth about $1.65 now.

 

[BenSkywalker]

The improved arcade(with HD maybe?) for slightly more would fit better with what we have seen from MS this gen so far.

It's the exchange rate for the pound to Euro that is driving the price increase. Not the dollar exchange rate.

The point I was making is that MS's suppliers are all outside of the US and they are dealing with considerably lower margins due to currency exchange rates already but still are cutting the price here, why would the UK be different? The PS3 is much stronger in the EU then the US, particularly compared to the 360(the PS3 could reasonably surpass the 360 by Christmas in the EU- roughly 1Mil unit difference now compared to 8Mil for the US). From a business perspective, I don't see why they would be willing to significantly reduce their margins in their strongest market while hurting their competitive position in a market they are close to falling into third place in. Now, if it is an enhanced arcade, that would make a lot more sense to me.

 

[Queasy]

Originally posted by: BenSkywalker
The improved arcade(with HD maybe?) for slightly more would fit better with what we have seen from MS this gen so far.

It's the exchange rate for the pound to Euro that is driving the price increase. Not the dollar exchange rate.

The point I was making is that MS's suppliers are all outside of the US and they are dealing with considerably lower margins due to currency exchange rates already but still are cutting the price here, why would the UK be different? The PS3 is much stronger in the EU then the US, particularly compared to the 360(the PS3 could reasonably surpass the 360 by Christmas in the EU- roughly 1Mil unit difference now compared to 8Mil for the US). From a business perspective, I don't see why they would be willing to significantly reduce their margins in their strongest market while hurting their competitive position in a market they are close to falling into third place in. Now, if it is an enhanced arcade, that would make a lot more sense to me.

Ok, but this is the way it works. MS Europe and Nintendo Europe buys all the parts, makes all the consoles, markets all the consoles, etc for the European territories. They do this in the Euro currency. They then have to turn around and convert to the British Pound to sell in the UK. This is why the pound to Euro exchange rate is affecting the price for both the 360 and the Wii.

 

[BenSkywalker]

Excluding the abnormally high warranty costs, I believe the base model Xbox 360 has been sold for a profit for a long time now.

If that is true, the PS3 must have been highly profitable for a while now. You can buy a BRD twice the speed of the one in the PS3 for $60 of NewEgg now, while the 360 has a more complex GPU and a CPU that is directly comparable in terms of size but Sony doesn't have any licensing costs associated with it. Given the PS3 has demanded at least a $100 premium over the 360, if the 360 is breaking even the PS3 is making money hand over fist.

 

[mugs]

Unless I missed some rumors, they're only reducing the price of the Elite in the US. The Elite probably had the highest profit margins of the whole lineup. What did it have in addition to what the base model comes with? An extra 60 GB of disk space, an HDMI cable and the HDMI-compatible audio dongle? What's that, $20 worth of stuff for an extra $100? They Elite had plenty of room for a price drop. The Arcade doesn't have room for a price drop, whether it be intentional or because of changing exchange rates.

 

[BenSkywalker]

Ok, but this is the way it works. MS Europe and Nintendo Europe buys all the parts, makes all the consoles, markets all the consoles, etc for the European territories. They do this in the Euro currency. They then have to turn around and convert to the British Pound to sell in the UK. This is why the pound to Euro exchange rate is affecting the price for both the 360 and the Wii.

That is an accounting issue, not one that drives price points normally in this market. In the US we are still seeing currency fluctuations on a regular basis from the territories MS's suppliers operate in, yet we don't see the MSRP bouncing around. It is the same thing.

 

[BenSkywalker]

Unless I missed some rumors, they're only reducing the price of the Elite in the US.

And dropping the Pro altogether if the rumors we are all hearing are the same. That doesn't change the fact that if what you stated is true, that the Pro was breaking even for a while, the PS3 must be making huge profits at its' current price point.

 

[Queasy]

Originally posted by: BenSkywalker

Ok, but this is the way it works. MS Europe and Nintendo Europe buys all the parts, makes all the consoles, markets all the consoles, etc for the European territories. They do this in the Euro currency. They then have to turn around and convert to the British Pound to sell in the UK. This is why the pound to Euro exchange rate is affecting the price for both the 360 and the Wii.

That is an accounting issue, not one that drives price points normally in this market. In the US we are still seeing currency fluctuations on a regular basis from the territories MS's suppliers operate in, yet we don't see the MSRP bouncing around. It is the same thing.

Didn't say it was normal but with both MS and Nintendo going this route, there is something significant happening here that accounts for the UK price increase. If it were just one of the companies we could say it was a fluke, aberration, greed, or whatever. But with two of the console makers going this route, there is something there with this story.

 

[BenSkywalker]

Didn't say it was normal but with both MS and Nintendo going this route, there is something significant happening here that accounts for the UK price increase.

Unless the possible different Arcade SKU is an enhanced version altogether. Also, didn't Nin raise their price several months ago? And why hasn't Sony made a move?

If it were just one of the companies we could say it was a fluke, aberration, greed, or whatever. But with two of the console makers going this route, there is something there with this story.

This could tip Europe in Sony's favor this year if it isn't an enhanced Arcade. Is it worth it for MS? That would leave them with a big lead in the US, and behind everywhere else in the world. From a business perspective I don't understand why it would be worth it, you are talking about selling a couple of games for each console to recover such a minimal price move. Unless this is an enhanced Arcade version, it seems like a straight up dumb move.

 

[mugs]

Originally posted by: BenSkywalker

Unless I missed some rumors, they're only reducing the price of the Elite in the US.

And dropping the Pro altogether if the rumors we are all hearing are the same. That doesn't change the fact that if what you stated is true, that the Pro was breaking even for a while, the PS3 must be making huge profits at its' current price point.

