New Xbox 360: Bad move, stingy Microsoft

After weeks of rumors, Microsoft has made it official: A third version of the Xbox 360 is coming out, this one with a 120 GB hard drive and HDMI. (And it’s a different color! Collect all two!) So now there’s a hard drive-less one for $300, a 20 GB version for $400, and a 120 GB/HDMI version for $480. Wired’s Gadget Lab blog has a rundown of how much the extras cost/are worth, and 100 GB more space for $80 seems worth it. But I bought a 160 GB hard drive for my computer in 2005 for 35 bucks. I’ve seen ads for 500 GB external hard drives plus enclosure for $150. I know hard drives in non-computer tech products are ridiculously overpriced (hello, $350 80 GB iPod), but even if the Elite system is the best value, it’s still way too much for the size of the hard drive.

I think this is a mistake for Microsoft because, as Wired points out, now the Xbox 360 is only $20 less than the 20 GB PlayStation 3. True, you’re getting six times the hard drive space for $20 less — but you can also think of it as getting a Blu-ray for $20 more. I still think Blu-ray is a giant boondoggle for Sony (even if it beats HD-DVD, both could easily go the way of DVD-Audio and Super Audio CD), but Microsoft can no longer separate itself from Sony in terms of price. Not as much as before, anyway. The biggest knock against the PlayStation 3 has been the cost — but now the 360 is expensive too. The biggest distinction or perceived distinction just got a lot less distinct.

I’m sure the new 360 is Microsoft’s way of preparing to get rid of the Core 360. Then they can drop the 20 GB version to $300 and the $120 GB one to $400. That would be a smart and competitive move. But doing that in two steps, by first releasing a system within the range of the “sooooo expensive” PS3, significantly weakens Microsoft’s hand, if only perception-wise. And in this business, perceptions mean a lot.

— March 28, 2007

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