Pachter: New Arcade SKU gives Microsoft “room” for 2011 price-cut to 250Gb model

By Johnny Cullen
20 July 2010 19:46 GMT

360 s arcade

Michael Pachter’s told VG247 that today’s announcement of the new 360 Slim 4Gb Arcade will give Microsoft “room” for a price-cut next year for the just-launched 250Gb model.

The SKU was announced earlier this afternoon alongside the pricing of Kinect, and will launch on August 3 in the US. It comes to the UK on August 20 for £150.

Meanwhile, the UK launch of the 250Gb Slim last Friday, according to Chart-Track, was more successful then the launches of PS2 Slim and PS3 Slim.

But in the aftermath of Microsoft’s megatoning this afternoon, the Wedbush Morgan analyst told us that the ball is firmly in Microsoft’s court.

“The new arcade SKU is very attractive at $199, and suggests that the standard SKU at $299 is very profitable, giving Microsoft room to cut price on the more expensive SKU,” said Pachter.

“I don’t expect that until next year, but think pricing on the new arcade SKU is a signal that price is coming down next year.”

Pachter also suggested that MS could sell Kinect at a $100 pricepoint due to the pricing of the hardware bundle. He added that the core price of Kinect was simply “too high.”

“The Kinect bundle costs only $100 more than the cost of a standalone console, so they can afford to sell Kinect for $100,” he said.

“The standalone price for Kinect is too high, and core gamers will be put off by the price [$150/€150//£130].

“My bias is that most core gamers will wait, but that 5 – 10% will buy it. That suggests 2 – 4 million standalone units.”

2011 console price-cut + Kinect = $349 bundle?

Pachter also said that if MS was to cut the price of the 250Gb model next year, a $349 bundle could go on sale featuring the console and Kinect.

“The takeaway is that if they can afford to cut price on the console and to bundle Kinect for $100 more, we could see a $349 bundle next year. That would provide an advantage over Sony. At current pricing, it’s only a $30 advantage, given that the all-in cost for a complete Move package is $180 and the all-in cost of a standalone Kinect is $150.”

Regardless, though, Nintendo shouldn’t be quaking in its boots with Wii following today’s announcement.

“I don’t see a meaningful threat to the Wii at these prices. The all-in cost of the arcade bundle is $299, still $100 above the Wii, although some people will find that attractive,” he said.

“The all-in cost of the PS3 plus a complete Move package is $479; $399 for the PS3, game, Move and Eye, another $80 for an extra Move and a sub-controller. At this price, it’s not particularly competitive with the Wii.

“I think that both Kinect and Move are priced too high to spark the whole industry, but think that both will sell modestly well.”

He went on to add that the Arcade model will sell quickly.

“I think that the Slim Arcade will sell very well, as it is quite competitive with the Wii (flash memory and WiFi built-in), so yes, I think it will help sales.

“I’m not sure Microsoft can do much more than cut price or convince gamers that Kinect is worth the price, and I don’t think that the bundle is all that compelling at $150. I expect the price cuts above, and an all-inclusive bundle at $349 some time next year.”

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