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Why You Can't Buy A 360

Zonk posted more than 8 years ago | from the i-vote-for-a-space-conspiracy dept.

XBox (Games) 168

Slate Magazine is running a story about the difficulties of finding an Xbox 360 this holiday season. They explore the reasons behind the console shortage, and have some ruminations on Microsoft's motives. From the article: "So, supply shortages are a fact of life. The puzzle is somewhere else: Why don't companies raise prices when supply is short and demand is frenzied? Leaving aside oxygen and a few other essentials, there is no such thing as an absolute shortage of anything: There is only a shortage if the price is too low. At the moment, Microsoft is easily selling out the half-million or so Xbox 360 units (there's no official number) for prices starting at $300 for the basic package. Why doesn't Microsoft price them at $700 instead?"

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ebay! (5, Insightful)

dismorphic (730041) | more than 8 years ago | (#14272298)

no need for microsoft to raise prices, as people on ebay will surely sell you one for a mere $1200!

Re:ebay! (1)

Fried-Psitalon (929587) | more than 8 years ago | (#14272321)

And I'm sure Microsoft would just LOVE the negative press that comes from jacking the price way up because they know they can get away with it. 300 is already pretty aggressive - if they went to 700, people would just extend their middle digits and wait a few months to buy a PS3 for a whole lot cheaper.

Re:ebay! (0, Flamebait)

Ontain (931201) | more than 8 years ago | (#14273333)

if you think 300 is too much, you aren't going to be better off when the PS3 is released for 500-600

Re:ebay! (0)

Anonymous Coward | more than 8 years ago | (#14273523)

So.... are you an MS employee? Or just an Xbox fanboy? Show me proof that the PS3 is going to be $500-600, Mr. curiously high UID. If you do, I will shove my foot directly into my mouth.

Re:ebay! (2, Funny)

Wylfing (144940) | more than 8 years ago | (#14272748)

people on ebay will surely sell you one for a mere $1200!

Or, at least, a picture of one.

Re:ebay! (5, Insightful)

Dachannien (617929) | more than 8 years ago | (#14272850)

Your comment may have gotten modded funny, but I'd have given it an insightful, instead. This phenomenon is called arbitrage [google.com] , and is quite common with heavily-traded commodities. It's not surprising that the same concept would be leveraged for profit here. In this case, Microsoft doesn't raise the price in the retail market because of the PR fiasco related to jacking up the price, while actual supply and demand concerns allow the price in the resale market to be much higher.

Re:ebay! (2, Insightful)

AuMatar (183847) | more than 8 years ago | (#14272985)

No, they don't raise the price because the 360 is meant to be a complimentary good. The real money is in games. If they price the machine high, fewer will be sold. THat means fewer games sold, which means less money in total. By keeping the price lower, they sell more consoles and will eventually sell more games, for more totala profit (or less total loss, if you look at how much they lost on the Xbox 1).

Re:ebay! (1)

Pentop (120848) | more than 8 years ago | (#14273109)

No, they can't sell more consoles by pricing them lower! They can only sell as many as they can make. And since they're already selling every single one that they can make, they might as well jack up the price until supply surpasses demand.

Re:ebay! (2, Insightful)

AuMatar (183847) | more than 8 years ago | (#14273403)

This isn't a short term game. By increasing prices, you brand yourself in the minds of customers as being too costly. They'll spend their money on other things, before you get the supply back and lower it again. Supply and demand is not the total of economics- its the starting point. The best long term strategy and best short term strategy are rarely the same.

Stores (1)

Dysproxia (584031) | more than 8 years ago | (#14272326)

You might also want to ask why the retail stores won't price them higher. They are the middle man between MS and the consumer, they should know the price game better.

Re:Stores (5, Informative)

feed_those_kitties (606289) | more than 8 years ago | (#14272414)

Because Microsoft has dictated what the price will be. You raise your price higher than that, you can kiss any future shipments bye-bye.

Same thing with minimum pricing. Ask why everyone sells iPods for the same price - because Apple says "you undercut our recommended pricing, you never see another iPod."

It's a game the retailers all play, or they don't get the hot products to sell.

Re:Stores (1)

RoadDoggFL (876257) | more than 8 years ago | (#14273006)

I don't know how this [joystiq.com] worked out... but I'm guessing they weren't getting many units to begin with, huh?

Re:Stores (1)

nelsonal (549144) | more than 8 years ago | (#14273382)

In the article he mentions using an auction to sell the initial allocations, which is effectivly what happened except the bidding was done through waiting in line the night before the sale (which makes no one any money). MS could just as easily have announce that all produciton through Christmas would be sold at auction but in 2006 the price will be set to $300/$400 or some other price. Effectivly most consumers expect consoles to be sold in a Dutch auction format (wait long enough and it will eventually fall to $99 or less). So this would not have been a huge change from the norm.

Re:Stores (1)

MindStalker (22827) | more than 8 years ago | (#14272478)

And thats the real story. MS can't raise the price as they already publically announced the price and it would be real bad PR to raise the price on their part, as well if they raised the price they charge retailers many retailers would simply buy less stock, and their interest is in popularity not a few quick bucks. The retailers on the other hand would be very smart to have a floating price based upon demand... Unfortunatly for them as I understand they are all contractually obligated by MS to charge an exact price. I've also heard that the retailers make very very little profit from console sales, and simply use them to leverage their game sales as well.

Re:Stores (0)

Anonymous Coward | more than 8 years ago | (#14273731)

The profit is about $5 per unit.

Overpriced (1)

Echnin (607099) | more than 8 years ago | (#14272328)

Uh... because everyone who wants a 360 that bad already has one. Is there really such a frenzy to get one in the US? Just get one from Japanese eBay; I've heard [slashdot.org] there are plenty of leftover machines there at an affordable price.

Re:Overpriced (1)

the computer guy nex (916959) | more than 8 years ago | (#14272540)

"Uh... because everyone who wants a 360 that bad already has one."

This is complete and utter bullshit. Best Buy will release more 360's before Christmas and I guarantee there will be lines similar to the launch date.

I won my 360 at a Wal-Mart in a lottery. 46 people showed up for 4 Xboxs.

Re:Overpriced (2)

ivan256 (17499) | more than 8 years ago | (#14273120)

That must be some odd definition of "won" that I've never heard of before. You still had to pay for it, didn't you?

This whole thing is nuts. There are plenty of new games out for the consoles that are plentiful to justify waiting until there are a decent number of games and a decent supply to buy a 360. So many in fact, that you probably don't have time to play them all between now and then. Anybody who stands in line in the cold for hours for an 8% chance of buying one (for themselves or as a christmas present) is a moron.

Re:Overpriced (0)

Anonymous Coward | more than 8 years ago | (#14273299)

While I agree that standing outside for 8 hours to buy a game console is insane, isn't MS silly for not taking advantage of the early adopters? There are going to be several hundred thousand people who would be willing to spend $700+ on the machine. Take their money, turn a profit on each box sold and then drop the price six months later. Dump the extra cash into building more games. Once the game library builds, lower the price again.

