With the news hitting earlier today that the Xbox 360 Elite will drop $100 in price on September 22, I jumped on the phone to Microsoft to ask them why.
I spoke with Xbox Australia's category manager for the console and accessories, Adam Pollington. Our chat began when I asked Adam if he had woken up last week to Sony's announcements and suddenly realised that the Elite was now the most expensive console in the market. He replied that such price adjustments are always planned well in advance.
"It's definitely not a reaction to Sony," he said. "It's quite coincidental that both of us have taken price drops in a similar time frame. I think naturally, promotional and pricing activity does tend to come at this time of the year as we turn to the holiday season. We always take that into consideration and we want to give customers access to the lowest price point we can offer when the majority of those customers are coming into stores to purchase."
I noted that while the Elite had fallen $300 in price since it launched at $749 and the PS3 had now halved its original launch price of $999, the Wii hadn't budged from $399 the whole time. Pollington suggested Nintendo may look to a price drop of their own closer to Christmas.
"You know, we've always taken our hats off to the Wii. They've come to market with a product that is somewhat different to the competitors and has really grown the market to include people who wouldn't normally have picked up a console. They have really opened up the market and that does provide an opportunity for Xbox 360 as well. I guess they haven't really seen the need yet to decrease price, but we'll see what happens in the coming months."
I asked Pollington what he thought of the PS3 Slim. He was quick to turn it back around to his own console, noting that "whilst [Sony]focused on adjusting the cosmetic appeal of the console and taking a price drop, Xbox 360 still presents the best value in terms of gaming and an entertainment experience."
I asked why they hadn't just dropped the Elite to the current Pro price of $399, since they're phasing out the Pro anyway. Pollington pointed out the "value difference" between the storage capacity of the two consoles, "especially if you look at the stand-alone accessory price."
Pushing further, I said surely they would drop the Elite to $399 in time for Christmas and once all the Pro consoles had sold out. Pollington would only refer back to what they've announced today, a $100 price drop for the Elite.
I asked why the Arcade hadn't also seen a price drop.
"In Australia we've been quite fortunate in that, despite currency fluctuations, we've been able to maintain the Arcade at the extremely affordable price of $299," said Pollington. "That's a pretty sweet price point if you look at where that lines up against the competitors; it's actually a fair bit cheaper, almost half the price of the PS3. Considering that you still get access to all the movies on demand, gaming, Facebook, Twitter and so on, it's a very compelling entertainment experience. It's such great value for customers that we didn't feel the need to take a price adjustment on the Arcade console."
I noted that the Arcade plus the 120GB hard drive would cost $500, making it $50 more expensive than the Elite. Pollington explained that it's all about offering choice "because all of our consumers have different needs and wants."
"I think one of the main reasons for eliminating one of the SKUs was to simplify the choice for the customer," he said. "When we first launched we had two SKUs and now we're getting back to that. We now have the entry-level, affordable price point console and the premium, upper-tier choice at a $100 reduced RRP."
Finally, Pollington told me that while the recommended retail price for the Elite is now $449, it doesn't mean you won't see retailers offering it for less, just as they do now.
I asked whether we might see retailers offering the console on its own, minus Halo 3: ODST, for an even lower price. Pollington confirmed that the Halo 3: ODST offer is complimentary with every console.
"I can't imagine too many retailers wanting to sell the standalone console when a free game is on the table for their customers," he said. "It's not like the retailer has the choice of whether to drop the Elite by a further $100 or offer Halo 3: ODST, the new price of the Elite console is $449 and Halo 3: ODST is a complimentary bonus to that during the launch period."
So it looks like I was bit off with the predictions I made last week for the 360. I'm a little surprised the Elite didn't drop straight to $399, but I guess there are still a few too many Pros left at retail. I also find it a bit weird that Microsoft is still producing two different hard drives, when they could surely reduce costs by manufacturing just the 120GB drive.
Still, $449 for the Elite and a copy of ODST is really a pretty good deal. What are your thoughts on the price drop? Where are your console hardware dollars going to go this year?