Microsoft's Pricing Strategy

It seems that my complaints against Sony worked out after all. After keeping secret as to the status of their PSP 2.0 firmware upgrade, they finally got off their lazy butts and posted the download on their website. Go figure that when they release the upgrade, I am out of town without my PSP or any internet access whatsoever.

Once I am able to get back to my test lab and give the 2.0 upgrade a run through, I will provide my opinion.

But now that the 2.0 situation is done, I can finally get on the topic I had in mind for last week. Last week, Microsoft came out about their pricing for the Xbox 360. Much to everyone's surprise, they actually have two SKUs listed.

The first SKU is for what Microsoft calls the "Core Package." For $299, it will consist of the Xbox 360, wired controls, and a standard A/V cable. But for an extra $100 (making the total price $399,) Microsoft offers the full Xbox 360 package, consisting of the Xbox 360, a detachable 20 GB hard drive, wireless controllers, a high definition A/V cable, Xbox Live headset, and for a limited time, a Media Center remote.

As many other people are, I am wondering why Microsoft would offer both packages? Microsoft claims that the "Core package" was designed for the casual gamer who wants to customize their own experience. But what about those so called "casual gamers" who already have an Xbox 1 and want to upgrade their games to Xbox 360? They are, at first, out of luck.

The Xbox 360 was listed as backwards compatible with the more popular Xbox 1 titles, and surely that will include classics like Halo 2. There is a catch however. To play Xbox 1 games on the 360, the 20 GB hard drive is required. My guess is that since the 360 runs on a different architecture from that of the classic Xbox (IBM chipset with ATI graphics compared to an Intel chipset with nVidia graphics), that games will need to be emulated, and each title will most likely need a profile installed. Eventually these profiles will take up a lot of memory, and a 64 MB memory unit will not be enough, hence the requirement of a hard drive.

The hard drive itself costs $100, so for anyone who buys the "Core package," as well as the hard drive, will also be out $399 plus tax. Thus, you are paying the same price as the complete package without all the extras (the remote, high definition cables, headset, etc.). Doesn't this make the idea of the "Core package" seem stupid?

Of course there will be those individuals who will criticize me about my belief on bundles. Yes, I have been very critical about retailers forcing bundles to customers when they are just extra junk that they don't want. However, just like with the PSP, what Microsoft is doing is NOT a bundle. The junk I mention in bundles are usually D-grade titles that no one in their right minds would purchase. I'm sure we will see EB and GameStop offering these crap titles as the 360 launch draws near.

Speaking of GameStop, I did talk to a rep at one of their stores (not the one that would not take my trade-ins a few weeks ago), and they told me that every pre-order that they received (mine included) are automatically listed for the complete package. It will be interesting just to see how many of those pre-orders make the jump to the "Core package," not to mention any new purchasers who end up with one.



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