The Battle of the Video Games
The Nintendo Game Cube and Microsoft’s XBox are battling each other for the best home video game console this fall. Last year Sony’s Playstation 2 was one of the hardest to find, and most desired toy of every video game fan.
Both products feature faster better cooler graphics and features more like a home computer than your average video game. Plus you can play DVD movies on the XBox and watch them on your TV.
Analysts said that Microsoft will actually lose money on the XBox due to it’s stiff competition with the game cube, but in the long term could earn profits for Microsoft.
Microsoft has said it will spend as much as $500 million on the initial marketing for XBox, which will retail for $299, the same price as PlayStation 2 and $100 more than the GameCube.
Manufacturing costs for the XBox are believed to be substantially more than the price of the console, with estimates of Microsoft’s cost to produce each unit ranging from around $320 to almost $400. Earlier this year, Merrill Lynch analyst, Henry Blodget estimated it would cost Microsoft $375 to produce each console, resulting in a loss of up to $2 billion over the next three years.
Game companies typically sell hardware at a loss for the first few years to spur sales, relying on income from software sales and licensing to subsidize hardware costs.
Although Microsoft’s XBox and Nintendo’s GameCube launched a mere three days apart, they aren’t just competing against one another. They’re both up against the Grand Pooh-Bah of gaming consoles, the Sony PlayStation. Microsoft must convince its target audience—roughly, men between 14 and 34 years old—that the $299 XBox is superior to the enormously popular $299 PlayStation 2, which practically caused fistfights when it hit store shelves in 2000. Meanwhile, Nintendo will try to persuade the parents of small, screaming children (who are begging for the latest from Super Mario and Co.) that its $199 GameCube is a worthy first-time console purchase.
Xbox is easily the most hyped gaming console of the year—thanks in part to a $500 million marketing campaign.
Last year there was only one video game (PlayStation 2) to fight over, now there are two more to choose from. Each product offers great games and features like networking and the ability to listen to music CDs. The price tag will of course be the big decision for the Santa Clause in the family.
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