Re:Overpriced (1)

KDR_11k (778916) | more than 8 years ago | (#14273548)

MS severely overpriced the original XBox here, too few people bought it and when they dropped the price very early the people who paid much for them were understandably quite angry. MS sent out apology packages to those people (additional controllers, games and a DVD remote, I think).

Re:Overpriced (1)

Kazzahdrane (882423) | more than 8 years ago | (#14273126)

So what about all the people still complaining that they can't get a 360? Oh wait, I guess they can't want one bad enough because they won't empty their bank acounts to buy a games console. Maybe people don't want to import and would rather get one locally in case there's a problem with oh, say the PSU?

No need to beat around the bush (1)

voice_of_all_reason (926702) | more than 8 years ago | (#14272330)

We all know why. Billy is gambling on being able to create a monopoly by outpricing all the other competitors. You can do that if you have money to burn in the short run. Then, when you're the only gig in town, you can play with the prices to increase profits while keeping others out.

Also, they're not losing as much per unit as all the articles say, because those pieces usually don't take into account that games and accessories are almost all gravy.

Re:No need to beat around the bush (1)

Yjerkle (610052) | more than 8 years ago | (#14273441)

The whole point of the article is that this argument makes no sense. Microsoft is producing consoles as fast as they can, and every single one of those consoles is getting into the hands of a consumer as fast as their supply chain can manage it. The same would still be true if the consoles were priced at $500, and maybe even at $700. If they can build up their monopoly just as quickly, but with money coming in instead of going out, why aren't they doing it?

Re:No need to beat around the bush (2, Interesting)

voice_of_all_reason (926702) | more than 8 years ago | (#14273678)

Because the supply bottleneck won't last forever. They have to keep both the fanatics and fence-sitters happy for now.

How would you feel if you paid $700 for an Xbox in November and then the schmuck down the street picks it up for $300 2 months later? You'd likely see it as MS gouging its loyalest fans for a quick buck and catering to the common crowd once your wallets were tapped.

Re:No need to beat around the bush (2, Insightful)

Yjerkle (610052) | more than 8 years ago | (#14273780)

People who are buying Xboxes on eBay are going to be in exactly that situation two months from now. More than that, they already know that they will, and it doesn't seem to bother them enough to keep them from buying. If Microsoft were doing the same thing, everyone would still know that the high price would only last as long as the supply shortages. The only difference is whether the extra money goes to Microsoft, or some random person who was lucky enough to be able to buy one early. I can't claim much insight into the minds of the people who would pay an extra $400 to have an Xbox a few months earlier, but if they're not mad at the eBayers they're buying from, it's hard to imagine they'd be mad at Microsoft, since they'd obviously rather have an Xbox now than an Xbox and $400 two months from now.

Jeebus (1)

fwitness (195565) | more than 8 years ago | (#14272355)

Now we encourage them to raise prices. Lovely. Why not just add in machine-specific DRM so each game only plays on one particular consoe? According to the article, people are going to buy the damn thing right now anway.

I understand the economic logic behind his thinking. However, when you obviously ass-rape your most-dedicated customers (by pricing at $700 for the core bundle, as the article suggests) perhaps they won't like you much tommorrow? Just a thought.

Re:Jeebus (2, Insightful)

GigsVT (208848) | more than 8 years ago | (#14272379)

A hard-core fan would be happier paying $700 than not getting one at all. That's the point of economics, the people that want it the most will pay the most.

Higher prices ensure that only the hard-core fans get the console, and other people will just have to wait until the price drops to a point they are willing to pay.

Re:Jeebus (2, Interesting)

ArsonSmith (13997) | more than 8 years ago | (#14272730)

Perhaps they wouldn't piss people off if they put out a price map. First run will be $999. Second run 2 weeks later will be $699 final run after Xmas will be $299 form then on. This way you can advertise it as pay what you want at the time that you want. If you want it 2 weeks earlier than everyone else you'll pay $300 more. is it worth it or should you just wait the 2 weeks or do you want to wait until after Xmas? Would all but stop the ebay scalping and would help Microsoft to not take a loss on the first ones sold. (ohh I'll get modded down for that I know. I can't give a suggesting that'll make MS money)

Re:Jeebus (1)

fwitness (195565) | more than 8 years ago | (#14272842)

That sounds like a plan. I like it. Anyone see any problems with this? Hard though I may try, that sounds ridiculously reasonable.

Re:Jeebus (0)

Anonymous Coward | more than 8 years ago | (#14272928)

The problem comes when you don't sell in those first two weeks. People might get the impression that it's not worth it... Also, when you do your chrismas shopping, you buy 'now'. So if XBox360 is out of the price range, it means a competitor will get the money.

Uhmm.. PR? (3, Insightful)

Propagandhi (570791) | more than 8 years ago | (#14272356)

At the end of the article this guy suggests that Microsoft should have sold all of their initial stock via auction. Ignoring the catastrophic potential for fraud, he claims that such a move "wouldn't have damaged their public image because the buyer is setting the price, not Microsoft" (paraphrased). That's the most laughable conclusion I've ever read in a Slate article, which is saying something...

Not only would everyone have been pissed that they weren't getting a fair shake at a 360 (especially real gamers, who aren't known for their endless funds), but the profits garnered from a few thousand 360's sold for ~$600 would have been miniscule (on the Microsoft scale of profits, of course). Furthermore, the ill will which certainly would have been created (contrary to author's opin, gamers would have been PISSED) could undermine the "real" launch of the console, when the normal demand could have been met.

All in all, this guy's an idiot for thinking that because some people were willing to pay a ridiculous amount for a 360 all of the consoles should have been sold at a ridiculous price.

Re:Uhmm.. PR? (1)

GigsVT (208848) | more than 8 years ago | (#14272435)

because some people were willing to pay a ridiculous amount for a 360 all of the consoles should have been sold at a ridiculous price.

He never said that. The higher prices would generate a relatively small amount of profit in the long run, yes. The point of them wouldn't be mainly to generate profit, it would be to ensure fair allocation of a limited resource. Making more profit would be a nice side effect.

Those willing to pay more would do so, and those people are the ones that wanted it the most. People that didn't want it as badly wouldn't pay as much. This is economics 101.

Re:Uhmm.. PR? (0)

Propagandhi (570791) | more than 8 years ago | (#14272471)

Those willing to pay more would do so, and those people are the ones that wanted it the most. People that didn't want it as badly wouldn't pay as much. This is economics 101.

Yeah.. no shit.. I get the supply and demand thing.

Problem is, in selling the console in such a fashion you piss off the loyal fans. The fans you've been hyping up with MTV specials and game rag "exclusives" for months. You've promised them all the opportunity to buy the XBox 360 at the low-low price of $300 (or $400 for the real one, but I won't delve into that).

