CNN/Money
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Xbox prices stand pat
Microsoft focuses on online enhancements rather than price cuts.
May 13, 2003: 11:26 AM EDT

LOS ANGELES (CNN/Money) Microsoft has opted against any current price cuts for the Xbox, choosing instead to focus attention on upcoming games and enhanced features for the online component of its console gaming system.

Industry analysts and retailers had wondered whether the company would lower prices before the Electronic Entertainment Expo (E3) starts later this week. Microsoft did not address pricing in its pre-show news conference. But before the news conference show, J. Allard, vice president of Microsoft's Xbox platform, discussed the issue with CNN/Money.

"The focus is to expand our audience," he said. "So for us, we're not focusing on price. ... At $199, the Xbox is flying off the shelf. Right now, we're confident."

Halo 2 should be released in 2004.  
Halo 2 should be released in 2004.

Sony (SNE: Research, Estimates) and Nintendo are scheduled to hold press conferences Tuesday. With Microsoft (MSFT: Research, Estimates) opting against a price reduction, it's unlikely either will lower prices on their systems.

It was Xbox Live that took center stage at the press conference, as Microsoft hopes to broaden its console's appeal beyond pure gamers. Starting later this year, an enhanced version of Xbox Live will beef up the service's community features, letting subscribers find friends even when they're not signed in to Xbox Live. They'll be able to send notifications to friends using PDAs, PCs and cell phones -- any device enabled with MSN Messenger.

They'll also be able to chat with friends in a virtual lobby, when they're taking a break from playing games.

"The video game industry has two choices," said Robbie Bach, Microsoft's chief Xbox officer. "There's business as usual -- with incremental growth -- or there's the opportunity for explosive growth.... We can make that happen by expanding our audience. We can make that happen by expanding the definition of video-game entertainment."

The company also put its software center stage Monday, showing footage from "Halo 2," the follow-up to the console's most successful title (which will not be released until sometime in 2004). And, after months and months of speculation, Microsoft and Activision (ATVI: Research, Estimates) confirmed that Id Software's eagerly anticipated "Doom III" will be on the Xbox as well as the PC.

Allard said the Xbox version of "Doom III" would be released before next year's E3.

Microsoft also plans to leverage the Xbox's hard drive to do more than preserve saved games. The company introduced plans to broaden its range beyond games to more of a home media station. Xbox Live subscribers will be able to use their console to store and play audio files and view Windows video files on their TV.

"Xbox Music Mixer" will let subscribers play digital music on their console. The service is expected to carry a $40 price tag.

"Music Mixer" will essentially turn the Xbox into a home karaoke machine. Users can download digital music and photos from their PCs, then either view a slide show on their TV to the music or sing along with the songs, with vocals displayed on the screen. However, Xbox owners will not be able to trade music files with each other -- or anyone else online.

Last Thursday, Microsoft announced the pricing structure for Xbox Live subscription renewals. A 12-month subscription will cost $49.99 and subscriptions will be available for $4.99 per month. The company will also offer two-month free trials of Xbox Live with select games.

John Taylor, managing director and analyst for Arcadia Investment Corp., described the pricing structure as "an impressive value statement" and said the relatively low rate would make it "a lot less challenging for kids or teens to get permission to play."

The Xbox has seen steady sales gains over the past six months, solidly beating Nintendo, but still lagging far behind the sales numbers of the PlayStation 2. As of February, there were 5 million Xboxes in U.S. homes, compared with 3.8 million GameCubes. (Sony has sold 16.8 million PS2s in America.)

While Microsoft did not lower Xbox prices Monday, analysts and retailers say it's only a matter of time before it is forced to do so. Should Sony cut PS2 prices at its Tuesday press conference, Microsoft would likely be forced to match those immediately. If Sony stands pat, the price cuts will likely come later this summer or leading into the holiday sales period.  Top of page




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Most stock quote data provided by BATS. Market indices are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer. Morningstar: © 2018 Morningstar, Inc. All Rights Reserved. Factset: FactSet Research Systems Inc. 2018. All rights reserved. Chicago Mercantile Association: Certain market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved. Dow Jones: The Dow Jones branded indices are proprietary to and are calculated, distributed and marketed by DJI Opco, a subsidiary of S&P Dow Jones Indices LLC and have been licensed for use to S&P Opco, LLC and CNN. Standard & Poor's and S&P are registered trademarks of Standard & Poor's Financial Services LLC and Dow Jones is a registered trademark of Dow Jones Trademark Holdings LLC. All content of the Dow Jones branded indices © S&P Dow Jones Indices LLC 2018 and/or its affiliates.