Xbox 360: Encyclopedia II - Xbox 360 - Retail configurations and pricing

Xbox 360 - Retail configurations and pricing

Microsoft's current retail strategy involves two different configurations of the Xbox 360 in most countries.

In United Kingdom and Europe, the console is available in two versions: an Xbox 360 SKU, frequently referred to as the "Xbox 360 Premium Edition"; and an Xbox 360 Core System SKU. The Core System is not available in Japan, instead Microsoft offers a package identical to the Xbox 360 SKU for ¥37,900 ($323.90 as of 21 December 05 8:09 UTC, [1]). The Xbox 360 Premium Edition is being sold in America for $399.99. Japanese pricing of the console has drawn some criticism, as customers there will be able to purchase the Xbox 360 Premium Edition for a lower price than in other countries.

Microsoft's decision has also allowed Japanese developers to fully utilize the hard drive to optimize game performance, since it is part of the default system configuration in their market. However because of the existence of a Core System edition, many games do not require a hard drive.

BusinessWeek magazine compiled a report which estimates that the total cost of all of the components in the "Premium Edition" is $525 USD, aside from additional manufacturing costs, meaning that Microsoft is losing at least $126 on every Xbox 360 system sold in the US, and at least as much in Japan. The strategy of selling a console at a loss is common in the console games industry, as console makers can usually expect to make up the investment with revenue from game licensing. Also, since Microsoft owns the patents for all custom hardware used in the Xbox 360, they can easily switch to new fabrication processes or change suppliers in the future in order to reduce manufacturing costs. This flexibility stands in contrast to the situation faced by the original Xbox, which contained a processor from Intel (a slightly modified Pentium III) and a GPU from NVidia (a modified GeForce 3). Both of these were very similar to "off the shelf" PC hardware and were therefore sold to Microsoft at inflated market prices. Because of these chips and the added expense of a hard drive component, Microsoft was never able to reduce the cost of manufacturing an Xbox below the break-even point. Microsoft's home entertainment division posted a loss through nearly every quarter of the console's lifecycle as a result. Microsoft hopes to avoid such a predicament with its new console, the company is predicting that a greater market share and falling hardware costs will make the Xbox 360 a profitable item.

Adapted from the Wikipedia article "Retail configurations and pricing", under the G.N U Free Docmentation License. Please also see http://en.wikipedia.org/wiki