Anilrgowda

Bach Makes Ready for Price War

Robbie Bach, president of Entertainment and Devices at Microsoft, believes a future hardware price battle will decide the outcome of Xbox 360’s struggle with PlayStation 3.

In an interview with San Joe Mercury News, he said that the company is seeking to bring down Xbox 360’s costs in preparation for a price initiative that he believes Sony will be unable to follow.

Responding to a question on the hardware wars, he said, “You have look at the economics. You have to ask the question, over the life cycle, who has the cost advantage? Who can price most effectively? Who can reach the price points quicker? That has a huge impact on what gets driven.”

He added, “Because we were out there first, we have a bigger installed base of consoles. We can drive down the manufacturing curve sooner and faster. And because we designed a box that was fundamentally easier to manage on costs, we’re going to have that advantage.”

Asked about engineering work going into a new Xbox, he said, “Right now we are thinking about how to cost reduce the Xbox 360. That seems to be the first order of business.”

Different outcome

Bach explained Microsoft’s reasoning for not bringing price into the equation this Holiday season, “It was not that hard a decision. When your competitor is supply constrained, it’s not clear what price buys you. Sony is going to sell as many units as they can ship in the U.S. I don’t know that a lower price would make a difference in the outcome. As you go out into later years, cost and price are both important issues. I’ve been on the other side of this equation. It’s a hard problem.”

He talked about Xbox 360’s position in the market overall. “We’ve got a great line-up of games. Reviews of both Viva Piñata and Gears of War have been very positive. If you look at what we have coming from third party, Need for Speed Carbon is doing exceptionally well. The Tom Clancy titles from Ubisoft are all doing well. Call of Duty 3 is a very anticipated title from Activision. THQ has great things coming. If you go through the publishers, you see the content portfolio is rich and full.

“The second thing is, frankly, our value proposition is just better. Our console is at $299 and $399. Sony is going to have a pretty limited supply of consoles at $499 and $599. Consumers want to buy during the holiday. We’re going to be a great logical choice for them. As you start to move out into 2007, you have the promise of Halo 3 coming out. I think there is going to be a lot of excitement in the category. We have an opportunity to benefit from that dramatically. Our goal is to get to 10 million and we think we’re going to be able to do that.”

Enormous investment

Bach was asked about the enormous investment Microsoft hs made in the games business. He defended the company‘s position, pointing towards the value of the Xbox business. “Yes, the amount of investment has been a large number. But compare that to the alternatives. You could have said, ‘Go buy Nintendo’ which at the time would have been a $15 billion acquisition - a much bigger investment.

“If I look at the assets we've built, it's an asset that we can be proud of. We went in knowing it was going to be a big investment, but the size of the marketplace and the importance to what we're doing justify that. Second thing I’ll say comes to the asset value point. People like to say we have invested many billions of dollars in that. But what they don’t point out is what is that asset worth? If we spent that money and there was no business there, I would say I should be working out on a farm someplace. The fact is there is a business there.”

Bach was also asked about the failed Halo movie project, “Does it make sense for Microsoft to be in the movie business? It’s not what we do, nor would I anticipate us ever doing it. It’s a different business with a different business model. We happen to have great intellectual property with Halo that could be made into a great movie. The No. 1 criteria for us is we have to be confident a great movie is going to be made. It doesn’t matter if Universal and Fox do it or somebody else does it. Frankly, if we didn’t think a good movie would be produced, we would rather have no movie. Until we are confident a good movie will be produced, we’ll keep looking. It’s not like the idea is going to go away. It’s not like the intellectual property value is going to go away. We are working on Halo 3 and that is going to make the property more successful. The easy way to mess it up is to do something forced that doesn’t work.”

Read The full transcript of the interview here: http://blogs.mercurynews.com/aei/200...view_wi_1.html

i would love to see how sony reacts if microsoft dropped the price of $100 for both packages.

it would be funny if sony went bankrupt if they tried to win the pricing war, wont happen, but man would i laugh