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Microsoft Slashes Xbox to $149

29 Mar, 2004 By: John Gaudiosi

As expected, Microsoft is slashing the price of its Xbox game console from $179 to $149, effective March 30.

In addition to the lower hardware pricing, Microsoft has reduced the price of hit Xbox games Project Gotham Racing 2, Crimson Skies: High Road to Revenge and Counter Strike to $29.99, and Voodoo Vince and Grabbed by the Ghoulies to $19.99.

With the lower price point, which brings the console closer to the mass-market price point that Nintendo's $99 GameCube entered last September, Microsoft is offering games targeted at families for $19.99. Current Platinum Family Hits include THQ's Finding Nemo and Electronic Arts' Harry Potter and the Chamber of Secrets. Additional games will be added throughout the year.

“I think Microsoft will see an increase of hardware sales between 15 percent and 20 percent over the next three months as a result of the price drop,” said John Taylor, analyst, Arcadia Investments.

Taylor does not expect to see a response from Sony, unless Xbox sales spike above 20 percent. Sony Computer Entertainment America EVP Andrew House outlined a 10-year life cycle for PS2 at last week's Game Developer's Conference in San Jose, Calif. And Taylor said House stated that Sony would run its own course, rather than reacting to competitors' moves.

A price cut for PS2 is expected this year, and video-game analyst Mike Wallace at UBS expects Sony to cut its hardware to $149 before the May E3 show in Los Angeles. A second round of price cuts for both Xbox and PS2 to $129 is also expected by this fall, according to Wallace.

Several analysts agreed that Sony will not announce any price cut right away to avoid looking like it's playing catch-up to Microsoft, especially since Sony is in the driver's seat for the current video-game cycle.

Microsoft's price cut is part of a move by the company to court gamers who already own PS2, according to Taylor.

Sony continues to run its own course and hopes to extend the life of its PS2 well beyond the PS one, which is still selling hardware and software. Microsoft is expected to launch its next Xbox, code-named Xenon, at the end of 2005. Sony's PlayStation 3 isn't expected to launch until 2006, at the earliest. Sony has a huge installed base of PS2 owners that should reach 100 million worldwide within two years. That's plenty of incentive for publishers to continue to introduce new games for PS2. The fact that development for PS3 and Xenon is expected to increase well beyond the $5 million to $7 million range that the average PS2 game costs to make is also an incentive to stick with the current generation of systems for as long as possible.

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