But wait! There's money to be made, lets drop all those launch promises and sell the shit on EBay! $10 million (note: probably less) in profits is totally worth betraying a notoriously bitchy customer base, especially when our competition is due in only a few months.. Oh.. wait.. Maybe not a good idea.

Re:Uhmm.. PR? (1)

drix (4602) | more than 8 years ago | (#14273271)

Yeah.. no shit.. I get the supply and demand thing.

Actually, I'm not sure you do. You make the loyal fans happy by raising the price. The serious, dyed-in-wool gamers I know are the guys who would e.g. curtail food expenditures for the month to come up with the extra $400 needed to buy a $700 XBox. In fact, I can't think of a better measure gamer loyalty than willingness-to-pay for a hot new console. (A lot of it is the cachet of having something no one else does.) Most of them are pissed right now because they'd be willing to pay more but can't because they're having to compete with all the casual gamers / their parents, who are more than willing to try their luck at Best Buy for $300 but would say Aww-fuck-it at $700.

Their solution is to go on eBay, which is exactly what the parent poster and TFA were suggesting.

Re:Uhmm.. PR? (1)

TikiTDO (759782) | more than 8 years ago | (#14273477)

You would perhaps make the most hardcore of the loyal fans happy, but the majority of the fans out there would not be willing to blow that extra money, though they still consider themselves loyal fans. Considering MS has been harping endlessly about the price of the console suddenly going back on their words would generate a lot more negative PR than the current shortage is generating.

The people raising a stink right now will buy a console anyway when it becomes more common, then the majority of them will go to their friends and prattle on like loyal fan boys/girls totally ignoring their screaming from before. If on the other hand the price suddenly exploded to $700 then you'd have a lot of mighty pissed of fans (Not to mention plenty of companies ready to jump on the bandwagon) yelling for blood. MS probably doesn't want the next CNN headline to be "Microsoft backs on price promise to raise profits" or something of that theme, especially if it's followed by a few nice articles to the tune of "Sony and Nintendo promise to give customers consistent prices."

Law of supply and demand works well for established products, but there is more to consider to this situation than you Economics 101 class taught you.

Thinking about this quarter only? (1)

Nicolay77 (258497) | more than 8 years ago | (#14273771)

And economics 101 doesn't teach to plan the future but only think about the profit of this quarter?

If MS did that, as soon as the rival consoles launch, the sales of 360 will stop to almost zero because in the mind of the buyers the 360 would still be "that overpriced console that ripped us!" and they will say "we get better graphics at HALF the price!!", even if this facts are not entirely correct, they would be in their minds, and mindshare matters.

MS is trying to stop having the 20% of the market and going to a 50% or more. They are selling at loss already. If they achieve this 50%, the next generation will be owned by them. Thinking about this quarter only, will give them about 5% marketshare, after current consumers get pissed off and convince their friends to never buy a 360.

Total profit would be much lower, because consoles are a scarce resource only until competitors launch their own.

Re:Uhmm.. PR? (1)

bateleur (814657) | more than 8 years ago | (#14272572)

I think you're completely misunderstanding the author's intent in writing the piece.

Tim Harford - the writer in question - writes the "Dear Economist" column for the Financial Times. Here it seems to me he's doing something very similar to what he does there: applying well understood economics principles to real life situations and seeing where it leads.

It's interesting stuff because if we're being honest none of us gave a second thought to why Microsoft chose to underprice a scarce resource. Or at least if you did I'm willing to bet you're in a small minority.

In my opinion, the article achieves a lot in making the reader think about stuff. And as for the effects of exploiting the 360 shortage for commercial gain, we need look no further than Best Buy, right?

Re:Uhmm.. PR? (1)

ArsonSmith (13997) | more than 8 years ago | (#14272770)

Wasn't the first run something like 50,000 units? If they all sold at 300+ over what they were planned for that'd be 15 Million in the first 2 days of launch. Not chump change by any means.

I am 100% for the ebay market. Let the buyers set the price. If there was an ebay auction where everyone could bid on 50,000 Xboxes that would, well, be a very interesting auction.

Supply vs. demand (5, Interesting)

alienw (585907) | more than 8 years ago | (#14272366)

Because supply vs. demand only works in freshman economics class. If Microsoft priced the things at $700, nobody would buy them if they knew the PS3 would be $300. Furthermore, there are certain expectations for console pricing. Every company that tried to make a $700 console (namely, 3DO) died a slow and painful death.

Besides, the idea behind selling consoles is not to make money. The real money is made on games. The console needs to go to the people who will buy the most games, which are also the people most eager to wait in line at Best Buy all night to grab a 360.

You illustrate an interesting issue. (1)

hackwrench (573697) | more than 8 years ago | (#14272608)

Nobody has faith in the basic economic controls. Setting a $700 price point is stupid, but setting the price point at this time at $300 is stupid too. The purpose of the economy is to allocate the finite resources available for production to the production of the most valuable goods. Letting the price float means that there will be sufficient money to continue building the product until all demand is met. Any money left over is available for reinvestment in other projects to meet new demands.

Re:Supply vs. demand (2, Informative)

Naerbnic (123002) | more than 8 years ago | (#14272736)

You're under the impression that it would be Microsoft setting these prices. You are of course correct if $700 was the long-term set price, but as other posters have said this price would only be temporary. Since this shortage is only at launch, if the free-market price were used, the people who put the most value behind owning a 360 would own one. No one can directly determine what that price would be except those people who want to buy them. In the stead of not being able to pay more money to make sure they get a 360, people got in lines which of course is also its own cost. I would imagine that people who stood in line the longest (and equivalently got them) would also probably be more willing to pay an extra couple of hundred dollars to get a console without having to sit out in the cold (or perhaps just really like sitting in lines).

Once the supply of 360s increased, the price would drop down to the minimum that Microsoft was willing to charge for them ($300 or $400), and things would continue as normal. The 3DO did die off at $700, but that was because it set the price way too high for demand. Right now there is huge demand for the 360 which will probably wane as more units become available. As long as Microsoft were to follow that demand with their price, their system would still sell.

Re:Supply vs. demand (2, Insightful)

alienw (585907) | more than 8 years ago | (#14272891)

You are completely wrong. Demand is a function of many factors, not just price. Hype is a much bigger factor. Shortages create hype, and hype creates demand. When Microsoft ramps up their production in a month or two, there will hopefully still be enough hype to generate large demand. The PS2 launch was one of the best examples of this technique.

If Microsoft just priced the consoles to generate minimal demand, the hype will die down and the console will get a reputation for being overpriced. Since demand will be equal to zero, there will be very few sales once the price goes down.

Furthermore, huge price drops are considered to indicate a dead product, and few people want to spend money on a dying product. Sega had to lower the prices for the Dreamcasts to $50 to get the damn things off the shelves.

