By Benjamin Schlichter (BenSchlichter@Gmail.com )
For reference, I cannot be credited with the picture, but nevertheless, I feel it's too important to just let go, as it's an amazing story to break - On VGC first!
This picture is confirmation of the earlier Ars Technica article from an informant stating that the Xbox 360 would drop it's price in September to $199.99 for the Core, $299.99 for the 60GB model, and $399.99 for the 120GB Elite model. This picture shows nearly irrefutable proof that those rumors are substantiated, and are set to happen in just over a month.Edit: Now Confirmed Thaks to Joystiq!
Included after the jump to Joystiq is confirmation of the rumor. Radio Shack just released their newest ad with the $399, Elite, and $199 Arcade price point. The date of sale? September 7th.
This news with a picture confirms that this exclusive rumor/leak we broke almost 3 weeks ago was 100% true. We thank the brave soul that may have lost his job over the initial picture.
Calculating the Impact of the $199.99 Price Point
Microsoft has been no stranger to the $199.99 price point. In interviews, high brass officials from Microsoft have stated they are 'very aware' that the $199.99 is the sweet spot for console sales. Earlier this year, a weakening Xbox 360 had it's price re-vamped to the 199 Euro price point in February. According to VGChartz.com tracking information, this price drop has allowed the Xbox 360 to gain traction, and sell 100% more units in the February-July timeframe - From an estimated 750,00 to 1,750,000 units in the 6 month timeframe.
Could a similar boost happen in the United States? It is entirely possible: Such a price point will leave the Xbox 360 as the lowest priced Next-Gen console on the market ($50 below the Wii's $249.99 price point), and digging ever-closer to the Playstation 2's pricepoint of $129.99
Not only is the impact of the $199.99 going to of large importance, the scheduling of the drop is telling as well. It takes place 1 week after Square Enix's 'Infinite Undiscovery' and 2 weeks before Harmonix/EA's 'Rock Band 2' - Both exclusive to the Xbox 360 platform at the time of release and pricedrop (obviously, Rock Band 2 will ship in November for the other platforms).
Could Microsoft be making a true power-play for the Holidays? I think so. At a $199.99 price point, and Microsoft's continued dedication to steal away both Sony's hardcore user base through gobbling up former exclusives such as Tales of Vesperia, and Star Ocean , and attempting to woo casual gamers away from Nintendo with such offerings as Your In the Movies and Lips , it would seem that the price drop could act as a suitable catalyst for higher sales.
Can Microsoft Still Profit from Such a Bold Move?
Dropping the price $80 on Arcades (and price drops on the Pro and Elite models), one has to ask, can Microsoft be profitable while reducing their price by over 20% on the base model, and roghly 15% on the Premium/Pro and Elite?
Lets take a look at past statements regarding the history of the cost to build an Xbox 360:
1) At launch, the Xbox 360 costs approximately $525 in parts to make a unit - Roughly 24% over the price of a standard $399.99 USD Premium model.
2) By November 2006, that price, according to iSuppli had decreased by nearly 40% - From Approximately $525 per unit to $323.90 per unit for the Premium model, and under $280.00 for the HDD-Less Core model (which is now the Arcade).
3) Since then, Microsoft has made 2 major revisions to the Xbox 360, the 2nd heatsink , and the cost-cutting 65nm archatcture of the Falcon revision. According to DailyTech, the Falcon revision cut CPU manufacturing costs by 50%.
4) And most recently, the Jasper chipset, with the 65nm GPU archatecture began it's production run in early May. TG Daily reports later in the article that they expect the Jasper chipsets to launch this month (which interestingly enough, coencides with the 60GB model and the price drop, exactly like last year's price reduction).
Because of the steps Microsoft has taken to reduce cost on the production of the console, and maintain profitability, it is very likely that the Xbox 360 has seen major reductions in the cost to manufacture a Xbox 360 since the $280.30/$323.90 prices were used more than 18 months ago. Using Moore's Law , it is believable that the Xbox 360 has reduced it's price a further 35-50% from the November 2006 pricepoint, and could be manufactured for (after the Jasper reivsion) $140.15 to $182.19 before other cost considerations (such as cost of delivery) are applied. This would fit in perfectly with Microsoft's goal to be profitable with the Xbox 360, as costs should be lower, or just at, the price of sale to distributors and retailers.
Stay tuned for more updates! Lets see how accurate this photo is. Obviously, if this does come to pass on September the 7th you have VGC to thank for the exclusive industry-altering news :)