Nintendo’s newest competitor seems to be preparing to raise the price of its X-tra large console by packing in games, peripherals and warranties.
LA Times ran an interesting article yesterday regarding Microsoft’s X-Box, which launches on November 8th in North America, hot on the heels of Nintendo GameCube’s November 5th launch. On top of appearing 3 days later than the GameCube, X-Box is priced $100 more than the GameCube’s $199 price, though justifies its high price tag by including a hard drive and the ability to upgrade to a DVD player.
It seems that those pre-ordering the X-Box may be asked to pay even more. Beginning next month, many retailers will be requiring customers to pay from $499 to as much as $1,200 to reserve an Xbox console that, like it or not, will come bundled with games, peripherals and warranties.
Why? It seems that Microsoft will provide additional marketing money to merchants that agree to include the software giant's games in their bundles. That's because Microsoft's games carry higher profit margins for the Redmond, Wash., company than those published by third-party companies such as Activision and Electronic Arts. Not surprisingly, consumers are angered by this plan the LA Times reports.
Microsoft claims it isn’t trying to intentionally honk anyone off and claim to be simply responding to retailers’ wishes. "When we came up with the program, we wanted it to be what's best for retailers," Microsoft spokesman James Bernard said. "This is based on what retailers told us they wanted."
Not only is Microsoft encouraging retailers to sell the higher-priced Xbox packages, Microsoft also is specifying how much shelf space stores must dedicate to the new product. To ensure retailers' cooperation, Microsoft is tying allocations of Xbox units and extra marketing dollars to its requests, retailers confirmed.
The report also addresses Microsoft’s highly publicized pre-order campaign, and how it may actually backfire. "They're overestimating demand," said P.J. NcNealy, senior analyst at Gartner Group Inc. in San Jose. "That could result in a near-fatal first step."
The article concludes by comparing the situation to Nintendo, which is not attaching incentives for retailers to bundle its upcoming GameCube console with software or accessories nor is it hyping pre-order campaign prematurely.
"I'm not sure what these programs get you, except a lot of marketing frenzy," said Perrin Kaplan, a Nintendo spokeswoman.
Thanks to PGC reader Clyde Arrowny for the tip!
