Xbox: 'Microsoft has its teeth kicked in'

[travler]

<< At the time they were released here, the Xbox was $377 each. MSFT took a $127 loss on each console (Boxes were sold to retailers for $250 each). That's according to their phamplet thing for investors that was sent out. >>



dont forget the $100,000,000 payed upfront to nividia. thats on top of production costs i beleive. takes alot of Xboxes to make that back.

 

[ViralCryption]

Actually, you forgot to factor in several cost factors. Most of the hardware is a varaible cost of the Xbox, you neglected the fixed costs which come from R&D, marketing, and plant costs to name a few. Obviously, some of you guys don't know too much about the business side of things.

 

[Mem]

The current price here in UK is £299 for X-Box and PS2 is £199,the Nintendo Gamecube is listed as £169 (pre-order price),so you can see it`s nearly half-price when compared to the X-Box, which really needs to come down in price if it wants to compete ,yes I know it has better specs etc but game console buyers don`t always go for all the added extras in a console system.

It will be interesting to see how the Gamecube does on launch compared to the X-box here in the UK.

 

[AA0]

I'm also taking retail prices, and so if you halve what I got, that is closer to their real costs.

 

[Soulflare]

As someone vaguely mentioned, Sony has been making a profit on every PS2 it has sold since
about the middle of last fall, thanks mostly to nosediving RDRAM prices... they may also have
completed a die shrink on their CPU. Currently the PS2 sells for a lot less in both Europe and
Japan than it does in the US.

Microsoft's only "killer app" in Japan is DOA3, and thanks to Microsoft's launch delays in that
country DOA3 was pretty much forced to go head to head with PS2 releases of VF4 and
Tekken 4, both of which are better (although probably not prettier) games.

 

[dowxp]

DOA3 = dead on arrival 3?

is there where u guess which ibm 75gxps will fail? or perhaps which via chipset will need a "A" revision..

 

[LH]

Incorrect. Ill have to dig up info, but Sony is still taking a loss.

As for the NV2A chip it goes for around $50 in lots of 10,000.

Its called

PIII Hybrid $~50
NV2A $~50
Ethernet $~10
DVD $~30
Custom HDD $~40
CHIPSET $~50
RAM $~25
+manufacturing costs = around $325. Most anaylsts said MS was taking a $75 loss per console, selling them for $250 to retailers.

MS isnt lossing over $100 thats for sure, and NV2A doesnt cost $200. Nvidia has always sold their video chips to card manufacturers for $28-$55.

MS isnt going to lower the US price, it will lower the Euro price, by 25% around E3 IMHO and Japan by 10%. Its already selling in Japan for less than $299 USD, its not selling will because it got a ton of negitive press, plus its american designed. Lets what for Oct of this year for when they launch in Korea, they should mop up Sony and Nintendo there The XBox is still doing extremely well in the US, MS's main target.

 

[Valinos]

You are all wrong about the price MS is selling the XBOX to retailers for. I work for a major video game retailer and I can tell you first hand how much they charge for just about any product. Just about every system is sold to us at near cost. The XBOX and PS2 are sold to us at $290 and after shipping costs, we make about $3 off each console sold. When you go to buy a new system from major video game retailers such as EB and Babbage's you'll notice that we try to sell you memory cards, controllers, games, extra cables, and strategy guides. We make most of our money off of peripherals, strategy guides, and lastly new games. That's why you always see new consoles sold in bundles when they first come out. There is hardly any profit in new games and consoles. It all comes from used games and accessories. That's why most places won't price match consoles that are sold cheaper elsewhere (like at Wal-Mart who sells so many things that they can afford to actually LOSE money on the consoles).

New video games (new meaning unused copies) generally make about 5-12% profit each. First party accessories generally being about 20% and 3rd party about 30-40%. Those $14.99 strategy guides are the biggest money makers being marked up about $12 each.

EDIT

Also, LH, you are pretty much right on target for how much MS loses on each console. They do not buy the graphics chipset from nVidia for $200 like we do. They buy them in lots of 1000's and have deals cut with the hardware manufacturers. The hardware manufacturers benefit from MS buying these massive amounts of hardware, so they cut the prices drastically. It isn't like MS goes out and buys 5 million GF3's from CompUSA. The ignorance on these forums makes me laugh sometimes...

 

[FuManStan]

<< Also, LH, you are pretty much right on target for how much MS loses on each console. They do not buy the graphics chipset from nVidia for $200 like we do. They buy them in lots of 1000's and have deals cut with the hardware manufacturers. The hardware manufacturers benefit from MS buying these massive amounts of hardware, so they cut the prices drastically. It isn't like MS goes out and buys 5 million GF3's from CompUSA. The ignorance on these forums makes me laugh sometimes... >>



The posts on pricing were replies to AAO who was talking about being able to physically purchase better computer parts and assemble a better system for lower the cost than Microsoft sells the products. Read more carefully before you comment on the intelligence of people like that which is rather rude.

Plus, figuring the economics of the situation, didn't Microsoft advance millions of dollars to Nvidia for development? From an economists point of view, factoring in opportunity costs and research and development also hits Microsoft pretty hard.

Also, everyone made a big deal about Microsoft wanting stores to sell console/game bundles for over 400 dollars at launch, but thinking back to the launches of all 3 major systems i really didnt see any bundles at all. Walking into a Best Buy, Circuit City, Toys R Us, or whatever, i never saw any advertised combination of accessories. I can definatly see how memory cards and other peripherals are large profit makers, but i didnt know strategy guides were very profitable.

 

[CZroe]

Nintendo looses about $20 for each GCN sold but with only a single game sold for each console they make a profit. MS needs about 3 games from what I hear.

 

[X14]

The most surprising thing to me since the XBOX debut is Sony's ability to maintain the $299 price point for the PS2 and still sell units.