Didn't Queasy post an article recently about the PS3 making a profit?

Edit:
http://forums.anandtech.com/me..._key=y&keyword1=profit

Obviously those numbers are rough. The $240 figure was based on analyst estimates I believe.

 

[Queasy]

Originally posted by: BenSkywalker

Didn't say it was normal but with both MS and Nintendo going this route, there is something significant happening here that accounts for the UK price increase.

Unless the possible different Arcade SKU is an enhanced version altogether. Also, didn't Nin raise their price several months ago? And why hasn't Sony made a move?

If by several you mean late March, then yes. The retail price didn't change but the price charged to stores was increased meaning that stores made less on every Wii sold.

This could tip Europe in Sony's favor this year if it isn't an enhanced Arcade. Is it worth it for MS? That would leave them with a big lead in the US, and behind everywhere else in the world. From a business perspective I don't understand why it would be worth it, you are talking about selling a couple of games for each console to recover such a minimal price move. Unless this is an enhanced Arcade version, it seems like a straight up dumb move.

We'll have to see what happens at Gamescom which kicks off tomorrow with Sony's big 3 hour press conference.

 

[BenSkywalker]

Didn't Queasy post an article recently about the PS3 making a profit?

I saw the one about the significantly reduced costs to build PS3s, but I didn't see them mention any sort of margins. My main point is that at most, the PS3 costs $50 more then the 360 to build(likely not that much, and that is compared to the Pro, not the Elite) so any price point that they hit beyond that is just impacting their bottom line in relation to MS. Or, said another way, they can easily afford to drop to $299 without issue if your estimates on cost are correct(I'm not saying they are wrong or right, no idea what kind of licensing agreement MS has so no way to judge their price point).

 

[BenSkywalker]

If by several you mean late March, then yes. The retail price didn't change but the price charged to stores was increased meaning that stores made less on every Wii sold.

UK works weird on console pricing, in the US there is no margin on hardware(as in less then 1%), retailers clean up on game sales.

We'll have to see what happens at Gamescom which kicks off tomorrow with Sony's big 3 hour press conference.

Of course, but no matter how you look at it a price increase isn't going to help anyone's market position no matter what.

 

[mugs]

Originally posted by: BenSkywalker

Didn't Queasy post an article recently about the PS3 making a profit?

I saw the one about the significantly reduced costs to build PS3s, but I didn't see them mention any sort of margins. My main point is that at most, the PS3 costs $50 more then the 360 to build(likely not that much, and that is compared to the Pro, not the Elite) so any price point that they hit beyond that is just impacting their bottom line in relation to MS. Or, said another way, they can easily afford to drop to $299 without issue if your estimates on cost are correct(I'm not saying they are wrong or right, no idea what kind of licensing agreement MS has so no way to judge their price point).

OK, that's great... I've been commenting on MS's price increase in the UK, which is the topic of this thread. I really don't care about Sony's price drops until the PS3 costs about $150. So... you're talking to a wall here.

 

[BenSkywalker]

OK, that's great... I've been commenting on MS's price increase in the UK, which is the topic of this thread. I really don't care about Sony's price drops until the PS3 costs about $150. So... you're talking to a wall here.

I honestly don't understand how you can isolate the competition when discussing price points, are you from a communist country perhaps? In a capitalist society the price of a product is very heavily influenced by its direct competitor. When a price move happens on one product in a given category it impacts the entire category. Perhaps because of my profession I look at this a bit differently, but the liquidity of Sony's console division ends up directly relating to how much the 360 costs you at retail.

 

[mugs]

Lulz @ communist... you're a character, BenSkywalker.

 

[BenSkywalker]

Lulz @ communist... you're a character, BenSkywalker.

It was a serious question. If ATi drops their prices, so does nVidia. If Toyota drops their prices, so does Honda. If Kraft drops their prices, so does Velveeta. It is how a capitalist society works, perception of value is largely determined by existing price points in any given segment. MS and Sony are clearly direct competitors in this segment, so what one of them does in terms of price point is going to, without a doubt, directly influence of what the other does one way or the other(they could make no price move, and it will effect them on the manufacturing side as their demand drops).

This is reality. There are certain rabid loyalists with no logic, talking to them is like talking to a wall, they don't want to hear it. But it is very much how the market as a whole works.

 

[tatteredpotato]

Originally posted by: BenSkywalker
There are certain rabid loyalists with no logic, talking to them is like talking to a wall.

Rabid loyalists... where!?

 

[mugs]

We aren't all wannabe analysts like you, BenSkywalker. Not caring about Sony's price drop doesn't make me a communist, and it doesn't make me a rabid loyalist. I don't care because I already own a PS3. I said I would care when the price hits $150 because that's the point when I would probably buy a second one. Maybe $200. I'll cross that bridge when I come to it. I don't care much about MS's price drops either; they do affect me slightly, because of the system's high failure rate. My interest in this thread was pretty minimal from the start, and with each reply we've gotten farther and farther away from the original topic. The number of times I've posted in this thread dwarfs my interest in it.

And please, please stop saying price point so much. There are very few contexts where "price point" is preferable to "price." It just makes you sound like more of a wannabe analyst.

 

[BenSkywalker]

We aren't all wannabe analysts like you, BenSkywalker.

Well, I guess you can call me a wannabe if you'd like, the company I work for pays me for it though. It isn't like you need to do it for a profession to figure out the price of direct competitors has a direct impact on what you will pay, that is how it works in capitalist markets.

And please, please stop saying price point so much.

Price point is utilized for MSRP, price is what people pay at retail.