Exchange Rates Make Microsoft's 360 Price Hike A Little Iffy

Like the US, the 360 Elite is getting a hefty price cut in the UK. But unlike the US, the price of the Arcade 360 in the UK is about to go up. Hey, Microsoft, what's the deal?

Microsoft Europe's Chris Lewis has told MCV "We are making modest increases on the Xbox 360 Arcade console as you can see. The reality now is partly to offset currency exchange rate fluctuations which have impacted us in local market conditions – particularly in the UK."

"And you've seen other consumer products operate in the same way. But I think even with that we still offer the most affordable console in the marketplace out there."

"So we've reset the price point largely based on exchange rate fluctuations, but are still very happy we offer great value through the Xbox 360 Arcade."

Currency fluctuations, eh? Take a look at this chart below, showing the value of the Pound against gaming's three major currencies: the Yen, Euro and US Dollar. Your eyes, they do not deceive you. The pound has increased in value over the past six months, meaning overseas purchases are cheaper, meaning the exchange rate excuse doesn't hold water. And it's the same for the Pound against the Yuan, as well as for the Euro against all mentioned currencies.

So if the price hike was "partly" due to "currency exchange rate fluctuations", we'd love to know what the rest of the reason was.

Kotaku AU note: Here's the Aussie chart for comparison:

Arcade hike due to ‘currency fluctuations' [MCV]


    Thanks Luke.

    However, the real statistic to look into would be Purchasing Power Parity, because exchange rates are set by governments and thus are not the real determinents of profit. While the PPP of Britain has been climbing, it hasn't climbed as fast as the graphs you have shown. Also if you look at the numbers below the graphs you have included, they describe the real situation. All these currencies are simply climbing up from very low numbers (which would appear if you extended your graph back a few months). The fact of the matter is that when the "recession" hit, demand for dollars shot up as it is seen as the safest currency in the world, but now that the recovery is in swing these rates will go back to normal. This could mean that Microsoft is simply trying to average out their costs from the previous year or so, when they were taking real losses. Finally, ocean shipping rates have almost doubled in the past few months as global trade has begun to return to normal levels. There may also be other factors, but those are the ones that I can see and they can likely account for at least 80% of this price change.

    Hope this helps,
    -Your Friendly Neighborhood Economist

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