With monthly sales of its Xbox 360 lagging far behind Nintendo's Wii, Microsoft  is reportedly considering a dramatic price cut for its next-generation gaming console. In an interview with Bloomberg News, David Hufford, a director of Xbox product management, said that the "sweet spot" for the gaming console market is $199.
Currently, the Wii is closest to that mark, with a typical retail price of $250. The Xbox 360, by comparison, retails on Amazon.com for $299 for the basic console and $399 for a model equipped with a 20-GB hard drive. Sony's PlayStation 3 clocks in at a much higher $599 -- although it comes with a 60-GB drive.
The monthly sales figures compiled by NPD Group, a well-known observer of the video game console industry, support Hufford's analysis. In May, the Wii sold 360,000 units; the Xbox 360 sold 174,000; and the PS3 sold just 82,000. All figures are for the United States.
Mass-Market Prices
NPD Group does not comment on rumors, so analysts declined to answer questions about a possible price cut by Microsoft. However, in an interview last month, NPD Senior Manager David Riley did stress the importance of console prices in attracting consumers.
"When Sony launched the PS3," Riley said, "the price point just killed them. It was priced to sell to the hardcore gamers, who were willing to pay that kind of money for performance . But it's not a mass-market price."
By contrast, Riley said, Nintendo purposely priced the Wii to make it more attractive to nontraditional gamers, and has followed that up by releasing titles that appeal to a more general audience. Although that has had some unintended consequences, such as recent cases of Wii-itis, it also has helped spur Wii console sales far in excess of what most analysts predicted.
The Better Halves
In addition to mulling a price drop, Microsoft executives made it clear that they plan to take steps to emulate Nintendo's success in attracting a broader consumer base. A key component of that strategy is manufacturing and marketing games that appeal to women, who typically make up a smaller percentage of hardcore gamers.
"If we don't make that move, make it early, and expand our demographic," Peter Moore, the head of Microsoft's interactive entertainment business division, told Bloomberg, "we will wind up in the same place as with Xbox 1, a solid business with 25 million people. What I need is a solid business with 90 million people."
Microsoft has not announced any plans for specific titles aimed at a more general market.
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