EEDAR Analyst Calls $299 Price Point "Sweet Spot", Predicts More Cuts Over Next Year


Posted August 27, 2009 - By Jake Gaskill

Analyst Calls $299 Price Point

By now, you have no doubt heard that Microsoft has officially dropped the price of the Xbox 360 Elite to $299, bringing it in line with Sony’s PlayStation 3. Well, EEDAR analyst Jesse Divnich has a few thoughts of what these price cuts mean from the consumer’s perspective as well as what it means going forward for Microsoft and Sony.

In terms of the specific price points that Microsoft and Sony have now settled on, Divnich says:

“The truth about consumer goods, something Sony and Microsoft have finally realized, is that you design your product around the price threshold consumers are willing to pay—just because you can cram nine processors into your console, it doesn’t mean consumers will pay a premium for it...Historical sales, accounting for inflation, suggest the $249 to $299 price point is the sweet spot where the industry can expand at a comfortable rate while still delivering profitability for the console manufacturers.”

Now, while the new price points are certainly welcomed and, clearly, necessary, Divnich believes that Microsoft isn’t done putting the pressure on Sony just yet.

“Over the next year Microsoft will most likely reposition the Xbox 360 Elite model closer to the $249 price point to both pressure Sony and attract potential Nintendo Wii consumers. From a strategic standpoint this would then allow Microsoft to introduce the new Natal model in 2010/2011 at the $299 price point and still have an option for consumers cheaper than the Sony PlayStation 3.”

Despite Microsoft’s insistence that it currently doesn’t have plans to release a 360 with Natal built-in, it certainly would make sense, and would assuredly make a serious splash, especially since the PS3 Slim's “ooh-ahh” high will have definitely worn off by then. And even if Sony manages to beat Microsoft to market with its motion-controller, people can’t get enough of redesigned pieces of technology, and if Sony thinks it will be able to tear eyes away from a Natal-infused 360 with a Wii-ish remote/camera combo, it’s going to be in for some serious disappointment.

Plus, as Divnich points out, if Microsoft does decide to introduce a Natal-ized 360, that would give it the chance to lower the Elite’s price below the PS3 Slim’s, and Sony will then have to compete against, essentially, two consoles. This would force Sony to either match Microsoft by offering a motion-controller/PS3 Slim bundle for $299, and lowering the PS3 Slim to $249, or simply accept the fact that its console is once again the most expensive one on the market.

Of course, we're talking about years down the road here, and there's no telling what will actually happen in the meantime. Still, whatever the outcome, one thing is for sure: gamers everywhere are about to enter one of the most gamer-loving periods in history, and nothing but good things can come from Microsoft and Sony competing for players’ affections and cash.

EEDAR Analyst Calls $299 Price Point "Sweet Spot", Predicts More Cuts Over Next Year


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