Xbox $30 cheaper this week
By Byron Achohido
USA Today
Video game fans have a new incentive to buy an Xbox console — a $30 savings.
This week Microsoft is reducing the Xbox's price from $179 to $149.
The price cut comes a month earlier than expected after an industry analyst predicted that Microsoft would lower the price within days, not weeks. According to industry buzz, Microsoft was supposed to have announced the price cut about the time of the E3 gaming conference in mid-May.
Microsoft was smart to cut the Xbox's price immediately because prospective buyers probably would have waited for the price reduction, says tech analyst Matt Rosoff of research firm Directions on Microsoft.
"They had to make this price cut to make Xbox competitive," Rosoff says. "This probably isn't the last price cut we'll see."
Microsoft launched Xbox in November 2001 at $299, optimistic that it could make Nintendo's GameCube irrelevant and challenge Sony's PlayStation 2. Microsoft continues to lose money on each Xbox sold, but it aims to profit from game sales and subscriptions to its Xbox Live online gaming service.
But GameCube has proved resilient. Nintendo cut its price to $99 from $149 last September and has worked overtime to keep up with demand. By February, nearly half of U.S. retail locations were out of stock, and Nintendo's North American warehouse was empty.
Nintendo has sold more than 2.5 million GameCubes since September. As the only console priced under $100, "demand remains very high," says Beth Llewelyn at Nintendo of America.
PlayStation 2 continues to outsell Xbox 5-to-1 in the $8 billion gaming console market. Scrambling to close the gap, Xbox has generated most of the $1.8 billion in losses Microsoft reported in its entertainment division for fiscal 2002 and 2003.
Despite the intense competition, Microsoft isn't likely to throw in the towel to its competition. Last week, it announced a new way for developers to create Xbox games that can be easily converted into PC games. The idea is to spur creation of more Xbox games by giving game developers a way to spread costs, which can run as high as $10 million to develop a hot title.
