So Now What?

Chris Kohler asks the excellent question apropos of the recent Xbox 360 price drop.  He makes the valid point that the console wars are effectively over; Nintendo has won this generation, and neither Microsoft nor Sony are going to reach the position that the PS2 managed to hit in the previous one.  So what is Microsoft doing?

I think that Kohler is largely right in his analysis.   But you need to consider that  that Microsoft isn’t really strictly competing with Sony any longer for the core gamer set: there are outliers, but many gamers have chosen to purchase one or both of the systems at this point.  Both Sony and MS, then, are trying to figure out how to get those remaining holdouts to take a chance on the console they didn’t purchase… and since the feature sets are set at this point, price is basically the only lever they have to pull.  That’s why Microsoft has dropped its pricing for the holidays - not to get people to purchase a 360 instead of a PS3 per se (although I’m sure there are some people who haven’t gotten either yet), but to get people to buy a 360 in addition to the PS3 they’ve already got at home. 

By the way, I’m guessing that with respect to those who haven’t gotten any console yet, I’m guessing a Blu-Ray player isn’t a particularly compelling feature.  Either they’re just unimpressed with either console’s line-up (which I suspect isn’t too likely at this point, even if they’re only passingly familiar with gaming), or they’re just very frugal - and are thus unlikely to have the higher-end hardware required to take full advantage of Blu-Ray in the first place.  So the price drop seems pretty smart to me… Sony’s already lost a ton of money on the PS3 and probably isn’t too interested in losing more in the short term, and thus probably won’t respond too aggressively to the move.  Microsoft can take advantage of that fact.