Re:Supply vs. demand (1)

hackwrench (573697) | more than 8 years ago | (#14273383)

I'm sorry, but hype is not a valid market control mechanism. Market control mechanims exist to ensure that the products of most value to people get produced in appropriate quantities. This means the elimination of shortages.

Re:Supply vs. demand (1)

Naerbnic (123002) | more than 8 years ago | (#14273397)

I'll grant you the point that shortages create hype. The demand curve can be fickle, and you have to take any thing which could affect it into account, but think a minute about what you're saying. Do you think that the news that 360s are selling on eBay for ~$700 helped or hurt the hype? Furthermore, who do you think set the $700 price tag on eBay? The demand is there, and some people are willing to pay that much for a 360.

I don't understand the term "minimal demand". A company's goal is never to create minimal demand, only to ensure that supply meets demand. The only time a console is overpriced is when available units aren't sold because people are unwilling to pay the asking price. Of course, with very few units out there, that price could be rather high. As more units come in, the price would drop lower, down to the minimum that the producer is willing to sell them for. Things don't get a reputation for being overpriced. Price is an obvious quantity, which people can see at any store. Things get a reputation for being low quality, poorly supported, faulty, and so on. All things that are not obvious from looking at the console.

Finally, the huge price drops you're talking about indicated a dead product because it set the price very low even for a console. Sure, if Microsoft dropped their price to $50, I would think the console is not doing well either. But if it drops from $700 to $400, since they already quoted a $400 price tag I wouldn't hold anything against them.

Re:Supply vs. demand (1)

Botia (855350) | more than 8 years ago | (#14272943)

Raising the price to $700 per console (premium edition) would have maid the same as selling 6 games for the unit (figuring $50 profit per game). While that might have increased their short term profit, I agree that it would be a bad decision in the long run.

What Microsoft did wrong was that they decided to do a near simultaneous world-wide release. This prevented them from having the supply needed for everywhere but Japan where the initial game lineup is so weak that they are having problems selling the 360's. They should have staggered the release of the 360 as all other consoles have done.

On another note, they should not have been selling the basic version for this initial release, at least not in the US. The people who are buying the 360's first are the die-hard gamers such as myself. None of us wants the basic edition. We all need the hard drive for updates, reverse compatibility, etc. Whoever decided to sell the basic editions for the release made a big mistake. They should have at least made enough hard drives available so that those with a basic edition could upgrade. Then they would have at least made a profit on that without upsetting the unfortunate people who ended up with a basic edition and no hard drive.

Re:Supply vs. demand (1)

NVP_Radical_Dreamer (925080) | more than 8 years ago | (#14273135)

>>>Every company that tried to make a $700 console (namely, 3DO) died a slow and painful death. Actually, they died a fairly quick and painful death.

Re:Supply vs. demand (1)

pappy97 (784268) | more than 8 years ago | (#14273650)

"Besides, the idea behind selling consoles is not to make money. The real money is made on games"

If this is the case, why not give the console to people for free?

If people who aren't even gung-ho get one for free, they probably will buy a couple of $60 games.

Dish Network and DirecTV figured out that the real money is to be made on programming, not equipment. That's why about 5-6 years ago they started to give everything, including installation, free to customers. All you had to do subscribe and Dish Network and DirecTV truly exploded onto the scene as a viable alternative to cable.

Why doesn't a console maker (Sony, Nintendo, Microsoft) go with an absolutely free console if the money is to be made on games? That model seems to work in satellite TV

uh.. this is simple (1, Troll)

Lord Bitman (95493) | more than 8 years ago | (#14272384)

The "shortage" is artificial in order to create higher demand for the product so that people will be in a frenzy to get them one week before Christmas (3 days from today). However, Microsoft has faced the FTC enough to know that if they also raised prices during an artificial shortage, they could face penalties for gouging. Not that being accused of "gouging" for something as non-essential as an X-Box makes sense legally, but it's a risk they don't really want to deal with while trying to eliminate the competition the old-fasioned legitimate way.

Re:uh.. this is simple (1)

Astatine210 (528456) | more than 8 years ago | (#14272426)

“The "shortage" is artificial in order to create higher demand for the product”

Much as my marketing-cynical side would like to agree with you, there may be a simpler explanation for the shortage:

Too many of them are failing their electrical QA test before they make it out of the factory.

Re:uh.. this is simple (1)

Lord Bitman (95493) | more than 8 years ago | (#14273409)

"Never ascribe to malice that which can be explained by stupidity" you say?

Re:uh.. this is simple (1)

reedsr (891163) | more than 8 years ago | (#14272473)

Good points on gouging, but here is an interesting idea that would probably have been better for MS. Initial release prices should have been 100-150 higher, they most likely still would have sold out, then guess what, Christmas discount special. The units sold during the higher price would negate or greatly reduce the loss on the systems sold and then the price drop would be once the next round of systems came out. MS would have 40-60 Million more in their pocket assuming 400k units sold. They would still be in the same situation with total stock and the game attachement rate for the first month would not have to be nearly as high to break even on the console.

Re:uh.. this is simple (1)

Xugumad (39311) | more than 8 years ago | (#14272696)

I'd be more convinced it's artificial if they'd managed to come even close to filling all the pre-orders here in the UK. As it is, my late October pre-order will probably get to me in early February, and anyone trying to get one at the moment is basically stuck risking eBay...

Re:uh.. this is simple (1)

ArsonSmith (13997) | more than 8 years ago | (#14272863)

I don't belive in price gouging on end user/consumer items, except perhaps food but even then it would have to be food over all and not just one or two items. Price gouging can only be done in b2b comerce where one company may have a non-monitary leverage over another company.

1st law of economics before supply and demand, "You don't NEED anything!!"

reason everything is a want. You want an Xbox you don't need one. You want a car. You want to go to work. You want to eat. You want to stay alive. there is no need in anything. You may feel you need a car to get to work, but that is only because you want to work. You may feel that you need to work, but that is only because you want to eat (among other things.) You may feel you need to eat but that is only because you want to live. Even air is just something you want (albeit really bad if it's in short supply)

Second law of economics, again before supply and demand, "The world has unlimited wants." No matter how much you supply people are going to want more. Not nesisarrly more of the same thing, but there is always going to me something else that people want.

Ok now you can insert all the supply and demand stuff here...

Re:uh.. this is simple (1)

bigman2003 (671309) | more than 8 years ago | (#14273359)

I think the word 'need' can be defined for a human as: "Necessary to sustain life."

I don't just WANT to eat, I NEED to eat (in order to continue living.)

The world has unlimited wants? (1)

hackwrench (573697) | more than 8 years ago | (#14273468)

That is an oversimplification. Once my belly is full and I am parked in front of my computer or console, or out getting physical exercise, my wants are sated for the moment. This is true for everyone. Sure, as time progresses, there are infinite wants, but for any given point in time the wants are finite. However the wants for a long time have exceeded the ability to supply them and only now is beginning to approach parity.

