Ballmer: Xbox 360 is a home run - price cuts not due to flagging sales
By Dave Parrack
The Xbox 360 has not had a good 2008, at least in America. But Steve Ballmer, CEO of Microsoft, still regards the console as a phenomenal success. He also rejects claims that the recent across-the-board price cuts had anything to do with flagging sales. He’s clearly living in cloud cuckoo land.
In Japan, the Xbox is actually doing rather well of late, with sales topping the PS3 for the past three weeks. In Europe too, the Xbox is doing brilliantly, with the recent price cuts seeming to up demand by quite a margin, at least if Microsoft’s own figures are to be believed. But the USA tells a different story.
In six out of the first eight months of 2008, the Xbox 360 was beaten by the Playstation 3 in terms of sales. Both consoles were massively behind the Wii, of course. And this came on the back of the dreaded Red Ring of Death issue which cost Microsoft over $1 billion to fix. So it’s all clearly going great guns.
Actually it is, at least according to Microsoft CEO, Steve Ballmer. He recently spoke to The Mercury News about the state of the current Microsoft product range, including Vista and the Zune. But he had particular praise for how well the Xbox 360 is doing. He said:
I certainly would say the work that we’ve done around Xbox is an unqualified success. No question about that. The product is selling very well. The Xbox is an absolute home run.
He was then asked about the fact that the Wii has overtaken lifetime sales of the Xbox 360 and how the PS3 is catching up. Were the recent price cuts made because the company has “run out of ideas to boost sales?”
No, that’s the craziest thing I’ve ever heard anybody say. All consoles start at higher prices. They always come down through the long cycle.
Price is not something you discuss externally. Nobody ever does. So, whether we were planning on cutting price the next day or in six months or a year, we’re not going to discuss price changes.
If you ask me, Xbox Live is going gangbusters. The console is selling well.
Well that’s sold me then. If the man at the top of Microsoft thinks the Xbox 360 is “an absolute home run” then it must be true. And there was me thinking the price cuts (the second in the space of a year) were about lowering the cost to try and reinvigorate dropping sales. Nope, they were nothing of the sort, they were just a normal part of the home console market. How come Sony and Nintendo haven’t followed suit then?
I wasn’t expecting Ballmer to admit that things weren’t exactly going according to plan with the Xbox 360, but I did expect more honesty concerning the price cuts. I suppose it’s telling that Ballmer also described Windows Vista and the Zune as “unqualified successes” when no-one I know actually likes the former, and no-one I know owns the latter.
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Tips N4G
October 6th, 2008
Dave P- nice picture of Ballmer. That pic should be at the end of every 360 commercial. Maybe they could put the 360 logo on his tongue.
October 6th, 2008
and use RROD for is eyes.
October 6th, 2008
That pic is TERRIBLE! Wylie, u r such a Dav Balmer fanboi!!!!
-Arvis
P.S. No, no one is impersonating me, I’m just really bored.
October 6th, 2008
The subtitle can be:
“Steve Ballmer, coming to a school near you”
October 6th, 2008
“Nope, they were nothing of the sort, they were just a normal part of the home console market. How come Sony and Nintendo haven’t followed suit then?”
if you knew anything about the history of consoles you’d know price drops are a normal part of a lifecycle as costs reduce over time as well.
the ps2 did the same thing even while clobberin the competition…
how you keep your job while knowing so little is beyond comprehension…
October 6th, 2008
Best picture ever.
October 6th, 2008
Reminds me of Gene Simmons….
October 6th, 2008
this is the most childish article ive ever read.
the commentary is about informative, and insightful as a fanboys.
the production of any console, and the reduction in manufacturing is something that is carefully planned, and mapped out over the life of the console. Pricing is a strategically planned to reflect this.
maybe the price remained high to offset the repair of consoles lost to RROD. The last thing they want to do is sell at a discount, and then have them all flood in as repairs…
or maybe they made a killing somewhere else, allowing for an offset in the price of the console…
or maybe, they just closed a renegotiated contract with the manufacturers allowing for the console to be made a little bit cheaper…
or maybe….blablabla
my point is, do a bit of research before you start waving your willy wonker around and calling it journalism…
October 6th, 2008
I demand pip be banned for not mentioning Steve’s picture! (Good post btw)…
October 6th, 2008
I think my favourite pic was the one of Ken Kurtagi (or however you spell it) sitting in a roller coaster with a PS3 controller in his hand. That guy was a head case, I liked him!
October 6th, 2008
kev, pip, you are both right in a way. Of course, the price goes down, but that still doesn’t explain why the PS3 and Wii haven’t dropped prices yet.
I imagine for the PS3, its because of cost. Sony doesn’t want to lose more on the PS3, and if they can’t make back what they spent on it, they want to get as close as they can.
For the Wii, its certainly because of demand. Now, make sure you pay attention here. The cost of the accelerometers of the Wii controller and the starting profit of the Wii would have allowed Nintendo to drop the price by the same percentage as MS without losing money per console sold.
