US price cut "only feasible option" for Microsoft

In the wake of Microsoft's announcement at the beginning of this week that it was cutting the price of the Xbox 360 across Europe, The simExchange analyst Jesse Divnich believes a similar move in the US is the company's "only feasible and economic option" to combat Sony's PlayStation 3 momentum.

"Whether there is an Xbox 360 shortage or not, it is clear that the PS3 has gained considerable ground on its rival," he said, as the impact of last year's PS3 price cut and Sony's Blu-ray victory become clear.

"Given these past two months and the momentum that the PS3 has gained, Microsoft must react quickly as the PS3's momentum will only get stronger until Microsoft reacts."

The Xbox 360 Arcade SKU is now cheaper in Europe than the Nintendo Wii, and half the price of the PS3, and Divnich believes that a similar move in the US is needed.

"In the short-term, Microsoft's only feasible and economical option is to look at reducing its hardware price in North America to at least slow down the PS3's momentum until it can implement more long-term solutions to winning the next-generation console war," he said.

Chris Lewis, Microsoft's newly-promoted VP of Interactive and Entertainment in Europe, yesterday told GamesIndustry.biz that the price cut would "open up the mass-market floodgates."

"We enjoy 42 per cent of that revenue share right now in this generation," he detailed. "That's a key milestone for us to have met and surpassed. We're also attaching just a little bit over seven games for every console — considerably ahead of where we stand with our competition."