It's about the cool factor. (5, Funny)

Supurcell (834022) | more than 8 years ago | (#14272387)

Because a company has finally come around that doesn't care about money. A company who decides that they want to make their customers look cool by being the only one on the block to have their rare game system. If you go out and by commonly available, high-priced system, you are a rich snob. If you go out and mannage to get your hands on a semi-high-priced, nearly-nonexistant system, you are truly the coolest of the cool.

Over analysis (2, Interesting)

Taulin (569009) | more than 8 years ago | (#14272399)

I heard this guy get interviewed on NPR, and he sounds like an intelligent guy, but I think he is over analysing things, and missed the point that MS just got the console out the door as fast as possible, which is why they couldn't stockpile them, as he questioned why they didn't. MS's only intention was just to hit the holiday season and get out as many as possible. The price they chose was only made in the attempt to second guess and match what the PS3 and Rev will sell for. They will most likely still be selling out when the PS3 hits the shelves, and if it is $700 on the shelf next to a $300 PS3, the sells will plumit. Start at $700 and lower $300 in the course of 3 or 4 months is unheard of, and will only scar customers. His idea of MS selling their units through eBay themselves is interesting, but that would only piss off retailers that MS relies upon.

Couple facts (2, Insightful)

the computer guy nex (916959) | more than 8 years ago | (#14272425)

1) Microsoft has a deal with each distributer to control the exact price of each console. Best Buy cannot change the prices to fluctuate with demand. Best Buy can, although, bundle products together to help mitigate the demand.

2) Microsoft will release another 300k or so 360's this weekend. Each Best Buy has from 30 to over 70 ready to sell this Sunday.

3) The 360 will continue to strive not only from what it can do but also how cheaply it can do it. The Power/Price ratio is completely outstanding. You cannot spend 2grand right now on a new PC and come anywhere close to the ability of the 360 (at a measily 300$).

PS3, on the other hand, has taken more expensive routes in developing their console. It will probably debut at aruond $500, and by that time the 360 will be easily at $250.

Re:Couple facts (1)

Lando (9348) | more than 8 years ago | (#14273164)

This strikes me as incorrect, I just bought a system for $2000 with dual core processors and almost a terabyte of hardrive, raid 5 and 4 gigabyte of memory... All far beyond what the 360 has I think. However I don't buy consoles so maybe I am off base?

Re:Couple facts (1)

the computer guy nex (916959) | more than 8 years ago | (#14273454)

"However I don't buy consoles so maybe I am off base?"

That is correct. The 360 will have more graphical rendering power.

The extra memory is meaningless. The 360 does not have virtual memory, the games are designed to run on what it has (and it is plenty). Same with hard drive space.

PC games are designed to be run on 1 processor. 360 games are designed for all 3 of their 3.2ghz cores. The 360's custom video card has no equivilent currently in the PC market.

The reseller dictates the real price (1)

Shivetya (243324) | more than 8 years ago | (#14272469)

and by a little prodding, namely press releases and such, Microsoft keeps them from exceeding what Microsoft wants people to pay for them. What is unusual in the game console business is how the units are priced. With many products you rarely ever see the manufacturer set the price and hold the retailers to it, there are actually laws that prevent some of this from occuring.

So whats a retailer to do? Simple, bundle it. Many did this and it irked many consumers but many still bought into it. Microsoft's angle is that raising the price only defeats the end purpose which is to sell the catridges and accessories where the real money is made. That and the fact if you keep it around $300 more will go for it. Combine also with many stores offering finance deals starting for totals of $299 and up...

Well it all adds up. Microsoft never intended to profit directly from the console itself. They are doing old adage of buying into a market. Get people to associate microsoft with the living room, television, and entertainment. Impressionable youngsters may look to them in the future with either concious or subconcious favor all based on this early exposure to the brand.

I'd like to know the same thing (0)

Anonymous Coward | more than 8 years ago | (#14272493)

It wouldn't be hard for the company to boost the price (I'd almost suggest it because there would be alot less people selling on ebay, and a lot of other money making scams that people are partaking in). However the problem lies in when to drop the price to normal. So many months or weeks. As companies have seem from past launch systems, choosing a starting price is crucial in the development of the system and how it will do years down the road. How can you market a system that cost $800 dollars with games and accessories?
      You can't! You can't think about the people making a ton of money off ebay or other scams. You have to think about the die hard gamer that has spent months waiting for launch day. If only there was a way to only allow those people to buy the system.
      There are several ways to limit people from making money on a system launch. First only allow one system per customer (no matter what situation). Next make the customers by a package of say two or three games. Non gamers what know whats good and will be throwing down more money to buy something they know nothing about. Maybe the final thing that could work would be to open the system when they are sold so they can't legally sell them as new. There are many flaws to this suggestion however if there was a way that no other person could own the system then that would be a suitable idea.

Slate.com question (-1, Flamebait)

Anonymous Coward | more than 8 years ago | (#14272498)

Here's a question for everyone out there. Previously, Microsoft owned Slate.com. Slate was bought by the Washington Post about a year ago. Does anyone know what sort of sway, if any, Microsoft may still have with Slate?

incorrect understanding (2, Informative)

blanktek (177640) | more than 8 years ago | (#14272508)

That leaves us with Napoleon's explanation: Never attribute to conspiracy that which can be explained by incompetence. This view of the world is antithetical to economics, because the dismal scientists tend to be suspicious of people's motives but credit them with vast intelligence.

This is not how the economic theory works. Producers can enter markets and produce at any price they want. However, they will quickly lose market share until their economic profit approaches zero as more firms enter at lower prices or if other producers already exist in the same market they get no profit. However, this is not a perfectly competitive market i.e. agriculture would be close. Just a clarification; non-economists can easily make many theoretical errors easily so take this with a grain of salt when reading the econ stuff.

Re:incorrect understanding (1)

maxume (22995) | more than 8 years ago | (#14273082)

Check out [timharford.com] who the author is. [timharford.com] I think he probably has a fair idea of what he is talking about.

Re:incorrect understanding (1)

blanktek (177640) | more than 8 years ago | (#14273657)

It seems he should know what he's talking about, however what is interesting is that there is no indication of his education. I'm not trying to dismiss him because of this, but economic theory is an academic field. But if anyone cares to challenge my point I'd be glad to respond.

Easy - MS don't hate their customers (2, Informative)

iainl (136759) | more than 8 years ago | (#14272535)

Last time Microsoft released an XBox in the UK, they had to drop the price by £100 after only a month or two, because no-one was buying them at £300.

As you can imagine, this somewhat annoyed the people that bought them at the higher price.

Microsoft would much rather have shortages at a price they plan on sticking to for at least 6-12 months than annoy their most valued game-hungry customers.

