The average selling price of Microsoft (NASDAQ:MSFT) Xbox gaming consoles is estimated to have declined from about $300 in 2007 to about $248 in 2009, [1] led by greater sales of low-end Xbox consoles in an overall weak consumer spending environment. Microsoft’s Xbox competes with Sony’s (NYSE:SNE) Playstation and Nintendo’s Wii in the gaming console market.
Since Xbox & Zune together account for only around 1% of Microsoft, the stock is hardly impacted by changes in the selling price of Xbox. We currently have a Trefis price estimate of $28 for Microsoft’s stock, about 14% above the current market price of around $25.
We expect consumers will continue to buy lower-priced versions of Xbox, led by persistence of a weak macroeconomic environment. In July 2010, Microsoft launched a cheaper version of Xbox 360 called Xbox 360 Slim priced at $200 with onboard drive memory of 4 GB. Xbox 360 products have shown good performance so far in 2010 [2].
However, competition from Playstation and Wii should also keep Xbox pricing under check. Nintendo’s Wii is very popular among casual gamers. It retails at an average selling price of $200, lower compared to the average price of $260 for Xbox 360 [3]. Nintendo’s Wii and DS together constituted nearly 50% of the gaming console market share in 2009 [4]. We do not expect much change in the competitive landscape, which should keep continued pressure on pricing.
The average of Trefis member forecasts for Xbox Average Selling Price indicate a decrease from $241 in 2010 to $201 by 2016, compared to the baseline Trefis estimate of a decrease from $235 in 2010 to $173 by the end of the Trefis forecast period. The member estimates imply a small upside to the Trefis price estimate for Microsoft’s stock.
You can drag the forecast trend-line above to express your own view, and see the sensitivity of Microsoft’s stock to Xbox Average Selling Price.
Our complete analysis for Microsoft’s stock is here.
Notes:
1. We have estimated Xbox Average Selling Price using data from xbox-scene.com and gamasutra.com sourcing estimates from market research firm NPD.
2. Analysis: Xbox 360 Blazes Ahead In 2010
