NEWS - Friday, March 30, 2007

Elite Won’t Improve Microsoft’s Market Share

Although the company is aggressively challenging rivals Sony and Nintendo in the gaming market, Pidgeon sees software, not hardware, as the key driver for new consumers. "The Xbox 360 Elite may sway some gamers waiting to decide on a new system, but I don't expect the Elite to have much an effect on the 360's market share this year," said Pidgeon, speaking exclusively to "The higher price and the 120GB hard-drive upgrade should increase revenue for Microsoft and for retailers, but system-selling games such as Halo 3 will increase the 360's position more significantly." Although Nintendo and Sony insist their consoles are a different offering and therefore in different markets, Microsoft is not afraid of acknowledging and tackling the console competition. "Microsoft is very aggressive in seeking market share. The 360 is in more direct competition with the PS3, but Microsoft is going after first place and sees Nintendo as a competitor as well," commented Pidgeon. The online space for home consoles has always been a focus for Microsoft's Xbox brand, and the release of the 360 Elite further confirms the company has its sights set on dominating the area. "With the 360, Microsoft is extending the online capabilities of Xbox Live including downloads of long form video as well as games and game add-ons, and the point of increasing the hard-drive to 120GB is to enable 360 Xbox Live gamers to download more items more often," offered the analyst. "Extending Live to Vista systems will also increase Microsoft's online audience, which is an important metric now and going forward," he added. Pidgeon estimates that Microsoft may soon lower the Premium Xbox 360 console to the same price as the Core model, and he also questioned the USD 179 price of the new hard-drive, to be released at the same time as the Xbox 360 Elite. "It'd be better for Microsoft to sell through existing Core systems before lowering the Premium SKU to the Core price, which would achieve both a price cut and a value add," said Pidgeon. "It will be interesting to see how the 120GB hard-drive will do as an upgrade options for current Xbox 360 owners. Uptake on the larger hard drive will increase the potential for Xbox Live downloads, but the price is a bit steep."

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