Economic understanding abates annoyance. (1)

hackwrench (573697) | more than 8 years ago | (#14272746)

If they had a better understanding of economics, they wouldn't be as annoyed, because they would understand that such pricing just reflect the true value of the XBox at a given point in time to other products in the economy.

Re:Easy - MS don't hate their customers (1)

SScorpio (595836) | more than 8 years ago | (#14273410)

In all fairness Microsoft did offer two free Microsoft published games to people who purchased the system at the higher price.

An idea (2, Insightful)

bradbeattie (908320) | more than 8 years ago | (#14272542)

If people see the prices of consoles dropping drastically within the first few months (ie: when the demand has dropped off), they're more likely to wait for a better price. The company in question is better off guessing one constant price (or range or prices like the core and full XBox systems) that will maximize their profits. Once you bring in fluxuating prices, you have to consider that your customers will strategically wait.

Price controls (2, Interesting)

Why's_This_Fish_So_B (904222) | more than 8 years ago | (#14272626)

It's absolutely true that if you want a shortage of something, price it below its market worth.

Doesn't matter if it's gas (Carter), grain (18th c. France), or Xboxes, if the market thinks X and the price is set at X-something, there will be a shortage.

OK, so there's a shortage. So what? Xboxes are not energy or food. There's no particular harm done, other than to MS's immediate profit, by underpricing the 360.

Maybe MS has decided that the revenue from higher-priced XBoxes is more than offset by the cost in bad publicity when the market price drops by half by spring. Maybe they realize the value of being the hot item instead of Cabbage Patch dolls this year.

There are other forces at work besides the next quarter's earning report. A console system isn't a one-time revenue stream like a loaf of bread or a gallon of gas. The Slate writer is right in his assessment, but also short-sighted.

Re:Price controls (1)

hackwrench (573697) | more than 8 years ago | (#14272686)

There's no particular harm done, other than to MS's immediate profit, by underpricing the 360.
Yes, there is. By underpricing the 360, the economy fails to reflect its true value relative to the costs of other goods. When someone buys an X-box, they have money in their pocket they wouldn't have if the X-Box was priced at its true market value. They then spend that money on other goods in competion with other people, thus setting the price of the other goods higher than they should be, sending a ripple effect throughout the economy.

Re:Price controls (1)

Why's_This_Fish_So_B (904222) | more than 8 years ago | (#14272829)

Your logic is OK, but the numbers are off for your theory to fly.

That might be true if a) there wasn't a secondary market in the form of EBay to restore market pricing; and b) if the financial impact of the underpricing was significant enough to have a ripple effect.

The U.S. has an $11,750,000,000,000 economy. At a theoretical underprice of $400 each (probably less, I'm sure the demand for the bare-bones 360s is lower than for the full kit), 500k Xbox360s free $200M into the economy, which is the financial equivalent of trying to cause a tsunami in Tokyo by tossing small rocks off the Golden Gate Bridge.

Re:Price controls (1)

hackwrench (573697) | more than 8 years ago | (#14273073)

The Ebay secondary market doesn't fully restore the effects of market pricing as the money doesn't go back into production of XBoxes. I was about to write, "to Microsoft", but even that wouldn't be sufficient if Microsoft didn't put the money back into XBox production. That single point not addressed in the simplified economic model, is part of what contributes to people reaching the conclusion that price controls don't work.

Now for your "b" statement:
If the global market operated consistently with appropriate price controls then one misstep wouldn't have that much of an effect. But as I said before [slashdot.org] people don't believe in the efficacy of basic market controls and thus don't ensure that the market operates to them, making each and every rillpe effect more severe.

Re:Price controls (1)

Why's_This_Fish_So_B (904222) | more than 8 years ago | (#14273207)

"If the global market operated consistently with appropriate price controls"

I assume, given your other comments, that you mean "with appropriate free-market pricing."

My point is merely that even if a company erroneously misprices something, the market as a whole is free and robust enough to absorb the ripple; and even if companies are always making such ripples by misjudging demand, it all works out as long as the mis-pricing comes from internal sources (MS's choice) and not from external sources (a government trying to tell MS what it may or may not charge).

Only in a system stagnated with forced mis-pricings, or in the case of a price ripple large enough to disrupt the whole economy, do deleterious effects arise.

And again, an Xbox, unlike an egg, is not a one-time revenue stream. You sell an egg, you've made all the money you're going to make from the egg. You sell an Xbox, and you've got a potential revenue stream from games and Xbox Live subscriptions that continues for years. Those residuals aren't considered in the article, but they are a part of MS's decisions.

Maybe it is just where I live... (2, Interesting)

wolf31o2 (778801) | more than 8 years ago | (#14272712)

...but I haven't seen any kind of shortage. You can find the 360 at pretty much any decent retailer. These things aren't exactly jumping off the shelves here (Southern USA). Everyone that I know that was planning on getting one right away has gotten one, without standing in God-awfully long lines or any of the other stuff I have heard of people going through to get one. They bought them at normal retail prices, and didn't resort to paying $5000 on Ebay. Perhaps it is just the extremes (rural and urban) that don't have any of them?

Re:Maybe it is just where I live... (1)

MaWeiTao (908546) | more than 8 years ago | (#14273139)

I'm pretty sure I've seen a few myself and local retailers. I tend to suspect its the bigger cities where there are shortages.

My brother did recommend that I should pick up a couple and sell them on ebay for profit. I don't want a xbox360, but if someone wants to pay more than they should for one who am I to stop them? :D

Re:Maybe it is just where I live... (1)

Unknown Relic (544714) | more than 8 years ago | (#14273174)

Do none of these "decent" retailer's sell online? You would think that if they did, people in areas where it is selling out would jump to order them instead of waiting in lines or paying excessive amounts on ebay. At the very least, you'd think that people in your area would buy them just to be able to sell it on ebay and make an extra hundred dollars or so. I actually managed to pick one up at the local best buy this morning, but to do so had to start waiting in line at 7am for a 9am opening. Even at that time, I was one of the last people able to get one. Between Best Buy and the Future Shop next door, there were well over 50 people standing out in the cold. If an online retailer (ebay excluded) with stock existed, there's no way I would have been waiting in line.

wrong business model (2, Insightful)

rsw (70577) | more than 8 years ago | (#14272774)

If MS were trying to make money on the console itself, the model suggested would be correct.

That's not what's happening.

MS makes money, theoretically, by achieving a high market penetration and then getting licensing fees for all the games that are sold. High penetration = lots of games = lots of revenue. That's why they're selling these things at a loss---the more people have them, the more money MS makes in the long run.

In this model, there truly _is_ a shortage, because the ideal scenario is an infinite number of XBOX360s available for sale (well, there are a few problems with that---obviously you only need enough that everyone gets one, and beyond that, there is evidence to suggest that in some markets, including this one, demand actually responds inversely to supply in certain situations, hence the rumors that MS was attempting to artificially increase demand by making them hard to get).

