Interesting Timing

so.  there has been some hullaballoo about microsoft offering free repairs on the original batches of of xbox 360’s.  most folks are thinking “duh!”  and a lot of other people are saying things like “better late than never.”

i’m a little skeptical tho.  maybe it’s the marketing guy in me, but, timing anyone?  hello?

here’s the skinny:

i don’t buy the “analyzing recent repair data” line.  recent?  it’s been almost a year.  there was a flood of overheating requests at the beginning.  they didn’t need a year to figure this one out.

so, what do they do?  well.  instead of a price drop, they are keeping the same “value” price, but using incentive techniques like bundling to add value to the 360’s on shelves.  (stay with me, here.  i’m getting there.)  so, what is another subsidized “value-add” they can come up with?  fixing (rightfully) busted xbox 360’s.

“all goodwill,” you say.

“exactly,” i say.

they know (as well as anyone with half a brain) that sony’s ps3 is going to have huge, huge manufacturing problems coming out of the gate.  and, similar to “bundling” strategies employed by nintendo and microsoft, sony also has to deal with “free replacements” for this first batch.  why?  because microsoft is offering it on their xbox 360’s.

however, the difference is that microsoft is starting to break even on the hardware, so, it’s not that big of a deal to them.  it just adds more cost pressures to sony who’s already taking a gigantic loss on the console itself.

so, it comes out as a win-win for microsoft.  foster goodwill with the market.  put another nail in the coffin of a competitor.

m3mnoch.

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3 comments so far

  1. fawazr on

    is MS really breaking even on the 360? Are you saying that the 360 has become profitable in less than 1 year? I’m more than eager to see the data supporting your claim.

  2. m3mnoch on

    yeah. crap. i can’t remember where i read it. i wanna say it was somewhere talking about how their new manufacturing techniques were saving them 20% already. since it’s costing them ~$520 for the premium console, that’s getting damn close to breaking even already.

    here. lemme see if i can dig it up really quick. hang loose.

    m3mnoch.

    [edited to make the percentage savings more clear]

  3. m3mnoch on

    voila.

    http://www.digitimes.com/systems/a20060726A1001.html

    negotiating component cost reductions.

    Microsoft, to prepare for the price cut, has negotiated reduced production costs for the Xbox 360 with Taiwan-based manufacturing partners, stated the sources. The manufacturers estimate that the total production cost can be reduced by 15-20% due to diminishing costs for most components along with increasing production scales and decreasing defect rates, the sources pointed out.

    hence the not “cutting the price” but “bundling” instead. smart move. the wii, had it come in under $200, tho, i’m sure would have prompted a price cut.

    ah. the games we play. (pun intended)

    m3mnoch.


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