The advantage to being first to market is you have the market to yourself for awhile; the disadvantage is your product looks old first and people stop buying it. Xbox 360 sales have been slowing though they still seemed to be outselling the PS3 which is rumored to be getting a price cut shortly to boost sales.
The Deal
So far the response to this new product has been a bit tepid, the core advantages over the Xbox 360 are HDMI out (which is important if you have a current generation High definition TV or an HDMI switching receiver), a larger hard drive for downloading movies and shows (which there still aren’t that many of), and all the connecting cables (this isn’t trivial, good HDMI cables typically aren’t cheap and Sony doesn’t provide one for that very reason).
So for about $80 more than the price of the old fully loaded Xbox 360 you get about $220 USD ($180 for the drive separately and about $40 for the HDMI cable) and an easier set up if you can use HDMI. Of course if you didn’t really need the drive, and can’t use HDMI then that $80 for the color black which, if you’ve ever had one of these things painted isn’t a bad deal if you wanted one to go into your stereo cabinet.
Not a bad deal but not a great one either. If you were planning on getting an Xbox 360 this might be enough to get you to the store and buy one of these because the product is more forward looking in terms of configuration and a console has a service life of over 5 years so $80 USD is a small premium to pay for one that will probably be more likely to go that distance. But it isn’t a great deal and I think if they had just done a couple more things it could have been great.
What the Elite Should Have Been
A lot of folks are writing that it should have had a built in HD DVD drive. The problem with that is the market still hasn’t locked down on either format and until it does, repeating Sony’s Blu-Ray mistake with HD DVD would be foolish. Remember this thing will need to remain current for at least 3 years and in 3 years one of these two format will win or, and the odds favor this, neither will. If you were going to put in a high definition drive you’d need to put in one that ran both formats and that would push the player well into nose bleed territory with regard to price.
What they should have done, however, is put in a named high quality up-scaler like the Oppo DVD player we like so much, the Gateway 24” display, or the Dell 27” display. This would have allowed them to better position the product as one for watching DVDs and the second brand would have helped support the “Elite” brand.
The other thing is to make the product quieter. Both the PS3 and Xbox 360 are too loud to really be considered as good movie players. For games this isn’t a problem but if you want the device to really be used in home theaters and as a set-top box for High Definition movies and music you need it to be quiet. Arguably it is quieter than the PS3, one of the benefits to having that huge brick of a Power Supply, but it should be silent and it isn’t.
Looking Ahead for the Xbox 360
Long term problems for the Xbox 360 are that the Wii is currently outselling it sharply and projections out of the Japanese market have the PS3 passing the Xbox 360 in 2008 (which seems a bit of a stretch given current sales rates.). In addition, some of Microsoft’s biggest partners are viewing the Xbox as a competing platform to the PC. This last could have broad implications for Microsoft’s competitiveness in other markets because these vendors typically lower their commitment to Microsoft’s products and actually look for competing offerings to sell under circumstances like this.
Microsoft, in my view, is making a fundamental mistake with the Xbox, they are playing the game as others would play it and not focusing on their own strengths. The one place this isn’t true is in game development where they are now using common tools and games are now starting to come out that will run on PCs and the Xbox with little additional work (but this doesn’t work for all games as the two platforms tend to favor different game types).
What the PC vendors would like is the ability to emulate the Xbox in high-end gaming and Media Center systems so they too can benefit from the infrastructure Microsoft has set up. This would both make new PCs more attractive and it would allow the OEMs to come up with configurations that better target users than the Elite, or any console, spin might. It might also be a better path to profitability for Microsoft which has bought its way into the gaming segment but found margins consistent with their traditional profitability numbers elusive.
Of course they could also spin the unit out and let it compete on its own against Sony and Nintendo, it just isn’t healthy enough to survive such a move yet and that points to the fact that the current path is probably not the right one for the unit.
Wrapping Up
I’ve always thought the Xbox should have been Black and think it looks better that way, but they had a chance for a hit and they fell short probably because they were focused too much on costs and not enough on requirements. In the end they can’t cost reduce their way to strong profitability but rather they need to change the game, and until they do that we’ll likely all be spending more time talking about what they should have done rather than what they did. Granted that’s kind of what we are doing with Sony but beating Sony in this way is probably not the road to success.
Overall, this market would be a lot more interesting if the high-end players, Sony and Microsoft, would do a little more “out of the box” thinking right now. It is really being defined by Nintendo who has done a better job in that regard with their physical controller and a vastly more attractive purchase price. I think it would be wise for Sony and Microsoft to pick up their game a bit if they want to make money here.