MS stands to make the most money by getting as many of the out as possible. Simple as that.

Now, you could argue "but the early adopters are willing to pay more, and they make up a large enough minority that the initial supply will be gone even at $700." Sure, MS could sell the first batch for $700 and drop the price immediately to $500. Problem is, they can only get away with this trick once, if that---once everyone knows that just have to wait a couple months and the price drops a couple hundred bucks, even most of the early adopters will wait, and that kills MS's edge over Sony in getting the XBOX360 out way before the PS3.

Just my two cents.

-rsw

Re:wrong business model (1)

grumbel (592662) | more than 8 years ago | (#14273550)

### Sure, MS could sell the first batch for $700 and drop the price immediately to $500. Problem is, they can only get away with this trick once, if that---once everyone knows that just have to wait a couple months and the price drops a couple hundred bucks

Over here in Europe MS already tried that trick with the original XBox, it started out at 480EUR if I remember correctly and then droped very quickly down to 300EUR. Didn't seem to work out that well, so MS gave all those that bought the XBox for 480EUR three games for free, so that nobody got angry at them.

This guy is an economist? Not very good is he? (3, Informative)

SmallFurryCreature (593017) | more than 8 years ago | (#14272846)

I mean this is basic economy stuff. Clearly the guy hasn't got a clue. Perhaps he should do some shopping.

Ages ago before computers existed and when dinosaurs still roamed the earth I was a baker by proffesion. Now bakers have a odd product, it is in constant demand (in times of economic crisis be in the food industry, people need to eat) but producing it is a hassle. You can't say, Oh monday is a slow day lets do some extra bread for the rush on saturday. You can't (if you want to keep your customers) sell yesterdays surplus today.

So most bakeries and even supermarkets run out before the end of the day (better sell no then be stuck with merchandise you got to throw away, waste eats up your already slim margin extremely fast). Just try to get bread at 6pm. Can't be done (well recently supermarkets have started with doing an extra run late in the day with bread that just needs to be baked off (sorry don't know the english terms) but many bakeries will already be closed or simply sold out)

So why don't they raise prices this person would ask? Well einstein because people got a very clear picture in their head of what they are willing to pay for their food and they are not going to exceed that. While people need food if the bread they can buy at 6pm is to expensive they will just eat something else.

Same with the 360. It's price is not set by supply and demand. It is set by a combination of what the people are willing to pay for it vs the cost of producing it. E-bay DOES NOT matter, same as people willing to pay 2 euro for a sandwich does not mean they are willing to pay 20 euro for a loaf, a lettuce and some meat (Tell your mom your local stay open late supermarket sells you that for about 7-8 euro and she will complain bitterly about the son she raised). Think of it like this. 1st edition Superman sells for thousands of dollars. That does not mean Marvel can sell their latest comic for 3000 dollar. Perhaps you have to have studied economy not to be able to spot this. It is not something you have to study it just is.

MS also of course will figure in that if they sell the device at 700 and drop the price in two months they will have two effects. The people who bought it at 700 will be pissed and the people who see the new price will think, lets wait for the next price cut.

I am like this with handhelds. I know that within a few months the price will have both come down AND it will have a bundle available. Look at the PSP, with the giga pack you get a 75 euro price cut.

Supply and demand is overrated as a price fixer. Just my example of bread being sold out before many people arrive home from work shows that in retail supply and demand hold very little sway. An other example was a breakfast cereal (brinta) wich I believe due to a fire was out of supply for a few months a while back. Now brinta has no ready replacement (it is a porridge) but did that mean supermarkets spiked the prices on their last supplies? Of course not. Nobody would pay 10 euro's for a package even if the alternative is going without. Even those who could easily afford too.

Some things just have a fixed price. MS realizes this. This economist apparently doesn't. 300 dollars is what the 360 will sell for. Less and they will loose to much (or worse people might think it is bad quality) more and people will just not buy it no matter how rare it is.

Oh and a final thing about e-bay. There supply is far far far more limited. 360 on ebay is like that first edition superman. Its pricing has no place in real world economics. Only a fool or an economist would base its retail prices on what is happening on e-bay.

Re:This guy is an economist? Not very good is he? (1)

reedsr (891163) | more than 8 years ago | (#14273399)

The only difference between bread and the 360 is that no one has died from not getting an Xbox 360, a few have gone to jail, but none have expired to my knowledge.....yet

Its all marketing. (2, Insightful)

MaWeiTao (908546) | more than 8 years ago | (#14272883)

You create a greater frenzy by making the console hard to come by.

First, the impression is that the system must be good if every last unit is being sold. If there are systems are sitting on the shelves within the first month of release it sends the wrong message.

Second, those that can't get their hands on a console are more likely to get even more anxious about getting their hands on one. It clouds judgement enough that one becomes available they wont think twice about buying it. That is assuming, of course, that the system is actually good and consumers are hearing positive reviews.

Companies aren't likely to be ambitious and ship out enough units to satisfy everyone from the start. So they need to cut back to ensure a shortage.

There are already plenty of idiots with so lacking in patience that they're willing to pay 5 times more for something that you're going to see sitting on shelves everywhere within a month or two. Not to mention that for the most part consumer products aren't priced according to demand anyway.

Would it have been better PR to... (1)

Andy_R (114137) | more than 8 years ago | (#14273004)

Put the initial shipments on ebay with a minimum bid of $300, and donate the additional profits to charity?

Re:Would it have been better PR to... (0, Troll)

November 1, 2005 (927710) | more than 8 years ago | (#14273180)

That'll make the retailers who you're going to rely on after the initial launch happens very happy; instead of bringing foot traffic into their stores in large numbers, you've taken them completely out of the loop.

Did you really think your little plan through? (Not that it matters, it would never happen.)

Re:Would it have been better PR to... (1)

Andy_R (114137) | more than 8 years ago | (#14273262)

You think retaillers like turning away 1000s of potential customers, disappointing 1000s more that don't set the machines they put deposits down for before Christmas, devoting big display areas to machines they don't have stock of, or losing sales of previous gen consoles to vapourware?

If retailers could simply have the high-mark up, small, well supplied Games on their shelves instead of low mark-up, big, scarce consoles, I think they would be very happy!

Re:Would it have been better PR to... (-1, Flamebait)

November 1, 2005 (927710) | more than 8 years ago | (#14273741)

"If retailers could simply have the high-mark up, small, well supplied Games on their shelves instead of low mark-up, big, scarce consoles, I think they would be very happy!"
So are you proposing that MS sells all its consoles through Ebay now? In your first stupid post, you were only talking about the launch period when people were willing to pay a high premium. Now in your second post you act as though EB doesn't want consoles in their stores at all - just the games. Either opinion is fundamentally stupid but I haven't yet decided which is more stupid.

