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Xbox 360 Price Cut in 2011

by William Schwartz

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At this stage of the console generation consumers have been condition to pay much less for hardware five years into a generation.  With consumers waiting for the next price drop analysts also think the big three could all benefit from a drop in prices.  An analyst from Wedbush Morgan believes that the Xbox 360 is in the best position to act first and put pressure on it’s competitors by introducing a price drop.

“After maintaining console prices at historically high points throughout 2010, all three console manufacturers appear to us to be poised for price cuts in 2011. U.S. PS3 sales were flat in 2010, while Wii sales were down more than 25% and Xbox 360 sales up over 40%; we think that Microsoft is in the driver’s seat on price cuts, and expect the company to lower price on its console at the first sign of a year-over-year sales decline,”

The analyst believes Microsoft has options at this point.

“Since the ‘whisper quiet’ black Xbox 360 was launched in June 2010 and Kinect launched in November, we think that sales will be up year-over-year at least until June, and we don’t anticipate a price cut for the 360 until then. Microsoft has the ability to bundle Kinect with any of its 360 models at a compelling price point (we remain convinced that the manufacturing cost of Kinect is under $60), and we expect to see a Kinect console bundle priced attractively by June 2011 if not sooner. In our view, a $299 price point for a Kinect/250Gb 360 bundle would force Sony to bundle Move with a PS3 at the same price point, and we think that Wii sales will suffer mightily with such competitive pricing,”

Common sense would tell you that with Microsoft coming off of one of the best years in the console’s history in 2010, they aren’t too compelled to give in to consumer pressures, but if sales start to slump the analyst believes that they are positioned best to jumpstart sales with a price cut.

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