Xbox 360 pricing revealed: $299 and $399 models due at launch

As the Big Three (Sony, Microsoft, and Nintendo) planned their business tactics for the next-generation console wars, none have been willing to divulge their strategies, lest competitors get the scoop. All that was left was for industry media, fans, and analysts to speculate on what would be of the new consoles.

In its quest to get the console out in time for the holiday season, Microsoft hasn't exactly kept the shutters drawn on its secrets regarding its next-gen contribution: the Xbox 360. Pictures of the console surfaced before its debut on MTV, its name was exposed before the company could spin it itself, and the prospect of standard wireless controllers came with no strings attached.

Today, Microsoft laid down new facts about its upcoming console at the Games Convention in Leipzig, and they sounded awfully familiar to analyst predictions and forum posters' speculations.

Microsoft announced that the Xbox 360 will be released in two SKUs, the "Xbox 360 Core System" and the "Xbox 360." The two products will be sold at $299 and $399, respectively. The two systems break down as follows:

Xbox 360 Core System - $299 (299 Euros, 209 GBP)
• Xbox 360 console
• Wired controller
• Detachable faceplate
• Xbox Live Silver membership
• Standard AV cables

Xbox 360 - $399 (399 Euros, 279 GBP)
• Xbox 360 console
• 20GB detachable hard drive
• Wireless controller
• Wireless Xbox Live headset
• High-definition AV cables
• Ethernet cable
• Xbox 360 Media Remote Control (limited time)
• Detachable faceplate
• Xbox Live Silver membership

Peter Moore, Xbox corporate vice president of worldwide marketing and publishing, who spoke with GameSpot, reiterated that the Xbox 360 is still on schedule to launch simultaneously in North America, Europe, and Japan this holiday season. Details on the specifics of the Japanese release will be disclosed at this year's Tokyo Game Show, which begins September 16.

Microsoft has confirmed that the "Core System" will not be backwards compatible out-of-the-box. In order to play current-generation Xbox games, owners of the bare-bones system will have to purchase the detachable hard drive. It is unclear whether or not backwards compatibility will work with the smaller-capacity 64MB memory cards.

Moore explained that the idea behind the two choices came from "lessons learned from the first generation [of Xbox], but perhaps more importantly to provide the gamer with choices in pricing as applicable to their gaming habits." In addition, gamers will be able to select from a range of peripherals available at launch:

• Faceplate ($19.99, 19.99 Euros, 14.99 GBP)
• Hard Drive (20 GB) ($99.99, 99.99 Euros, 69.99 GBP)
• Memory Unit (64 MB) ($39.99, 34.99 Euros, 22.99 GBP)
• Wireless Networking Adapter ($99.99, 79.99 Euros, 59.99 GBP)
• Wireless Controller ($49.99, 44.99 Euros, 32.99 GBP)
• Play and Charge Kit ($19.99, 19.99 Euros, 14.99 GBP)
• Rechargeable Battery Pack ($11.99, 14.99 Euros, 9.99 GBP)
• Controller ($39.99, 34.99 Euros, 24.99 GBP)
• Headset ($19.99, 19.99 Euros, 14.99 GBP)
• Universal Media Remote ($29.99, 29.99 Euros, 19.99 GBP)
• Component HD AV Cable ($39.99, 29.99 Euros, 19.99 GBP)
• S-Video AV Cable (US) ($29.99)
• SCART AV Cable (Europe) (24.99 Euros, 17.99 GBP)
• VGA HD AV Cable ($39.99, 29.99 Euros, 19.99 GBP)

It's too early to get a reaction from gamers on Microsoft's pricing plan, but a few analysts privy to the information were able to chime in with their thoughts.

One anonymous analyst who spoke with GameSpot said, "I think tiered pricing makes sense, particularly as Microsoft wants to offer hardcore gamers more-advanced services. $299 is clearly a price leader and headline grabber, but I imagine they initially expect to ship (and sell) a majority of units at the higher price point. Also, with a $299 SKU, they avoid disappointing consumers, who are likely to compare launch pricing with the PS2 in 2000 and original Xbox in 2001."

The analyst adds, "As far as the publishers are concerned, Microsoft needs to make sure that publishers are making games that can be played with or without a hard drive, and I think they are communicating this message."

Michael Pachter, of Wedbush Morgan Securities, wasn't as cheerful. He sees the $299 model as a "publicity stunt." "They're doing it to say they are launching at $299. The hardcore guys will absolutely not buy the $299 model...only a complete idiot would buy the $299 model."

Pachter references Sony Computer Entertainment president Ken Kutaragi's statement saying the PlayStation 3 would "be expensive" as an attempt to "psych Microsoft into charging $399." But, he sees the $399 price point as providing Microsoft with breathing room to lower the price once the PS3 is released, which is projected to be in 2006, or even 2007.

Regarding the release date, Moore said there have been no announcements made primarily for competitive reasons, but also because Microsoft was still monitoring the production flow of the console's components and localization of launch titles. "One thing we won't do is underserve the market and leave retailers high and dry. That never works. That just leaves more people who are P.O.'d at us than happy with us."

There are also still no games that are definitely launch titles. But Moore does outline the strategy Microsoft is approaching. "So much is going to happen in the next couple of months. My view is simple: You need to make sure that you have the key genres covered at launch. Take care of sports, racing, action adventure, fantasy, first-person shooters. I think there are check marks that need to go in boxes to make sure that gamers have games they are looking for in a particular genre. We're still tracking 24 to 40 Xbox 360 games for release before the end of the calendar year. I think you'll see that all the titles we got excited about at E3 are still firmly in that launch window [90 days from the release of the Xbox 360]."

But what about gamers who aren't ready to jump into the next generation? Moore seems pleased with the current success of the original Xbox and doesn't see any price drop with the console. "We're selling all we can get [made]. Our biggest challenge is to meet demand in what is typically a very quiet time of year. So, no, I don't see any plans to change any pricing as we currently stand on the Xbox."