Microsoft has officially cut the prices of the Xbox 360 in Europe, dropping the Arcade model to just over $320 and prompting industry analyst Michael Pachter to predict a 20 percent sales increase as a result.
The Premium version of the system will now cost just over $400, while the Elite edition will clock in at $525. A GamesIndustry report said the price changes will take effect on March 14, but some retailers are already taking advantage of the news by cutting their prices now.
"Xbox 360 is now mass market in Europe," said Microsoft's Vice President of Interactive Entertainment Business in Europe Chris Lewis. "We have reached and surpassed several key milestones that form part of our long term strategic plan to achieve critical mass in Europe, and our portfolio now offers the kind of mainstream entertainment experiences that secure wider appeal for Xbox 360."
In response to the move, Wedbush Morgan analyst Michael Pachter said he expected the price cut would boost sales by roughly 20 percent over the coming months, but that it was unlikely to impact Microsoft's long-term fortunes in Europe since Sony would almost certainly follow with its own cuts to PlayStation 3 prices.
"Price elasticity of demand is an economic concept that says demand goes up as prices comes down," he said. "I would imagine that demand will increase by 20 percent or so, and we'll see sales increase by this amount over the next few months."
"If the price cut were in a vacuum, I suppose it would make a difference," he continued, "but it's likely Sony will match the cut sometime later this year."
He also suggested that the acceptance of Blu-ray over HD-DVD gave Microsoft added incentive to make the change, based on consumer perceptions of the PlayStation 3 as the "winner." "I'm sure it is more than coincidence that Microsoft cut price just after Sony won the Blu-ray/HD-DVD battle," he said. "Sony definitely gained in the eyes of consumers, who suddenly see the premium for the PlayStation 3 as having some value, and I think Microsoft decided to widen the gap between the two consoles."