US Xbox 360 price cuts – Microsoft targeting Wii and PS2 owners

We all knew it was going to happen, after all, it’s been rumoured and speculated on for the last month or so, but it’s now finally been officially announced by Microsoft. What am I talking about? The price cuts of the Xbox 360 across the board, which come in to force on September 5th.

Microsoft first unveiled its strategy of price cuts at E3 when it announced the price of the Pro model would be cut by $50. It turned out to be just a fire sale to clear the way for the new 60Gb model. Since then, there has been further speculation over price cuts being on the way, mainly prompted by the fairly stagnant sales of the Xbox 360.

The price cuts were all but confirmed at the end of last month when flyers from retailers such as Best Buy, Kmart, and Radioshack showing the new price points were leaked. But still Microsoft kept quiet.

Then just a few days ago came the news of price cuts across the range in Japan, which pushed the basic model Xbox 360 below the price of a Wii for the first time. And now these same price cuts have been announced for the US, at last.

Microsoft confirmed the long-awaited price cuts in a mass email. The cuts see the basic Arcade Xbox 360 drop in price from $279 to $199. As in Japan, this undercuts the cheap and cheerful Wii for the first time this generation, and also brings the Xbox 360 price point down below the $200 sweet spot where industry analysts claim a console needs to be to reach mass market appeal.

The 60Gb Pro model will now cost $299, down $50 from $349, while the top of the range Elite complete with 120Gb hard drive will also get a $50 price cut to $399. This puts it on a par with the 80Gb Playstation 3, although the Blu-ray drive included as standard in the latter means the Sony console still represents better value for money.

Rather than going after PS3 owners, it seems as though Microsoft are targeting Wii and PS2 owners looking to upgrade to a more serious piece of kit instead. Aaron Greenberg, Microsoft’s director of product marketing told MTV Multiplayer:

Our position here is that we’re complimentary to the Wii. Our strategy all along has been to secure the core in our first couple of years, and I think we’re done a great job doing that. We’ve always planned to broaden the reach to the masses, and we knew that having the games library, having the price point to do that is very important.

I think we have a very compelling story for them [PS2 owners], and there’s a lot of very price-sensitive guys [that are] clearly a much larger audience than the Wii audience today. They [Sony] sold over 100 million consoles so there’s got to be at a good least 80 million PS2 owners that haven’t upgraded yet. From an addressable market standpoint, that would be the single largest addressable market for us.

Is Microsoft finally embarking on a sensible business strategy? I never thought I’d see the day. While the PS3 would surely be the natural successor for PS2 owners to upgrade to, the Xbox 360 is now a very attractive proposition for gamers stuck in the last generation and finally looking to move up to the current one.

While I think it will take a more cohesive strategy than just more price cuts to prevent Microsoft ending this generation in third place, this surely won’t harm sales, and we all know what a little momentum can do for a console.

The only question now is if and when Sony or Nintendo will fight back with their own price cuts.

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