Xbox Pricing, Availability Revealed

Microsoft’s Xbox video game console will be available in North America on Nov. 8, 2001, for a suggested retail price of US$299. Microsoft is looking for a slice of the US$6 billion U.S. video game console market, but a US$500 million advertising campaign and low or possibly negative margins on each unit will make Xbox an expensive gamble for the company. (Revenues will come from selling games and from licensing fees paid by third-party game manufacturers.) The company will manufacture between 600,000 and 800,000 consoles for the launch date and expects to make between 1.2 and 1.5 million available through the end of the holiday season.

Microsoft hopes that Xbox’s high-powered hardware, support from game developers, and a broadband online gaming network to be introduced in summer 2002 will help it beat Sony’s US$299 PlayStation 2 (PS2), released last December, and Nintendo’s less expensive GameCube, scheduled for launch three days before Xbox. Sony, in particular, presents a threat: the company has announced agreements with Microsoft rivals AOL Time Warner to provide Internet access through the PS2 and RealNetworks to provide a version of its RealPlayer media playback software for the console. This could turn the PS2 into a home Internet gateway, potentially threatening Microsoft’s home PC market and Internet-connected TV products.