Why do these price drops for the big N not translate to a Wii price drop….this is important…DEMAND, or, more specifically, quanitify demanded. A price drop would cause the number of Wii bought to increase, and Nintendo would again run out of consoles.
Now, follow me here. MS would have the same problem with the 360 if demand was that high. MS wouldn’t be able to drop prices at all (let alone the massive amount they have come down to this point) if sales were healthy.
In fact, you can see sales are unhealthy because of the high attach rate for games. It’s an end of life number, when consoles stop selling well.
That beside massive price drops aren’t running the 360 out, except in Japan.
It’s normal for prices to drop, but they only can drop when the sales are low enough not to leave the shelves bare.
Economics says MS could not have reasonably cut the price if console sales weren’t low-ish. It’s not like a price cut is the end of the world. However, I’m sure MS wishes sales were good enough to hold off price cuts, since its just more money in their pocket. The only reason to be mad is if you’re a stock holder, since it cuts into MS profit.
October 6th, 2008
Oh, and that picture, priceless.
It could really be the big sign for the new, casual Xbox. Doesn’t it look like a face he could make after winning a game of Scene it?
October 7th, 2008
That picture of Steven Ballmer looks nasty. And he had to say that what else did you expect him to say. He is the CEO of Microsoft so his job is to to make things look good for them self. Even if is just lie. Xbox is definitely far from being a home run or a success.
October 7th, 2008
Matt; Ever think that the xbox has came down first because it was the first on the market. And Sony screwed up so they can’t drop the price early (or maybe even when they should) and Nintendos may drop the price next year or they may milk it for what they can. I think when it is time for them to drop the price they will.
Don’t forget the 360 has a year lead on the PS3 and Wii.
October 7th, 2008
It’s all PR bullshit. Really, if there was no compition there would be no price cut. So yes development cost have come down but that doesn’t mean they gave a price cut because if that. Compition make things better and cheeper faster.
October 7th, 2008
Norm,
Look more at units sold, not time on the market. More people have the Wii than have the 360. Yet the Wii has not needed a price cut because there are still so many more units being bought that a price cut would result in shortages.
The PS3 has had price cuts in the past, and I don’t feel like looking up units sold when it happened, so no point for comparing there.
If the 360 had sold 100 million units at this point in time, it would probably have had MANY more price cuts than we see now, simply because as more people get their hands on it, it becomes cheaper to make (as you make more), and because the fewer people that still want one are willing to pay the current price.
Calculators have been on the market for much longer (and with more competition), but for a long time, calculators don’t get a price drop because people are willing to pay the price for one, and a price drop would get more people to buy calculators, causing a shortage (though I would imagine the demand for calculators is less elastic than for consoles).
Regardless of how long an item has been on the market, price cuts aren’t even an option if sales are healthy.
October 7th, 2008
Matt:
Are you high wow how that hell could anyone in 3 years have sold 100 million units wow. Not even if the Xbox 360 had launched at $200 still it would have not achieved that high mark. The PS3 price help a lot why do you think they almost passing the Xbox 360 in unit sold.
October 7th, 2008
Ivan, again, you are the King of Missing The Point.
-Arvis
October 7th, 2008
People, people! The reason Sony is not cutting their prices is because they have already committed all their stock to retailers. That means they’re sold out through 2008. In fact, they announced they would only be able to meet 80-90% of consumer demand this holiday season.
Do you know what that means in Economics 101 land? No need to lower prices. That’s what happens when demand outstrips supply, and that is why the X360 is the only one slashing prices right now.
October 8th, 2008
Sorry if I hurt you, Ivan.
Would it help if you thought of the PS3 selling 100 million? I assume an impossible (in a good way) situation for Sony is within your realm of imagination, even if its no more possible than the same situation for MS.
October 8th, 2008
Matt:
How can you think that your enormous idiotic stupid imagination hurt me is just pathetic that you will say that. No console can sell that many units in three years idiot.
October 8th, 2008
Sony is Microsoft biggest nightmare. PS3 is Xbox 360 killer for sure. Xbox sucks big time.
October 8th, 2008
Ivan_PSP
When you’re saying that PS3 is an X-box 360 killer, you are actually admitting that the 360 is superior… LOL. It’s like to Zune is an iPod killer!
October 9th, 2008
That’s a face that only a monther could love…. a blind mother.
October 10th, 2008
PS3 DOESNT NEED TO CUT ITS SALES IN HALF THE TIME ON MARKET COMPARED TO X360 ARE ACTUALLY HIGHER AND PS3 SALES ARE RISING X360 SALES ARE SHRINKING A SHORT TERM PROP UP AFTER NUMEROUS PRICE DROPS IS NOTHING ITS MEANINGLESS X360 WILL BE A 3RD PLACE CONSOLE BY 09
WII SALES WILL JUST CONTINUE X360 IS DEAD AND ANY ATTEMPT TO SAY OTHERWISE IS FANBOUYING