Consumers in the Republic will be able to buy the latest generation of games consoles at a fraction of their introductory prices following price cuts by Microsoft and Sony that will take effect from tomorrow.
In the latest instalment of the two firms' bitter price war, Microsoft and Sony announced €50 price cuts yesterday for their flagship consoles, the Xbox and the PlayStation 2. Both companies cut the suggested retail price of their consoles in Europe to €249, down from €299 within an hour of each other, demonstrating the keen rivalry in the video games market.
Sony later said it was suggesting more moderate price cuts that would reduce the price of the PlayStation 2 to €269.
The 17 per cent price cuts, which come on the eve of a video games developers conference in London, follow 33 per cent price cuts in the US last May, when both firms reduced the prices of their consoles to $199 (€203) from $299.
Microsoft launched the Xbox in Europe in March at a price of €479 but lopped €180 off the price just a month later due to slow initial sales in the region. This latest price cut comes as the firm gears up to tackle the current market leader, the PlayStation 2, in the run-up to Christmas.
Sony last cut the price of the PlayStation 2 in Europe last September. It says it has sold 180,000 consoles in the Republic to date, and 8.25 million in Europe, Middle East and Africa.
PlayStation 2 is the world's best-selling video games console, having shipped 33 million units worldwide since its Japanese launch in March 2000. By comparison, Microsoft said last month it had sold 3.9 million units worldwide in the seven months to June.
But console makers traditionally lose money on the sales of their hardware, which they make up with some $10 royalty revenues they receive on every game sold. Games sell at $40 to $50 and gamers typically buy four to five titles a year.
Due to advanced graphics chips, a built-in broadband modem and a hard-drive, the Xbox is relatively expensive to produce compared with PS2. Though economies of scale are improving, Microsoft still loses money on each console sold and it aims to make up the difference in higher-margin video game sales.
In May, analysts estimated that Microsoft was losing $76 to $105 on every Xbox sold. Microsoft has since concentrated production in fewer sites and started buying cheaper components.
Meanwhile, a Nintendo spokeswoman said the company had no plans to change the price of GameCube in Europe, already lower at €199.
GameCube is the second-best selling console after PlayStation 2 and before Xbox, and the firm is due to publish a trading update on Thursday.
But in the run-up to the Christmas sales period, video game giants Sony, Nintendo and Microsoft plan to step up sales and marketing initiatives to cash in on a global market predicted to top $31 billion this year.
Microsoft's Dublin facility, which employs about 1,800 people, is managing the distribution of the Xbox across Europe, the Middle East and Africa. More than 100 staff in Dublin worked on the Xbox project in the lead up to its introduction. - (Additional reporting Reuters)
