Microsoft today lowered the price on its Kinect camera peripheral in the US by $40. It's a sign that Microsoft is getting ready to ramp up for the holidays, but is it also a portent of an imminent price drop on Xbox 360 hardware? Not necessarily, according to top industry analysts speaking to GamesIndustry International.
Most analysts we spoke with think Microsoft is much more likely to continue enhancing its bundle offerings rather than slashing any hardware prices.
"Price cut no, bundles yes. For now, I think Microsoft is happy with Xbox sales and some early traction in the different pricing models they have rolled out at retail," said Colin Sebastian of RW Baird. "We still expect the launch of the next Xbox in the fall of 2013, so there will still need to be a price cut on the current gen, although perhaps not until after the holidays. I am sure retailers will offer their own promotions this holiday though."
Sebastian makes a good point. Consumers hungry for great deals may still find a sudden temporary sale price for Xbox 360 at huge brick-and-mortar stores like Walmart. To the extent that Microsoft will cut prices on anything, it will be in the form of discounted bundles.
"I don't believe an Xbox 360 price cut is imminent. The Xbox 360 hardware still leads in sales and I do doubt whether we even see a price cut at all in 2012. However, we should expect a holiday season full of discounted and limited edition bundles that, on paper, would reflect a price cut. But a full price cut on the base hardware, I wouldn't expect one until early 2013," Jesse Divnich of EEDAR told us.
Divnich noted one caveat in his prediction, however, and it involves Nintendo. "Of course, this is entirely dependent upon the success of the Wii U. If the Wii U comes flying out of the gates and begins to impact Xbox 360 hardware, I would expect Microsoft to react swiftly with a price cut or more aggressive retail promotions," he added.
Wedbush Securities' Michael Pachter couldn't believe that Kinect hadn't seen a price cut already. "I thought Kinect had been cut a long time ago, and can't believe that the standalone unit sells that well," he said. Pachter is forecasting a slight reduction on the current Kinect bundles. "I think they will price a Kinect bundle at $50 lower than the current bundles, so $249 for the 4GB bundle and $349 for the 250GB bundle, and yes, I think this is a sign [of future Xbox hardware cuts]," he remarked, deviating from other analysts' opinions.
Aside from the possibility of Xbox 360 hardware seeing a price cut, we also have to look at what a Kinect price cut means for Kinect. Is Microsoft paving the way for a Kinect 2 launch this holiday? Lewis Ward of IDC Research believes so.
"I'm leaning toward Microsoft not cutting the price of the Xbox 360 in the near future since it's already selling quite well, though a minor cut is possible. I think there will definitely be some interesting bundles this holiday season," he noted, then adding, "I'll go out on a limb as far as the Kinect MSRP cut goes. It's been rumored that Kinect 2 will arrive with the Windows 8 launch at the end of October. It's possible that Microsoft is clearing the channel in preparation of this (potential) new arrival."
"If Kinect 2 does arrive this holiday season I'm sure they'll put it in a bundle and there will have to be a few marquis games that use it in interesting ways. That's a tall order, though, and if they've been able to keep it quiet to this point that would be a stunning feat!"