It appears that Microsoft is indeed releasing two Xbox 360 systems. The base system is $300 and the deluxe system is $400.
The addition that drives me nuts is the 20GB hard drive.1 I’ve been saying this for a while now, but I think that this is a bad idea.
A little background. Microsoft is unbundling the hard drive because this part does not get cheaper with scale. You may be thinking, “Huh? Hard drives are always getting cheaper,” and you’d be slightly off. Hard drives don’t get cheaper, they get a higher capacity for the same price. In the PC market this is just semantics; in the embedded market, this is life and death. When you work with embedded devices, every part matters. A hard drive is an especially expensive part in this market because it never gets any cheaper once it reaches a price point.
How was this bad for Microsoft’s Xbox? Because the Xbox had a part that could not get any cheaper than the Playstation 2. You can merge chips together, but you can’t design out a hard drive. Since the Xbox was made with commodity parts, this meant that Sony could sit there with a spreadsheet predicting Microsoft’s prices. When it appeared that Microsoft would go break-even with their console, Sony could simply lower prices on the Playstation 2 and force Microsoft back into the red.
Which is exactly what happened. Before the Xbox, Microsoft’s game division was making a tidy profit. After the Xbox, even with the success of Halo 2, they have yet to turn a profit.
I think, Microsoft learned the wrong lesson with the original Xbox. Sure, by unbundling the hard drive with the Xbox 360, they hit a price point that Sony will be hard pressed to match with the Playstation 3, but it is a consumer and developer-unfriendly move.
Think of the PC game market. I imagine that in a large company like Vivendi Interactive when they decide to come out with a new version of Warcraft they have a spreadsheet out there that tells them how much sales they will lose for based on the minimum system requirement. Consoles work because unlike a PC you know the game you buy will just work. Why? Because everyone has the same console.
This is just an ignorant opinion of someone who barely plays any video games, but it seems to me that as a consumer I don’t know which to buy and as a developer I wouldn’t know which Xbox to target.
Look, It is unlikely that the sales will be evenly split between $300 and $400 Xboxes—either the $300 Xbox or the $400 Xbox will sell well. If it is the former, then the developer will kill sales by requiring a the hard drive.2 If it the latter, then why come out with a $300 Xbox? The price of admission for the consumer is $400 and everyone will know it.
Microsoft has an edge over Sony in the robust Xbox Live! and development experience in hard drives. It’s a shame to see them effectively squander both just because they learned the wrong lessons.