Here's a hint fuckwit: retailers aren't going to like it when you've got two products that are tied together (games + console: I'm trying to spell everything out for you Andy) and there's one place where you can get both at the same time (Ebay) and one where you can get only one (retail outlets).

Furthermore, when consoles are sold at EB, do you think EB sells any games? Gee, I think so. Take your nonsense elsewhere.

The real question should be... (0, Troll)

BigZaphod (12942) | more than 8 years ago | (#14273034)

Why would I want one at all?

Re:The real question should be... (1)

BigZaphod (12942) | more than 8 years ago | (#14273266)

Offtopic? How so? I see no reason to get the new XBox 360 and the shortage press they keep getting just confuses me. Why does anyone really care? There's almost nothing compelling about it as far as I can tell. Perhaps I'm just not gamer-enough.

Can't buy? (2, Interesting)

JFMulder (59706) | more than 8 years ago | (#14273044)

Today, I walked into Futureshop (BestBuy in Canada). I asked for a 360. They received 62 of them this morning. Got it, the warranty, a controller and Project Gotham Racing 3. There's no trouble getting them. At least in downtown Montreal. The stored had been opened for 30 minutes and there were still some left, tough that might be because of the snowstorm outside.

Re:Can't buy? (1)

Shad_the_protector (931920) | more than 8 years ago | (#14273348)

ok, offtopic, but if FutureShop is best buy, why is there a BestBuy and a futureshop in the same building.....?

Re:Can't buy? (1)

JFMulder (59706) | more than 8 years ago | (#14273393)

Well, I didn't want to get into the details. Future Shop was recently bought by Best Buy. They are separate stores and they cater to slighly different consumers. Also, the store policies are different : while Futureshop workers get commissions on sales while Best Buy only pays you by the hour (I suppose the hourly pay is better in Best Buy tough).I never went to both at the same time, but I suppose the stuff they sell are not exactly the same, howdo they clearly have some overlaps, namely, games. I went to Futureshop this morning and got a 360. While they didn't have them online, Best Buy did (and sold their allotment of 70 in 10 minutes.) So there's clearly different priorities. But best of all, both don't force a bundle on you. (well, not since the apologised for it two weeks ago)

Re:Can't buy? (1)

Shad_the_protector (931920) | more than 8 years ago | (#14273699)

thanks for the information

Re:Can't buy? (1)

Durrill (908003) | more than 8 years ago | (#14273392)

Similar situation happened to my coworkers here this morning. Heard that all futureshops / bestbuys were going to have a minimum of 10 units per store today, so at 9:30am my boss went to a future shop near our work, cause he heard that it'll have 60 units in stock. They were sold out, as was the bestbuy right next to it. So the XBox is still a hot item here in Ottawa, cause after he got back, he made his wife call around the city, and it being 2pm right now, she's given up.

Online auctions by Microsoft for 360s? (1)

JFMulder (59706) | more than 8 years ago | (#14273193)

See, this guy's conclusion is traditional right-wing-rich-kid-thinking. Have the people who are willing to spend more spend more and leave the less fortunate not buy one. By pricing the console at 300$ instead of 700$, they are making sure that a lot more people (well, not everyone, but certainly more people) can afford it. Everything is about profit with them. I actually applaud Microsoft for selling such a powerfull piece of hardware for so "little", considering all you get. Whatever their end game is, they have guts. Maybe this is not what the market needs, but it's still great value for consumers.

Different means of selection (1)

adb (31105) | more than 8 years ago | (#14273281)

If you keep the price low, you're not giving any more people access to it; you're just changing how you prioritize. Where a high price prioritizes rich people, a low price prioritizes idle people: those who can spare the time to wait in line...

...which, when you think of it, is precisely the target market.

It's about market share - not initial profit (1)

binaryspiral (784263) | more than 8 years ago | (#14273279)

Microsoft is competeing with the largest console companies - they don't want to turn a profit on the 360, yet.

They want to get as much hype and press time as they can. Jacking up the prices will make them look like moneygrubbers trying to make a buck off the public and poor Timmy down the street will never be able to afford a $700 xBox.

Now, Timmy has just as much chance to get one as the rich kid up the block.

Then again, if Timmy were smart - he'd max out his credit card, get two and sell one on ebay to recoup the cost of both XBox'en.

Why not simply MAKE MORE UNITS? (1)

amrust (686727) | more than 8 years ago | (#14273470)

There is only a shortage if the price is too low. At the moment, Microsoft is easily selling out the half-million or so Xbox 360 units (there's no official number) for prices starting at $300 for the basic package. Why doesn't Microsoft price them at $700 instead?"

I fail to understand why there's a shortage in the first place. If they're selling that many at the $300 price, why not just make more Xbox units? If people are this upset and not being able to score one, wouldn't Microsoft be doing themselves a service by getting this many consoles in the market, for future game sales for these units?

Re:Why not simply MAKE MORE UNITS? (2, Insightful)

fleck_99_99 (223900) | more than 8 years ago | (#14273606)

I'd say, because it's just not that easy. It's not like there's a secret Microsoft XBox Factory hidden deep beneath Cheyenne Mountain, guarded by the SGC and NID, that's lying idle while Bill Gates twirls his moustache and cackles over the shortage he hath wrought. There's a whole process [wikipedia.org] involved with manufacturing an item like this. Someone molds the case. Someone fabs the CPU chip. Someone fabs the power supply regulator. Someone fabs the ADC for the left stick on the controller. Someone makes cables. Someone etches the PCB. Once all 1700 or so parts are fabbed, someone assembles the whole shebang. Someone boxes it. Someone ships it to distributors. Distributors ship it to retailers. Meanwhile, marketing and accounting processes are running...

On the other hand, I still haven't received my preorder, so I'm sticking with the "Evil Bill and the SGC" theory.

Re:Why not simply MAKE MORE UNITS? (0)

Anonymous Coward | more than 8 years ago | (#14273673)

This is the real question, IMO. As the comments so far have shown, there are a lot of problems with raising the price to meet demand. With such an extreme shortage, rapidly dropping the price by fiat will piss off the consumers. Initially high prices will hurt sales as people wait for later to buy them (I'm waiting for Oblivion to come out before I get mine,) or maybe decide to get a PS3 or Revolution instead.

There are a lot of issues, but at least Microsoft is being consistent with their policy of controlling the pricing. The failure to respond to demand by raising the price or increasing production is what is creating the shortage.

The pricing doesn't seem so mysterious to me, with all the previous rhetoric about how important the price "point" is. So why the shortage in the first place? How did that happen? Why isn't Microsoft manufacturing more units for the release? That is the question that needs to be explored and answered.

I also think the policy of controlling the price in general stinks, cripples the market, and cripples the ability of retailers to determine their own profits off the units. But that's another discussion. Not that Slashdot discussions aren't known to go wildly off-topic. ;)
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