Analysts cautious of new Xbox 360 pricing

Microsoft may have cut the price of the Xbox 360 in Europe, but analysts remain cautious that the console has yet to prove popular with an audience outside of the dedicated core gamer.

Although he agreed that an immediate boost in sales was likely, Screen Digest's Ed Barton argued that pricing is only one factor and consumers can be swayed more by brand appeal than value for money.

"For the longer term it depends on how price sensitive consumers are with regard to games hardware purchasing decisions," he said.

"Naturally Microsoft hopes that consumers prove very price sensitive in their choice of games platforms — after all the Arcade model is now undercutting Wii by GBP 20 — however, hardware pricing is only one of many factors which influence consumers' games hardware purchasing decisions."

David Cole, analyst at DFC Intelligence, also noted that European sales of the Xbox 360 have slowed, and that Microsoft needs a renewed sales push in the region

"The price elasticity for videogame hardware systems has proven quite high, especially when you get down to the price range the Xbox 360 and Wii are now competing at," said Cole.

"However, Europe sales for the Xbox 360 have been disappointing so it remains to be seen whether this will give the system the needed jump-start," he added.

Microsoft has already attempted to attract a wider demographic through previous price cuts and software titles such as Viva Piñata and Scene It? but Barton feels these haven't had the desired effect.

"There is yet to emerge conclusive evidence that the platform is appealing effectively to demographics outside the core gamer with whom the Microsoft platform has resonated strongly, particularly in North America," commented Barton.

At GBP 159.99, the Arcade Xbox 360 is cheaper than the Wii and the PlayStation 3, and while it will help Microsoft sell more home consoles, it remains to be seen just how effective the 360 will be against its competition.

"The impact on Xbox 360's competitiveness certainly won't be negative, however, the real issue is to what extent will it help Xbox 360 compete with PS3 and Wii?" questioned Barton.

"We come back to how price sensitive consumers are. Currently my feeling is that most consumers are not particularly price sensitive and tend to think 'I want a specific games console, how much is it?' as opposed to 'I want a games console, what is the cheapest?'"

David Cole also said that although the price is lower than the Wii, the two consoles are still appealing to different audiences, and as such the price cut isn't likely to be a threat to Nintendo.

"The Wii seems to be off in its own realm so I think the price cut is much more of advantage for competing with the PS3," offered Cole.

"For the overall picture, much will probably depend on how aggressive Sony is for the PS3 with both pricing and new software.

"I think this puts some pressure on Sony in terms of pricing," he added.